The Commission on the Private Rented Sector- A Reaction

on Saturday, 05 July 2003. Posted in Issue 38 Dying on the Streets, 2000

Seamus Murphy, SJ

November 2000

Table 2. COMPARATIVE PERCENTAGES (1991)

Country Owner-Occupied Private Rented Social Housing Other
Germany 38 36 26 0
Netherlands 47 17 36 6
Sweden 43 16 22 19 [co-op]
IRELAND (1995) 72 15 11 2

 

The reasons for the strength of the owner-occupied sector need not detain us. No doubt cultural and historical factors have led to a strong desire on the part of Irish people to own their dwelling rather than rent or lease it. Traditionally, government policy on housing has had two goals: to provide adequate housing for all, and to promote owner-occupation. As the \'70s and \'80s wore on, the latter goal began to take precedence to an excessive and unbalanced extent. The NESC\'s A review of housing policy (1988) was critical of governments\' failure to protect the private rented sector. However, the government of the day, as reported in The Irish Times (15/3/89), stated that it would reject much of the report, and a spokesman later added that \'the overall government objective would remain that of promoting home ownership.\'

However, the proportion of the stock which is owner-occupied appears to have levelled off in the \'90s at around 80%. More striking is the increase, both absolutely and comparatively, in the size of the private rented sector since the beginning of the decade. While an absolute increase in the number of private rented dwellings is notable, it is not entirely surprising given the overall surge in house-building during the boom years of the decade; but that the growth should have been so proportionately greater than in the owner-occupied sector is striking.

In 1991, 81,400 households (8% of the housing stock) in 1991 belonged to the private rented category; according to Labour Force estimates, by 1997, 131,600 households (11%) belonged to that category. On the other hand, there is a marked decline since the 1960s, both proportionally and in absolute numbers, of the number of houses coming under the heading of social housing. All of these factors, as well as others, indicate an increased reliance on the market for provision of housing, whether for buying or renting.

The private rented sector is increasingly being utilised for housing people on low incomes. This is reflected in the steep rise in the amount of money paid in the form of rent allowance to tenants under the Supplementary Welfare Allowance (SWA): 2

Table 3: Rent Allowances Paid

1989: £9m.
1991: £14.4m
1997: £75.3m.
1998: £88m
1999: £115m. (estimate)

At present, it is estimated that one third of all such private rented households are in receipt of SWA rent allowance.

Overall, from being a residual and declining sector, the private rented sector is growing and becoming more important.

The sharp increase in housing prices is well-documented elsewhere. Similarly, rents have risen steeply also. The growing interest of investors in the private rented sector has helped to increase the supply, but the demand considerably exceeds the supply.

Insecurity of Tenure

The Irish private rented residential sector is made up of a number of sub-sectors. A rapidly dwindling sub-sector is the old rent-controlled sector, which is regulated by the Housing Acts of 1982 and 1983. The particularly rigid form of rent control which governed such tenancies (involving indefinite security of tenure along with frozen rents) was deemed unconstitutional in 1981. The rest of the private rented sector has no form of rent control, and security of tenure is no more than from week to week. Some tenancies are based on leases, but these are rare and occur only at the upper end of the market.

Overall, the private rented sector is largely unregulated. In the 1990s, regulations were introduced governing the registration of such premises with the local authority, the maintenance of standards, and certain other details. The tenants\' rights under these regulations include the following:

A notice to quit must be given in writing 28 days notice in advance.

The landlord must provide the tenant with a rent book, which must include names, terms, amount of rent, amount and purpose of deposit, and inventory of furnishings.

The landlord is to comply with the Standards in Housing Regulations Act 1993: proper repair, sink with hot and cold water, toilet and bath facilities, etc.

The landlord must register the dwelling with the local authority. 3

These rights are relatively new, but rather difficult to enforce. Threshold estimated in 1997 that less than 1 in 5 tenancies had been inspected by the local authority. In addition, it appears that only a minority (estimated varyingly at between 20-30% of landlords are registered.4 The current tax allowance for those under 55 is £500; but many landlords reluctant to take tenants who intend to claim it. In a number of cases, landlords gave notice to quit to tenants who asked the landlord\'s RSI.

