The Irish Department for Social Protection has now published the new rules and rates for rent assistance in the State. There are reductions in all categories in all counties – no county or category has been spared. The reductions range from 0.0% in Roscommon for a couple in shared accommodation to 28.6% in Fingal for a single person in shared accommodation. The simple average reduction is 13% . Here are the new rental assistance levels, and it should be noted these are the maximums.
Here are the old rates. Note the new rates split Dublin between “Fingal” and “Other”, the old rates didn’t.
Here are the % changes.
It is estimated that 96,100 households are in receipt of rent allowance – Minister for Social Protection Joan Burton responded to a Parliamentary Question in November 2011 and she said “Between 2005 and 2010, rent supplement expenditure increased from €369 million to €516 million. The number of persons claiming the allowance increased from almost 60,200 in 2005 to more than 96,100 as at 18 November 2011, a 60% increase.”. It is estimated* that 150,000 households in total are renters in the State. Therefore the reductions announced today are will significantly affect the rented market.
What will they do to rental levels? Considering only the reduction in rent allowance, the changes should tend to reduce rents in the State. Many properties that are advertised for rent won’t accept rent assistance, but there is anecdotal evidence to suggest that such properties will acknowledge official levels of state support.
Residential rents in Irelandhave risen by 4% over the past year and looked set to continue rising. This morning’s announcement should temporarily reverse that trend. The prediction on here had been that rents would rise between 0-5% in 2012. With these announced reductions which average 13%, that prediction looks outdated, and it is now the view that rents will reduce in 2012.
*The last census for which we have full results was in 2006 when 128,696 homes were rented out of a total of 1,503,291 households which represents 9% of all households. In 2011 there were 1,709,973 households – if the same % of households rent then that would imply there about 150,000 rented properties in the State.
UPDATE: 9th February, 2012. The quarterly DAFT.ie rental report is now available where Minister for Social Protection, Joan Burton provides a commentary and background information on the decision to cut the levels of rent allowance last month. Minister Burton says “Since 2005, rent supplement expenditure has increased from €369 million to some €503 million in 2011. The number of people claiming the allowance increased from almost 60,200 in 2005 to over 96,800 at end 2011, a 61% increase. In terms of overall share in the market, rent supplement accounts for approximately 40% of the private rental market.” Elsewhere the report confirms that rental prices continue to stabilise with rents up 0.3% nationally in the past twelve months (index rise from 75.5 to 75.7) and that the stock of property is at a 3-year low, but before you run around in panic thinking there’s no vacant property left, remember (a) the stock of vacant property is still nearly 16,000 compared to an all-time high of 24,000 in 2009 and (b) the 16,000 is less than 100 lower than the vacant stock this time last year.
NAMA Wine Lake 
I’m not confident this will have as big an impact as being projected. The tenant has to negotiate with the landlord and there is no guarantee that the tenant won’t carry the burden. There has always been a big gap between what a private tenant and a council tenant pay out of their own benefit and I feel this is leaning more toward this disparity. For example if someone is a council tenant on benefit and the local authority rent is approx. €90 per wk. this tenant will pay approx €50-€60 per wk from their benefits as no rent allowance for council tenant. Someone therefore in receipt of rent allowance may not have had any rent to pat therefore bigger “disposable benefit”. I think the private tenant may be expected to “cough up” in line with the council tenant.
@ AP While approx. 40% of the private sector tenants are assisted by DSP, the figures will vary in different parts of the country. There are areas outside of centres of education where the DSP is assisting up to 80% of private sector tenants.
If you are a landlord in Roscommon or Cavan or similar spots, you don’t have much of a choice. The same will not apply in Dublin.
I notice in Dublin there seems to be a lot of multi unit houses up for sale. There are an awful lot of for sale signs on the N C Rd between The Phoenix Park gates and Phibsboro These are very much at the low end of the rental market. Landlords already seeing the writing on the wall perhaps
@Niall, do you have a source for the “40% of private sector tenants are assisted by DSP”. I couldn’t find any recent statistics on the total rented market and had to resort to Census 2006 to get a guide, which suggests that in 2011 that approx 150,000 households rent which if correct presumably means that rent assistance applies to nearly 2/3rd of households.
Joan Burton’s PQ in November mentioned people in receipt of rent assistance, but presumably in the case of a couple living in a property, only one of the two is in fact paid. So people in receipt presumably equals households.
@ NWL It was the figure mentioned by the Minister this morning on the radio. I seem to remember Dan Boyle mentioning a similar figure some time ago. I have some statistics for the number of recipients of Rent & Mortgage supplement.
