The latest DAFT report is out covering rents, and PE's Michael Taft has written the quarterly commentary. The headline news is that rents have 'stabilised' and have started to rise - though whether this presages a long-term upward trend remains to be seen. However, the commentary goes behind the numbers to examine a
' . . . fragmented, under-capitalised 'cottage' industry lacking the professionalism and modern synergy with a strong regulatory culture that prevails in other EU countries.'
The full report and commentary can be downloaded here.
Showing posts with label Rent. Show all posts
Showing posts with label Rent. Show all posts
Tuesday, 16 February 2010
Tuesday, 18 August 2009
Lower Rents Still Higher Than Rent Supplement in Dublin
Nat O'Connor: Rents drop 17% over 12 months according to DAFT’s latest Rental Report. This headline will be referred to in the next Budget to justify cutting Rent Supplement payments. But it isn’t that simple.
As noted previously, the Rent Supplement maximum payment will cover a significantly different proportion of average rents, depending on what part of the country you live in. So people in some areas are more likely to be squeezed into poorer accommodation and/or to make further top-up payments from their social welfare than are their equivalents in other areas, by the mere chance of what administrative area they live in.
Another problem with the headline figures is that it is an average across all housing units, from one-bed studios to 5 bed+ houses. However, some detail is given on page 7 of the report based on the number of bedrooms in the dwelling. So, let’s illustrate what Rent Supplement will do for you (bearing in mind the limits of the available data):
A three-bed unit will cost an average of €695 in Waterford City, €780 in West Leinster, €1,273 in Dublin 8 or €1,486 in Dublin 1.
Rent Supplement for a family with 3 or more children is the highest possible Rent Supplement payment, and it varies across the administrative regions of the health services (who administer the payment). Including the family’s contribution of €103 per month, the maximum payment is €788 in Waterford City, €909 in Meath or €1,203 in Dublin.
So far so good, if you don’t live in Dublin. Maximum Rent Supplement covers average asking prices. But given that it has already been cut and rents have fallen, is there really much scope for cutting RS further? Also, it is a maximum, so a CWO can simply decide to pay a lower amount. Do we need a further blanket cut of payment ceilings? Dublin already lags behind by €70 per month in Dublin 8 or €283 per month in Dublin 1, which is a lot of money for a family on welfare. So there is a clear problem with how this payment is calculated. And if other social welfare payments are cut in the next Budget, people’s ability to pay for their housing will be put further at risk.
Now take the example of a one-bed housing unit, which will be an apartment in most cases. A one-bed will cost an average of €532 in Waterford City, €511 in West Leinster, €849 in Dublin 8 or €892 in Dublin 1.
Maximum Rent Supplement for a single person living on his/her own (plus contribution) will cover €571 in Waterford City, €571 in Meath or €632 in Dublin. So, it’s sufficient in Waterford or Meath, but €217 too low in Dublin 8 and €260 too low in Dublin 1 (and these are not the most expensive areas in Dublin either). There is a massive gap in Dublin between average rents and Rent Supplement, which is likely to force single people into the cheapest accommodation and to make further top-up payments from their welfare payments.
Some people will say that we should expect people on Rent Supplement to move into the cheapest accommodation. But let’s examine this logic.
If lower Rent Supplement forces people into the cheapest accommodation, the taxpayer ends up subsidising the worst flats, which are often owned outright and can undercut modern apartments (e.g. buy-to-let) in terms of low rent. It also increases ghettoisation, as families on welfare become priced out of large areas of Dublin. The fact that market rents are lowering is an opportunity to move people into better quality, modern apartments and to achieve a better social mix. These are stated goals of national housing policy.
Bedsits have been banned, which is a move towards higher quality standards in the private rented sector. But this means that rents will be higher. So, we have to look at how we meet those costs. Rent Supplement will cost an estimated €490 million in 2009. But part of the problem is the decision to pay near-market rent rates to private landlords, rather than take a long-term view and build (or acquire) more social housing, which very soon becomes a cheaper option for the taxpayer.