Overall, the group with the greatest interest in having the standards enforced, viz. tenants, have good reason to avoid being in any way involved. This is because tenants effectively lack security of tenure and may be required to quit for any or no reason.

Without the core-right of some security of tenure, enforcement of other rights is often
impractical. This is a serious problem, as
the Report acknowledges.

The Commission\'s Report

The Report of the Commission on the Private Rented Residential Sector5 reflects a growing awareness on the part of the government that the legislative framework dealing with the private rented sector6 has long been unsatisfactory and that recent trends indicate that the private rented sector will become more, and not less, important in future years.

There are two major issues concerning the private rented sector at present. The first is the shortage of suitable accommodation, whether for owner-occupation or for renting. The current supply-side bottleneck is not peculiar to the private rented sector. The second is the vexed issue of providing an appropriate balance of rights between landlords and tenants. Given the negative effects of rent control in the past, it is important that reforms undertaken with respect to the second issue should not be such as to deter investors in the market. Accordingly, while the focus will be on the second issue, the first issue\'s relevance must not be ignored.

Throughout, the Report takes pains to emphasize the importance of encouraging future investment in the private rented sector and hence the necessity of balancing this consideration with the need to improve the legal entitlements of tenants.

The Commission\'s Proposals

The Report\'s main proposals7 are: (1) to establish a Private Residential Tenancies Board, to deal with landlord-tenant disputes, and (2) to provide for security of tenure of up to 4 years for tenants who have completed 6 months\' tenancy.

These proposals may seem modest enough but they were not unanimously accepted by the members of the commission. As the Report brings out (sects. 2.4 and 8.2), those seeking private rented accommodation vary greatly in their needs: they range from such relatively transitional groups as immigrants, workers who need to be able to move at short notice, and persons undergoing breakup in relationships, to more stable groups for lower-income single persons, retired persons who wish to shed ownership responsibilities. Thus, for instance, while a lease of some duration provides a measure of security of tenure, the reciprocal obligations on the tenant may be undesirable for short-term tenancies. It is, then, not easy to formulate far-reaching proposals which would be satisfactory to all.

The proposal for a Tenancies Board merits full support. The more disputes between landlords and tenants can be handled by such bodies instead of by the courts, the better. The Rent Tribunal set up to deal with the formerly rent-controlled tenancies has been quite successful, and something similar should be worked towards other tenancies.

The Report\'s proposal for improving security of tenure is modest8. It proposes that any tenant whose tenancy has lasted 6 months should be statutorily entitled to continue in occupation for up to 4 years. The landlord shall be entitled to recover possession during the 4-year period only if the tenant violates the agreement or the landlord wishes to sell or renovate the premises in such a way that vacant possession is required.

Additional Measures Needed

The Report suggests, almost in passing, that \'Safeguards, such as applying a burden of proof on landlords, will also need to be introduced to protect tenants from eviction in circumstances where the tenant has made a complaint or taken other action in pursuit of compliance with the provisions of the statutory regulations applying to the sector.\' 9

This is important, but underdeveloped. It is contained in the context of discussion of the landlord-tenant relationship during the 4-year period of security of tenure. Yet there is no reason for not applying the same principle to any time of tenancy. It is unreasonable that a landlord should be able to evict a tenant at any time simply because the tenant has sought to have his rights vindicated at law. It is unreasonable to the point of being an outright injustice that the law should allow a tenant to be evicted where the eviction arises from the landlord\'s breaking the law.

In line with the above, additional legislation could be proposed along the following lines:

Security of Tenure, Registration and Standards: Can we learn from the U.S.?

(1) In many US states, the courts will not grant possession of the premises to a landlord (apart from cases where the tenant has violated the agreement or the landlord needs to sell the property) within 6-12 months of any (successful) legal action by a tenant against a landlord for failure to maintain the premises or fulfil any other obligations. The courts will presume that a suit for repossession in such circumstances is vindictive.

Effectively, this means that a tenant who has successfully sued the landlord in court for failure to carry out repairs is entitled to a subsequent 6-12 months security of tenure. This should be introduced here. The fairness of such protection is obvious enough. In Ireland, the absence of any such protection at law is a significant deterrent to the tenant from seeking the proper maintenance of the dwelling to which he is entitled.

