Stringent new tenancy rules spark ‘stampede’ of landlords from market as fears for renters grow

THE number of landlords leaving the market is accelerating ahead of new tenancy rules, estate agents across the country have told the Sunday Independent.

There has been a surge in the number of termination notices issued as landlords look to sell properties before being tied to new rules from next March, sparking fears that the rental crisis is about to get worse. 

From March 1, rule changes will give renters who sign agreements after that date six-year tenancies and ban small landlords from putting their properties on the market without tenants being left in situ.

However, housing agencies are urging landlords not to have a “rash reaction” amid a dearth of supply and record homelessness levels which have climbed to 16,600.

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Dublin estate agent Gavin Mulcahy told the Sunday Independent: “There will be a stampede of properties coming to the market next year.”

The managing director of Get ­Property said he is aware of 10 landlords who have sold recently and knows 30 more considering doing so before March.

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“It [the rental market] was broken before, but what they are doing now is widening the leak rather than putting a Band-Aid over it. The Government hasn’t really thought this through properly,” Mr Mulcahy said.

John-Mark McCafferty — chief executive of Threshold, a body that supports renters in distress — said he is worried about emerging evidence of an increase in the number of landlords with multiple properties who are serving termination notices to tenants.

“We have seen in recent weeks and months landlords seeking to end ­multiple tenancies in different parts of the country,” Mr McCafferty said.

“That is based on a number of ­cases we have been tracking and working on over the last six weeks. We are ­certainly getting more of the types of cases we were seeing eight or nine years ago before the RPZs [Rent ­Pressure Zones] came in.

“The legislation is intended to bring greater protection for tenants, so that is supposed to be a theoretical reassurance, but the flip side to that is where the public and tenants hear of tenancies ending like this, it is obviously a worry.

“We believe the arrangements are beneficial for tenants and landlords and would urge landlords to stay the course here and not make a rash ­reaction.”

Limerick-based estate agent Mike O’Connor, managing director of O’Connor Murphy, said he has met with landlords in the last week about the sale of 18 homes in the county and “they’re all getting out”.

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He believes 90pc of small landlords there are giving termination notices to tenants now because they fear they won’t be able to sell up once the proposed regulations come into effect.

The minute this [rental reform] kicks in, your property is now valued on a yield basis

“It’s going to cause awful problems in the rental market,” he said.

Mr O’Connor said one of the major fears over the new rules is that small landlords will have to retain existing tenants when putting properties up for sale, which could slash the value of their investments, prompting landlords to get out of the market now.

“Ninety-nine times out of 100, your house or apartment is more valuable with vacant possession — by as much as €100,000 [in Limerick],” he said. “The minute this [rental reform] kicks in, your property is now valued on a yield basis.

“If a house is worth €400,000 in some parts of Limerick with vacant possession, it’s probably worth €280,000 to €290,000 on a yield basis. So people are getting out now.”

Charlie McDermott, director at Sherry FitzGerald McDermott Bagenalstown, Carlow and Tullow, said he is being asked on a weekly basis to sell properties for landlords who are unhappy with the market, regulations and difficulties managing properties.

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About 15pc to 20pc of his stock is made up of homes landlords are selling. ­Normally, such homes would account for 5pc to 10pc of his portfolio, he added.

“The rental sector is the biggest ­crisis we face, because people have ­nowhere to live if they cannot rent,” he added.

There are currently fewer than 2,000 properties available to rent nationwide, and nearly half of those are in Dublin.

“They [the Government] have escalated the exodus of landlords from the market. We have one scheme in Athy where we would be lucky to have one or two properties [for sale] there per year. Three of them have come in the last few weeks,” Mr ­McDermott said.

“It’s terrible because there are tenants who will have no place to live and landlords who have no intention of getting back into the market.”

In June, the Cabinet approved fresh policy measures to strengthen protections for new tenancies. Housing ­Minister James Browne said the measures were “part of a suite of work being undertaken to boost supply of new homes and retain existing landlords”.

The plans include the introduction of rolling tenancies lasting at least six years and a clampdown on “no-fault evictions”.

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Small landlords — those deemed to have no more than three tenancies — will have restricted grounds for ending a tenancy, such as if they face hardship including separation, bankruptcy or homelessness, or if they need the home to house an immediate family member.

Under the proposals, tenants entering a lease with larger landlords (those with four or more tenancies) will no longer face no-fault evictions.

Landlords will be able to reset rents to “market value” for new tenancies, but, from March, cannot evict current tenants so they can charge a higher rent to new tenants. However, those operating in the ­sector believe the proposals have not been thought through.

Sherry FitzGerald group chief executive Marian Finnegan said: “It’s the law of unintended consequences. The intention was to improve security for tenants but the consequence is that it disimproves the situation for landlords.

“It fundamentally misses the point that we need small landlords and if you’re discouraging them in any shape or form, you’ll make the [rental] situation worse. If we really want to address [the rental crisis], we need to incentivise landlords.”

Mary Conway of the Irish Property Owners’ Association said there will be too few investors interested in ­buying the properties because of the new ­restrictions on landlords.