As noted previously, the Rent Supplement maximum payment will cover a significantly different proportion of average rents, depending on what part of the country you live in. So people in some areas are more likely to be squeezed into poorer accommodation and/or to make further top-up payments from their social welfare than are their equivalents in other areas, by the mere chance of what administrative area they live in.
Another problem with the headline figures is that it is an average across all housing units, from one-bed studios to 5 bed+ houses. However, some detail is given on page 7 of the report based on the number of bedrooms in the dwelling. So, let’s illustrate what Rent Supplement will do for you (bearing in mind the limits of the available data):
A three-bed unit will cost an average of €695 in Waterford City, €780 in West Leinster, €1,273 in Dublin 8 or €1,486 in Dublin 1.
Rent Supplement for a family with 3 or more children is the highest possible Rent Supplement payment, and it varies across the administrative regions of the health services (who administer the payment). Including the family’s contribution of €103 per month, the maximum payment is €788 in Waterford City, €909 in Meath or €1,203 in Dublin.
So far so good, if you don’t live in Dublin. Maximum Rent Supplement covers average asking prices. But given that it has already been cut and rents have fallen, is there really much scope for cutting RS further? Also, it is a maximum, so a CWO can simply decide to pay a lower amount. Do we need a further blanket cut of payment ceilings? Dublin already lags behind by €70 per month in Dublin 8 or €283 per month in Dublin 1, which is a lot of money for a family on welfare. So there is a clear problem with how this payment is calculated. And if other social welfare payments are cut in the next Budget, people’s ability to pay for their housing will be put further at risk.
Now take the example of a one-bed housing unit, which will be an apartment in most cases. A one-bed will cost an average of €532 in Waterford City, €511 in West Leinster, €849 in Dublin 8 or €892 in Dublin 1.
Maximum Rent Supplement for a single person living on his/her own (plus contribution) will cover €571 in Waterford City, €571 in Meath or €632 in Dublin. So, it’s sufficient in Waterford or Meath, but €217 too low in Dublin 8 and €260 too low in Dublin 1 (and these are not the most expensive areas in Dublin either). There is a massive gap in Dublin between average rents and Rent Supplement, which is likely to force single people into the cheapest accommodation and to make further top-up payments from their welfare payments.
Some people will say that we should expect people on Rent Supplement to move into the cheapest accommodation. But let’s examine this logic.
If lower Rent Supplement forces people into the cheapest accommodation, the taxpayer ends up subsidising the worst flats, which are often owned outright and can undercut modern apartments (e.g. buy-to-let) in terms of low rent. It also increases ghettoisation, as families on welfare become priced out of large areas of Dublin. The fact that market rents are lowering is an opportunity to move people into better quality, modern apartments and to achieve a better social mix. These are stated goals of national housing policy.
Bedsits have been banned, which is a move towards higher quality standards in the private rented sector. But this means that rents will be higher. So, we have to look at how we meet those costs. Rent Supplement will cost an estimated €490 million in 2009. But part of the problem is the decision to pay near-market rent rates to private landlords, rather than take a long-term view and build (or acquire) more social housing, which very soon becomes a cheaper option for the taxpayer.
Monday, 29 June 2009
More Cutting Times (Rent Supplement)
Nat O'Connor: Today’s Irish Times suggests that rent supplement (along with child benefit) is being targeted for cuts by the Special Group on Public Service Numbers and Expenditure Programmes (aka 'An Bord Snip Nua').
Rent supplement is a reasonably large area of expenditure in the national budget. The 2009 Revised Estimates for Public Services give a total spend of nearly €11 billion for Social and Family Affairs, of which the package of supplementary welfare allowances make up €1.1 billion or around 10%. Rent supplement is estimated at €490 million; that is, 4.5% of welfare spending. This represents a steady increase in recent years; for example, it has increased from €151 million in 2000, when rent supplement represented 2.8% of a total social welfare expenditure of €5.3 billion.
The Comptroller and Auditor General conducted a value for money exercise about rent supplement, published in April 2006. Without going into the detail here, the report noted that the payment was not being used for its original, temporary purpose, but is relied on for long-term housing by many households. The long waiting time for social housing can partially explain this situation.