In relation to Rent supplement the number of recipients @ 18th Nov was 96,109, however I don’t have a breakdown between individuals and families. This breakdown was not made available to me and I am not aware as to whether it is available. Families are much more likely to be housed by local authorities. so I agree that there is likely to be a larger number of single people in private rented sector. Local authorities have seen families as a greater priority. However Dublin City Council has dome some very good work with older single people.
Irish recipients make up nearly 64% of claimants with non nationals slight over 36%, with Pole accounting for 9.4%, UK 5.7% Lithuania 3.1% Nigeria 2.3%. Latvia 1.95% & Romania 1.76%, nationality seems to play a major role.
There also seems to be a strong link between lone parents and rent supplement. While the number of foreigners claiming OPF is around 15%, they made up 30% of new claims in the past year. (A word of warning, some of those classed as foreigners by DSP, may not see themselves as such, e.g. UKs of Irish extraction.)
All of Dublin accounts for 35.3%, all of Cork is 11.1%
The Community Welfare Officers are now fully integrated into DSP and I will try to see whether I can obtain a more detailed analysis.
However if I was to make a few wide sweeping statements, I would say that the many of the Irish recipients are single people or lone parents with the non nationals being much more of a mixture with perhaps a lot more families among them because they had not bought houses and would not be in local authority housing..
On the child benefit file there is approx. 40,500 Polish children in about 27,100 families, which would suggest that a much higher proportion of the foreigners have children.
I expect the mass return of the bedsit to the Irish property landscape(Not that it ever really left). Sure, you could convert one of those two room apartments into three bedsits if you removed the kitchen.
@ NWL,
“Residential rents in Irelandhave risen by 4% over the past year and looked set to continue rising. This morning’s announcement should temporarily reverse that trend. ”
I’m not sure… most leases are for a minimum of 12 months. However landlords are getting squeezed on the number of costs which are non tax deductible, hence prices have to go up.
Now it is the turn of the tennent (unfortunately).
Despite the fact that property continues to fall in price, I still can’t make out if it is a worthwhile investment even if you were given a house for free. I suspect one would be better off putting money elsewhere.
@Sporthog, there is a constant tug of war between landlords and tenants and the setting of rents. What I mean by the statement above is that on the tenant side, the amount of specific assistance given for rent has reduced substantially and all other things being even, demand in financial terms has reduced and you would consequently expect rents to drop. Yes there are other considerations, and over the past year landlords have been winning the tug of war as evidenced by a 4% increase in rents. But I will stick with the view that a 23% average reduction in rent assistance levels will “temporarily reverse that trend”.
All this will do is drive more tenants into poorer accommodation. If any of this falls on landlords, which it will, expect to see more or them handing back keys and flocking to new beginnings ultimately the banks balance sheets will take further hits.
With unemployment rising in the land of the decklanders I expect to see more people trying to move back into the city centre if only for their mental health.
1. why is there more lolly for a “Couple with No Kids” than “Single”?
2. why is there more lolly for non-shared accomodation? This is an incentive to make a bigger claim.
Who did they ask for these stat’s that could split property. And exactly what kind of property rents for €475 in Dublin.
shadow inventory will be significant factor in rental rates,sorry hold on they are not actually ‘renters’ yet,these numbers are from only FOUR financial institutions.There are 25,000 properties with defaulted mortgages,basically getting ‘subsided’ by other taxpayers.Is the plan to allow these properties/owners/renters to lurk out there as shadow inventory,to stay there indefinably not paying either a mortgage or ‘rent’.
“The data contains approximately 74,000 loans in arrears at the end of 2010, associated with 63,000 properties. Of these, 24,011 properties have at least three months worth of repayments outstanding on their mortgages.
Approximately 31 per cent of mortgaged properties, or 47 per cent of the value of outstanding loans, are found to be in negative equity at the end of 2010.”
“The Irish Mortgage Market:
Stylised Facts, Negative Equity and Arrears”
Click to access 12rt11.pdf
@NWL
There is something pretty obnoxious and utterly inconsistent with Govt policy in relation to the issue of rent and the current rate at which it is charged.
On the one hand they say today that given the real cost of renting they are insisting on right sizing rental supplements to the market rate charged and yet they feel constitutionally constrained in allowing business tenants right size their rental arrangements with landlords for fear that the precious upward only rent review cannot be amended on the basis of some obscure archaic constitutional black hole which we’re told (reasons not published) would see a bevy of landlords down in the High Court. Give me a break.
If there was ever a case of protecting the elites and sticking the boot into the lower social ends in society this is surely it.
