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Minister Murphy’s address during the Seanad debate on the impact of Short Term Lettings on the Housing and Rental Markets

Published on Tuesday, 14 Nov 2017
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Thank you, Cathaoirleach.

Thanks to members of the Seanad for providing the opportunity, this evening, to discuss the report of the Joint Committee on Housing, Planning & Local Government on the Impact of Short-term Lettings on Ireland’s Housing and Rental Market and my plans to address this.

I want to thank the Joint Oireachtas Committee on Housing, Planning and Local Government for their work in preparing their report on the sector. I am pleased that, broadly speaking, the recommendations of the report mirror the anticipated approach I hope to propose.

The Strategy for the Rental Sector, published nearly a year ago, recognised the potential issue of significant numbers of properties being withdrawn from the long-term rental market for use as short-term tourism-related lettings.  It recognised the negative impact this would have for the supply and availability of residential rental accommodation.

As the Committee’s Report states, it is difficult to accurately measure the extent of the different forms of short-term letting and to estimate the impacts on the rental market and the availability of housing but we are aware there is the real potential for a more substantial impact in the future.

Accordingly I established a Working Group, made up of representatives from my Department, Finance and Jobs, Enterprise & Innovation, An Bord Pleanála, Fáilte Ireland, the RTB, and Dublin City Council, to develop proposals for the appropriate regulation for management of short-term tourism related lettings taking into account the Government’s overall housing and rental policy objectives.  I have asked this group to report to me before the end of the year.

There are three broad categories that this may affect.  Homeshares, occasional short term letting of apartments and full time short term letting of apartments.

I want to say that I support the practice of “Home sharing” – i.e. people providing overnight and short-term accommodation in their own homes - it is a good thing. It can be an important source of income, helping “home sharers” to meet the costs of mortgages, rents or other household expenses and hence support tenure security.  It also supports tourism and associated economic activity and even social and cultural exchange.  Home sharing does not reduce the number of residential units available in the economy.

In contrast, the reason that we have to carefully monitor and, in some cases, restrict short term lettings is because it may divert landlords, who normally provide residential rental accommodation, to short-term letting to tourist and business traveller customers.  Similarly, people may purchase or rent properties specifically for short-term letting as an investment option, taking them out of residential market. 

Short-term letting under either of these scenarios, would involve a direct loss of units in the rental sector or the broader housing system.  They would mean less long-term and secure accommodation available to the growing numbers of families and people who need it in high demand areas and can’t be allowed to continue.

I absolutely recognise the potential for positive impacts of short term letting though platforms such as Air BnB, such as increased economic activity and tourism revenue.  But in the context where the housing system is under severe pressure, the positive impacts may be outweighed by the negative ones.

Nor do we want to deny people the opportunity that short-term letting – in the traditional B&B manner or via on-line platforms – gives them to let out rooms in their homes as a means of earning some extra income.

Recognising this essential duality in short-term letting – the difference between the home-sharing host and the commercial operation, where properties are used primarily or entirely for short-term letting – is key for both our understanding of the sector and for the policy and regulatory response.  This is strongly reflected in the Committee’s Report and recommendations and strongly influences my own thinking as we move to developing long term proposals to manage this issue.  Fortunately we haven’t been affected by the same rate as other cities. And thankfully we can learn from approaches already taken elsewhere.

Proposed Regulation
We have to develop a nuanced policy response to this issue.  A response that provides clarity to property owners, enables individuals to rent their apartments in a way that protects their neighbours and is consistent with the existing planning of their dwelling.  A policy response that distinguishes between the occasional letter and the structured, full time short term lets of some landlords, which removes those properties form the local rental market.  It will also recognise that in many parts of the country, there is less pressure on the rental sector than, for example, in the centre of Dublin, and so a nuanced, balanced approach is needed to help everyone get the best out of their local situation.  In some places short-term letting will pose a risk to the rental stock, while in others it could provide an important opportunity for landlords to make profitable use of properties that they have difficulty letting.  And we shouldn’t forget the positive impact that increased occupancy can have on local services and businesses, where occupancy might traditionally be low.

As such, the primary goals of the regulatory proposals are to:

  1. Reduce the market impacts of short-term rentals on the long-term residential rental market;
  2. Facilitate the use by resident householders of unused capacity in their homes for short-term letting and the associated economic benefits for them and the local economy;
  3. Ensure the quality of accommodation services provided, consumer protection and safety; and,
  4. Limit and mitigate the costs associated with high volumes of short-term lettings borne by residential communities.

What is currently envisaged is a licensing system for both intermediaries – such as websites and management companies – and persons renting out both single rooms and entire properties as a short-term lets.

The precise details regarding inspection, monitoring, enforcement limit setting, fees as well as consideration of local factors, are still being finalised by the Working Group.

Planning Circular
As a first task, the Working Group was asked to develop guidance for Local Authorities, when considering planning applications in relation to short-term letting.  This work has been completed and a circular was issued by my Department last month.  While I am here, I would like to take the opportunity to clarify some points that have been raised in relation to the circular.

The purpose of the Circular is to address issues where an application is made for permission under the Planning and Development Act 2000 for material change of use for short-term letting purposes.

Let me just be very clear.  The circular has not made any change to the planning and regulatory framework in relation to short-term letting.  It simply provides transitional guidance to Local Authorities until a more developed regulatory structure can be finalised.  

The circular applies to apartments only, not houses, because of the different rules already in place about a material change of use. Importantly, planning regulations have traditionally recognised that home sharing and overnight guest accommodation is permissible in certain circumstances in houses, but not apartments, without a need to obtain planning permission.  Let me just explain and clarify that - owners of homes are in full control of the area surrounding their homes whereas apartment owners share facilities such as doors and corridors surrounding their homes.  So we have to treat houses and apartments a little differently, not because of the impact on the owner of the property, but because of the impact on the other owners in a shared facility setting such as an apartment block.