It is also reasonable to assume that the above-mentioned provision in US law
factor helps to deter landlords from letting the property deteriorate. When the issue of enforcement of standards is raised, it is
generally admitted that it is hard for the local authority to achieve this. Accordingly, serious thought should be given to the idea of giving the tenant, who is the person most negatively affected by the landlord\'s failure in this regard, an interest in drawing the courts\' or the local authority\'s attention to this failure and protection against any subsequent victimization by the landlord.

(2) Furthermore, in many US states, it is the tenant\'s obligation to report substandard sanitation conditions to the local authority. This tends to raise the likelihood that accommodation standards will be met. Again, failure to protect the tenant against vindictive eviction on foot of such reporting would be unfair and would severely discourage tenants from doing so.

It is recommended then that the obligation to report significant sewage or toilet disrepair or substandard sanitation to the local authority, and that, where the tenant has done so, he or she may not be served notice to quit until the premises has been inspected by the local authority. In the event of the local authority inspector upholding the tenant\'s claim, no notice to quit may be served until after court hearings. If the court convicts the landlord, then no notice to quit may be served for the following twelve months.

(3) Failure of the landlord to register the premises with the local authority could be dealt with effectively and cheaply by giving the tenant an incentive to ensure that it is registered. The incentive would be the automatic awarding of entitlement to a year\'s undisturbed possession.

No doubt many landlords will be appalled at such suggestions, and argue that they will deter investors. Yet these are not burdens placed on landlords generally.
Landlords can easily avoid such burdens by complying with the law on registration and standards.

It is important to note (as the Report does not appear to do) that failure on the part of landlords to register and to meet standards are an attack on the tenant\'s interests, and not just a general violation of the law. It is only fair then to ensure that tenants who seek to vindicate their rights are not victimized as a result; it is also good public policy to give tenants an interest in ensuring that the landlord\'s obligations are met.

If such provisions were enacted, one could assume that it would lead to an improvement in standards and an upsurge in registration by landlords anxious to avoid having to give tenant\'s an extra period of security of tenure. Those landlords who would feel most burdened by having to do so will know exactly how to avoid having to do so: comply with the law as it currently stands.

Rent Control

The Report holds (sect. 4.3.5) that it is mistaken to suggest that rent control per se is unconstitutional. Thus, where a reasonable balance between the interests of landlord and tenant have been struck, rent control could be constitutionally acceptable.

The historical context here is that of the Supreme Court decisions in the early 1980s, notably the Blake and Madigan cases, which struck down rent control as it then operated. The form of rent control involved was rent freeze, and was accompanied by indefinite security of tenure. In the interest of constitutionally protected property rights, the court struck down the Rent Restrictions Acts. The Report notes that in other cases the Supreme Court has balanced property rights against the principles of social justice, indicating its view that property rights may be restricted in the interest of the common good.

Surprisingly, the Report does not note the strongest argument against the claim that rent control has been held to be unconstitutional. In its judgement in the Blake case, the court carefully and explicitly limited what it was rejecting as unconstitutional, holding that the particular kind of rent control involved (i.e. rent freeze) was unconstitutional when taken in conjunction with indefinite security of tenure, and indefinite security of tenure was unconstitutional when taken with rent freeze. This leaves open the possibility that either on its own could be constitutional.

Most people would accept that rent freeze is normally unreasonable, since it makes no allowance for inflation and rising market prices; and it would certainly deter any investor. However, many countries do employ (typically at the local authority level) a form of rent control, typically limiting rent increases to the annual increase in the overall consumer price index.