I see this having a very material impact on nominal rents and believe the assumptions of stable rents for the forseeable future is wishful thinking. Heres the deal for property prices:
Market asking yields per Daft.ie in July 2007 (market peak) 3.12
Adjustment to bring asking rents to agreed contracted rents (5% discount market average) 0.95
Contracted gross yield at peak 2.96
Adjustment of 30% in nominal to end 2012 – latest Daft.ie survey is -25% from peak. Additional 5% drop now expected. 2.07
Gross Yields per recent Allsops sales 8.5
Minimum peak to trough market average fall now expected 75.6%
i.e. (8.5-2.07)/8.5 = 76.6%
You are right the government are tying themselves up in knots protecting the elites. They will not make a decision based on what is good for the country. They produced a fictional constitutional opinion, as you say, never published, to state they could not give commercial tenants market rents, when at all times they had the opinion of the top constitutional lawyer Gerard Hogan who said there was no difficulty and that the government could bring in the legislation. Extracts of Gerard Hogans opinion were published on this blog under the title “Fine Gael called “LIARS” in metre-high headlines on Grafton Street premises”.
In relation to the rent supplement, it was the political decision to move away from the council housing system to using private developers that has created the current mess and left vulnerable people dependent on often sub- standard private builders e.g. Priory Hall and the rent supplement. The building boom was partly driven by the rent supplement system. One piggy backed on the other and the system is unsustainable. This is just the start of the dismantling of the rent supplement system.
like to amend my comment, got overexcited.
The 2011 comparison is wrong.
The drops are not nearly as big as being suggested above.
The previously rent limits were last changed in 2010, can be found at the link below
http://www.welfare.ie/EN/Press/PressReleases/2010/Pages/pr100610.aspx
outrageous spin by landlords found all over the airwaves today and going wholly unchallended by the supposed journalists of this country.
@Conor, many thanks. I was unable to find the old rates on the DSP website today and used those printed in a regional newspaper. Corrections made. The maximum reduction is 29% and the average is 13%.
I thought the expected ‘real’ reduction is about 22m on 500m, or about 4.5%. This is in terms of what is expected to be actually paid, as opposed to reductions in maximum levels. Isn’t this the real measure of the reductions?
Although, what you could say, is that this will almost certainly be followed by at least a few more years of similar reductions. And, this is the problem that the property market faces -persistent downward pressure on prices caused by this, as well as many other factors, like reductions in net wages for public sector workers…….
@KOR, not sure where the €22m comes from in your comment but the Budget 2012 document projects savings of €55m per annum (page 14 of the attached)
Click to access Summary%20of%202012%20Budget%20and%20Estimates%20Measures%20Policy%20Changes.pdf
This is to come from “increase minimum contribution and review rent limits” so less than €55m will come from rent limit reductions. The simple average reduction is 13%.
Source
http://www.irishtimes.com/newspaper/breaking/2012/0116/breaking50.html
I think there is real problem working from the maximums when actual practice may be closer to the new limits. A 4.4% seems realistic to me, but the real problem, as I said, is where this is going.
@KOR, thanks. I wonder is the IT mixing up the saving on the mortgage interest supplement payment which is shown on page 14 of the Budget 2012 document at €22.5m.
Click to access Summary%20of%202012%20Budget%20and%20Estimates%20Measures%20Policy%20Changes.pdf
No, I think YOU’VE over egged the decrease……
http://www.independent.ie/national-news/landlords-hit-as-rent-welfare-cut-2989650.html
http://www.rte.ie/news/2012/0116/rent.html
Unless there’s some spin going on.
@KOR, I agree with you that €22m is being reported in several media outlets as the saving on the rent assistance allowance.I’m merely saying that the Budget 2012 document which sets out in detail the savings to be made, says that the adjustment to “increase minimum contribution and review rent limits” is to deliver savings of €55m. Maybe €33bn is to come from increasing the minimum contribution.
The Census 2006 figure of 128,696 is for rented accommodation that was furnished or part-furnished. There were also 16,621 in unfurnished rental accommodation. That gives 145,317.
Also from what I can see there were 1,469,521 households in the 2006 Census. That gives a rental rate of around 9.9%. There were also 21,701 who were “occupied free of rent”. Applying that to the implied number of households in 2011 gives 170,000 households renting. Given the stalling of the property market I would guess it is higher.
Average rents as of 15th of Jan
This topic was covered by RTE 9pm news.
It included this noteworthy comment from Margaret McCormick from a group called the Irish Property Owners Association…..
” … unacceptable that the market rent is being forced down by the government.”
hmmm.
[…] a 3.0% increase (mostly recorded in February and October 2011). At the start of January 2012, the Department of Social Protection reduced its rent assistance payments by up to 29% (an average of 13%) and the Department says that some 40% of the rented market in the […]