Now, it is generally acknowledged that rents are currently in decline, although there is a lack of available data. Frustratingly, the state body, the Private Residential Tenancies Board (PRTB) has a great deal of information in its database about the actual level of rent paid that could provide a detailed rental index. Likewise Revenue and the Department of Social and Family Affairs may have data on rent levels that could be used to construct a rental index. A limited picture of current rents is available through DAFT, but this data is limited to asking prices not actually paid rent, and only applies to properties currently to let through the DAFT website. Nevertheless, it is possible to use the DAFT report (Quarter 1, 2009) to show the limits of the current level of rent supplement.
DAFT gives an average monthly rent for every county in Ireland, with a breakdown of this information for the larger cities. Although Rent Supplement might be expected to be paid to properties at less than average rent levels in some cases, it is reasonable to assume that rent supplement will provide an equivalent level of support across the country.
This does not appear to be the case, as there is a wide range of difference in how much of average rent will be covered by rent supplement in different areas.
For example, maximum rent supplement for a single person or couple sharing a dwelling varies from €66 to €92 per week. Although this variation is meant to be in line with different rent levels across the country, the payment – plus the €24 weekly contribution the household makes – represents anything from 37% of the average rent level of South County Dublin or 46% in Galway City to 78% of average rent levels in Leitrim or 79% in Laois.
A single person on his/her own is paid a maximum of €85 to €122 per week, depending on the area. Adding the €24 weekly contribution, this equates to 47% to 103% of average rents, depending on where the person is living.
What this variation shows is that there is seemingly a poor alignment of rent supplement with local rent levels (despite the regional rent supplement maximums). This means that households in some areas are much less well supported than households in other areas. One basic anomaly is the fact that average rent levels vary considerably in the city versus the county in Cork, Galway, Limerick and Waterford, but rent supplement remains the same. Similarly, rent levels vary enormously across Dublin, yet there is only one level of rent supplement for the capital, which essentially means that people who rely on rent supplement are effectively excluded from living in large sections of the city.
In this context, it is worth reminding ourselves of the overall aim of Government’s housing policy, which is to “enable every household to have available an affordable dwelling of good quality, suited to its needs, in a good environment and as far as possible at the tenure of its choice”.
It is true that rent supplement levels for families with two or more children can be above the average market rent in some cases. However, caution must be exercised in interpreting this, as rent levels for larger houses are also going to be above average.
It is a very simplistic argument for the Government to make that rents have decreased across Ireland, hence it can universally reduce rent supplement. Cuts across the board will fail to address the fact that rent supplement is already distributed in an illogical and unfair manner. Not least, some of the most vulnerable people (especially single people) already do not receive sufficient assistance to pay for decent housing in many areas. Organisations such as Threshold and the Peter McVerry Trust have long pointed to the fact that many households are required to top-up their rent with additional payments, leaving them with very little to live on.
The Government may have some margin to reduce rent supplement in a few cases. The Comptroller and Auditor General’s value for money report noted that landlords have no incentive to ask for less than the maximum payable and it is possible that the maximum may now be above average in a small number of areas. But the Government can only reasonably proceed to lower rent supplement if its decision is based on good evidence of local rent levels. The current wide variations suggest that the levels of rent supplement are not evidence-based.
Given that the Government has access to data with which it could generate a much more sophisticated national rental index, why is it not using this data in order to more fundamentally revise the level of payments based on local rent levels?
If the Government simply introduces cuts across the board, this indicates to me that not only are they unfairly punishing some of Ireland’s most vulnerable households, but they are incapable of the basic competence required to operate the rent supplement system as it stands, never mind developing an alternative housing policy that would be more sustainable and give the taxpayer a tangible asset (like social housing) for the large amount of money currently paid out to private landlords.
Dr. Nat O'Connor is Policy Analyst with TASC
Rent supplement is a reasonably large area of expenditure in the national budget. The 2009 Revised Estimates for Public Services give a total spend of nearly €11 billion for Social and Family Affairs, of which the package of supplementary welfare allowances make up €1.1 billion or around 10%. Rent supplement is estimated at €490 million; that is, 4.5% of welfare spending. This represents a steady increase in recent years; for example, it has increased from €151 million in 2000, when rent supplement represented 2.8% of a total social welfare expenditure of €5.3 billion.