Under the Planning Act, all development, including a material change of use, unless specifically exempted under the Act or associated Regulations, requires planning permission.  Short-term letting in apartments, therefore, may  - and I would stress may - constitute a material change of use and, if it does, it requires planning permission.  It is up to the owner of the property to seek guidance from their Local Authority as to whether or not change of use permission may be required.

This is the current position and has not been altered by the recent guidance.  The Department is open to assist web-based platforms, such as Airbnb and others, where they do not yet do so, to provide the necessary information on their platforms to ensure that property owners using their services are fully aware of the applicable planning requirements and on how to meet them.

The guidance provides that, when considering an application for planning permission for a material change of use in an apartment to allow short-term letting, consideration should be given as to whether the short-term letting will be for more than 60 nights, will cater for more than 4 guests, and involve more than 2 rooms and whether more than 20% of the apartments on any floor of the building are being used for the activity.  This refers to applications in relation to apartments only.  It does not relate to houses.

This guidance is a first step. The broader licensing and regulatory approach, on which the Working Group is developing proposals, will provide the nuanced and comprehensive framework that I believe we need to meet our varying goals within the sector. I will revert to both Houses with any proposed amendments to the planning code that may be required on foot of the Working Group’s report.

Research  Commissioned
One thing I would particularly point out to Senators is that, throughout the Committees examination of short-term letting and its impacts, all stakeholders agreed that there is a lack of quality data in order to inform an evidence-based approach to the problem.

Most stakeholders consider that short-term lettings are having an adverse impact on the residential rental market, particularly in Dublin, but that much of the evidence presented is anecdotal or based solely on opinion.

To try to remedy this, Dublin City Council, in conjunction with Fáilte Ireland, are commissioning a study to assess the impact of short-term letting on Dublin’s residential housing market.  In addition, any proposed licensing regime will need to generate quality data so that policy makers in the future will be better informed.

ESRI and Reports
Before concluding, I would like to refer to today’s reports from the ESRI on house prices and on rents.

Both reports point to a strong demand for housing, bolstered by economic recovery and falling unemployment which, coupled with a tight supply of housing, is exerting a strong upward pressure on house prices, and rents.  A continued and sustainable supply of new homes across all tenures is the solution.  The Rebuilding Ireland target is to increase annual supply of new homes to 25,000 by 2020.  

Regarding the ESRI Special Article on House Prices: The report, published today, seeks to determine if house price growth is divorced from key economic fundamentals:  employment levels; population growth; and disposable income.  The ESRI paper was produced under a joint research programme, operated by the ESRI with the Department of Housing, Planning and Local Government.  The conclusion is that prices appear to be at or close to the levels expected – based on our economic recovery – and there is no evidence that other factors, such as a credit bubble, are responsible for price inflation.

While the results of the paper underscore the challenges we face in the housing area, it is hugely important that research such as this is conducted to inform our understanding and to provide a sound, empirical basis for policy responses.  The clear message from the paper is that the ongoing recovery in the economy will continue to exert upward pressure on house prices.  In view of the strong growth envisaged, the ESRI notes that Government policy needs to focus clearly on housing supply.  And that is exactly the focus of the Government’s Rebuilding Ireland Action Plan.

Regarding the report – We are well aware that there are acute pressures in the rental market, driven by rising demand, a result of the economic recovery, by a lack of supply and by the high costs that highly indebted landlords face in servicing their mortgage loans.  These pressures are borne out by the trend highlighted in the data – which is upwards – but I would dispute the reported rate of increase.

It is important to note that data measures rent asking prices, which tend to be higher than the rents actually being paid.  The low number of properties being advertised on means that the figures are based on a relatively small sample and may not be entirely representative.  The Rent Index Report issued by the Residential Tenancies Board (RTB) is based on actual rents in registered tenancies. Its figures are based on excess of 20,000 registrations each quarter.  The RTB data is used by the Government to monitor rent prices.  The RTB’s Rent Index report for Quarter 3, 2017, which is expected next month, will provide information on actual rents agreed for tenancies established in Q3 2017.  However there is no doubt that rent increases continue to place huge pressures on tenants, particularly those who are seeking new accommodation.  The data in the report further underlines the need for and the relevance of the Government's Rent Predictability Measures.  

The Department carried out a review of the Rent Predictability Measure over the Summer, based on the RTB data for the first 2 Quarters of 2017, with a public consultation and inputs from Local Authorities.  The review found that the rent predictability measure and the rent pressure zones (RPZ’s) are not fully achieving their desired effect, due to non-compliance by some landlords with the RPZ requirements (e.g. around using the refurbishment exemption to charge higher rents), and with some tenants willing to pay over the legal rent increases permitted.

On foot of this review, I announced a number of changes that will be made to strengthen the impact and effectiveness of the Rent Pressure Zones.  These will clarify and tighten up the rules for exemptions and make it an offence to charge rents above those permitted by the legislation, and the RTB will be given the powers to investigate and prosecute landlords who implement such increases.

Government policy is clearly focused on increasing housing supply and particularly the supply of homes at more affordable price points.  The ESRI analysis underscores the need to boost supply across all tenures – private, rented and social housing – to meet current and pent-up demand and mitigate any further increases as the economy recovers.

To conclude, I would like to thank the Committee for its thoughtful and substantive report on the impact of short-term letting and for the recommendations which it contains, which are and will continue to be extremely helpful as we move forward with the design and establishment of an appropriate regulatory framework to both protect our housing and rental supply and also take advantage of the benefits that this new and growing shared economy provides.