There seems to be no good reason why local authorities could not be given the legal power to introduce that form of rent control for a period of, say, up to 5 years, and thereafter renewable only annually. Such an instrument would be usable only under special circumstances, e.g. severe housing shortage leading to rent inflation. While there would be a certain risk of \'normalisation\' of such an emergency measure (as happened in the case of the earlier form of rent control which was introduced as a temporary emergency measure during World War I, only to be made permanent in subsequent years), the fact that it would not be accompanied by long-term or indefinite security of tenure should suffice to ensure that the measure had no seriously negative impact on the supply side of rented accommodation. At the same time, the wider culture in the western world is (as the Report notes in chap. 3) moving away from institutionalised long-term rent controls and more towards encouraging investment. It seems unlikely that such measures would become permanent and damaging.
Whether this would be good policy is less clear; but the idea that such an approach has been held to be unconstitutional by the court\'s decisions concerning the Rent Restrictions Acts is quite unsupported, and if anything undermined, by the Supreme Court\'s judgements in this area.

Ethical Issues

At a time of major economic boom, with enormous growth in wealth for many groups in Irish society, it still has to be acknowledged that wealth-increase does not occur for all. Some groups are on relatively static incomes. When the economic boom (through the pressure it puts on an inadequate infrastructure) begins to move the cost of meeting a basic need beyond the reach of such groups, the public authority has a certain duty to help.

On the financial level, through the sharply increasing amounts of subsidy in the form of rent allowance, the public authority is meeting that need to some extent. However, since that subsidy goes directly to landlords, the public authority has reason to ensure that this subsidy is being well-used. To put it baldly: from a time (in the 1980s) when the state spent only a few million punts on such subsidy to today when the bill is well over £100 million and growing, the state has moved from having little invested in this sector to giving it a great deal. It too has an interest in ensuring that standards are met, as well as an obligation in justice to tenants who have very few rights, and none that are practically enforceable, for want of security of tenure, at law.

The right to shelter is probably the most basic human right, after the right to life and bodily integrity; it is more basic than the right to work, the right to an education or health-care, since none of the latter can be met unless the right to shelter has been met.

Because over 80% of the population of the Republic live in owner-occupied accommodation, we are a nation of landlords, and think rather like landlords, in the sense that we tend to assume that owning a house or flat and having a home mean the same thing. In other words, we tend to think of the right to shelter as a kind of property right, rather than a human right. Our culture is uncomfortable with the idea that one\'s home may be owned by somebody else.

In 1989, the Jesuit Centre for Faith and Justice commented:

The homeless are not just those who have no roof over their heads: people in Simon hostels do have shelter, but they are still homeless people. The homeless are those who have no reasonably secure place to stay where they can establish what the average human being would call a home. A rough definition of \'home\' is shelter plus security for a period of time. As a matter of justice it is not good enough that people in private rented accommodation merely have a roof over their heads; they need homes, in the sense of having a reasonable measure of security, so that they are not vulnerable to being moved on from week to week at the arbitrary will of the landlord. There is no particular reason why they must personally own property in order to have a home. A private rented dwelling is the landlord\'s house, but it is - or ought to be - the tenant\'s home. 10

*Seamus Murphy S.J. is a lecturer in philosophy in the Milltown Institute. A former staff member of the Jesuit Centre for Faith and Justice, he has been involved in housing issues for many years.

 

Notes:

1.Report of the Commission on the Private Rented Residential Sector: Department of the Environment, July 2000.  References to this document will be abbreviated as \'Report\'.

2.See Bacon II, 21/2.2.4.

3. As regards rent support, the tenant is entitled to (a) tax relief at standard rate for under 55 (marginal rate for over 55) to £500 (1,000) for single person, £750 (1,500) for widowed, £1,000 (2,000) for married person; and (b) if the tenant is on a FAS scheme, claiming social welfare or working part-time, s/he may qualify for rent allowance from the Community Welfare Officer or local health centre.

4. See Drudy, 34.

5. Hereafter referred to simply as \'the Report\'; all page-references are to the Report, unless otherwise stated.

6. The report is not concerned with the private rented commercial sector, which is governed by different pieces of legislation.

7. This phrase is generally to be taken as referring to the majority view of the commission.

8. See sect. 8.5.

9. Sect. 8.5.4 (emphasis added).

10. \'The shadowy world of private rented housing\', Doctrine and Life 39, (May/June 1989).

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Working Notes is a journal published by the Jesuit Centre for Faith and Justice. The journal focuses on social, economic and theological analysis of Irish society. It has been produced since 1987.