The Comptroller and Auditor General conducted a value for money exercise about rent supplement, published in April 2006. Without going into the detail here, the report noted that the payment was not being used for its original, temporary purpose, but is relied on for long-term housing by many households. The long waiting time for social housing can partially explain this situation.
Now, it is generally acknowledged that rents are currently in decline, although there is a lack of available data. Frustratingly, the state body, the Private Residential Tenancies Board (PRTB) has a great deal of information in its database about the actual level of rent paid that could provide a detailed rental index. Likewise Revenue and the Department of Social and Family Affairs may have data on rent levels that could be used to construct a rental index. A limited picture of current rents is available through DAFT, but this data is limited to asking prices not actually paid rent, and only applies to properties currently to let through the DAFT website. Nevertheless, it is possible to use the DAFT report (Quarter 1, 2009) to show the limits of the current level of rent supplement.
DAFT gives an average monthly rent for every county in Ireland, with a breakdown of this information for the larger cities. Although Rent Supplement might be expected to be paid to properties at less than average rent levels in some cases, it is reasonable to assume that rent supplement will provide an equivalent level of support across the country.
This does not appear to be the case, as there is a wide range of difference in how much of average rent will be covered by rent supplement in different areas.
For example, maximum rent supplement for a single person or couple sharing a dwelling varies from €66 to €92 per week. Although this variation is meant to be in line with different rent levels across the country, the payment – plus the €24 weekly contribution the household makes – represents anything from 37% of the average rent level of South County Dublin or 46% in Galway City to 78% of average rent levels in Leitrim or 79% in Laois.
A single person on his/her own is paid a maximum of €85 to €122 per week, depending on the area. Adding the €24 weekly contribution, this equates to 47% to 103% of average rents, depending on where the person is living.
What this variation shows is that there is seemingly a poor alignment of rent supplement with local rent levels (despite the regional rent supplement maximums). This means that households in some areas are much less well supported than households in other areas. One basic anomaly is the fact that average rent levels vary considerably in the city versus the county in Cork, Galway, Limerick and Waterford, but rent supplement remains the same. Similarly, rent levels vary enormously across Dublin, yet there is only one level of rent supplement for the capital, which essentially means that people who rely on rent supplement are effectively excluded from living in large sections of the city.
In this context, it is worth reminding ourselves of the overall aim of Government’s housing policy, which is to “enable every household to have available an affordable dwelling of good quality, suited to its needs, in a good environment and as far as possible at the tenure of its choice”.
It is true that rent supplement levels for families with two or more children can be above the average market rent in some cases. However, caution must be exercised in interpreting this, as rent levels for larger houses are also going to be above average.
It is a very simplistic argument for the Government to make that rents have decreased across Ireland, hence it can universally reduce rent supplement. Cuts across the board will fail to address the fact that rent supplement is already distributed in an illogical and unfair manner. Not least, some of the most vulnerable people (especially single people) already do not receive sufficient assistance to pay for decent housing in many areas. Organisations such as Threshold and the Peter McVerry Trust have long pointed to the fact that many households are required to top-up their rent with additional payments, leaving them with very little to live on.
The Government may have some margin to reduce rent supplement in a few cases. The Comptroller and Auditor General’s value for money report noted that landlords have no incentive to ask for less than the maximum payable and it is possible that the maximum may now be above average in a small number of areas. But the Government can only reasonably proceed to lower rent supplement if its decision is based on good evidence of local rent levels. The current wide variations suggest that the levels of rent supplement are not evidence-based.
Given that the Government has access to data with which it could generate a much more sophisticated national rental index, why is it not using this data in order to more fundamentally revise the level of payments based on local rent levels?
If the Government simply introduces cuts across the board, this indicates to me that not only are they unfairly punishing some of Ireland’s most vulnerable households, but they are incapable of the basic competence required to operate the rent supplement system as it stands, never mind developing an alternative housing policy that would be more sustainable and give the taxpayer a tangible asset (like social housing) for the large amount of money currently paid out to private landlords.
Dr. Nat O'Connor is Policy Analyst with TASC
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