GAVAN REILLY: It’s not just elite tenants being stung by high rent ruse
You may have read in the last few days about an ingenious ruse being run by high-end institutional landlords in Dublin. In short, unable to fill their properties at the high rent being advertised, they’ll secretly take tenants with an ‘incentivised rate’ while leaving the higher ‘official’ rate on the lease, and disclosing that higher rate to the authorities - and to their own shareholders, who then believe they have a more valuable asset.
Those who believe in the free market as a solution to all economic quandaries will have you believe that this is all routine: the market could not sustain higher rents, and so it is now offering lower ones. This would be true if the market was fully transparent: if everyone else could see the rents falling, they’d react accordingly. Instead what we have is a obfuscation.
If a tenant gets ‘one month free’ and is paying €2,750 for a €3,000 home (preposterous, I know) then there’s simply no way the lease should say the rent is €3,000. If it was actually a €3,000 property, the landlord would be able to get someone to pay it. Remember: value is subjective. There is no handbook that says exactly what mod cons you should get for €3,000, or for €700 for that matter. The going rate is only what a new occupant might pay.
The bigger problem is when you start to realise the impact this has on everyone else. All of Meath is currently designated as a Rent Pressure Zone, meaning annual rent increases are capped at 4%. You’ll be hard pushed to find someone who has had an increase of less than 4% in the last few years. What was supposed to be a ceiling has become the default.
That’s where the impact of everyone else’s inflated rents kicks in. You might think that this wheeze only affects those who live in high-end property, and those are indeed the biggest victims. Someone living in a luxury Dublin apartment block shouldn’t be asked for €3,000 per month if the same landlord is offering the flat next door for €2,750. They are clearly being locked into a lease at higher than the market rate, penalised only by an accident of timing.
(By the way: tenants with ‘incentivised rates’ might face trouble down the line. Landlords can raise rent by 4%, but that applies to the ‘official’ higher rate, not the true lower one. €2,750 can therefore become €3,120.)
But there are trickle-down consequences for everyone else in the rental market. If a tenant knew they could pay €2,750 for a place which is advertised as €3,000, then how could a landlord charge €2,750 for a lesser property? They’d have to lower the cost to compete. Suddenly, those who charge €2,500 also have to come down; then so do those charging €2,250, and €2,000, and so on. Tenants could exercise their own power , and remedy the imbalance of supply and demand, if only they all realised how they’re being wrongly squeezed.
Don’t forget too: with Covid’s interruptions on the building of new homes, and with continual demands for social housing, the State itself is increasingly becoming the tenant of properties like these. A huge chunk of ‘new’ social housing being added to the State’s books is existing property that local authorities are renting on a long-term basis. Those authorities are given public money with which they enter long-term leases - often for between 10 and 20 years - at a rate equivalent to 80% of today’s market rate.
And today’s market rate is… ah.
Gavan Reilly is Political Correspondent with Virgin Media News and Political Columnist with the Meath Chronicle. Read his column first in the paper every Tueday.