Sunday, 13 June 2010

Revised rent supports

An Saoi: The Dept. of Social Protection (formerly Dept. of SFA) has finally announced the revised rent supports, effective from now until Secember 2011. It is unfortunate that An tAire Ó Cúiv did not publish the Report on which the revised figures are based. The Report was prepared from, “Information from the Private Residential Property Board databases; the CSO Rental Indices, in addition to the various rental market reports was utilised. Consultation with certain local Superintendent Community Welfare Officers also took place as part of the review.” It certainly would make interesting reading.

It has been suggested in the past (and the Minister made reference to it in interviews) that rent support had become a floor in the private rental market. Our friends in Daft do a comprehensive quarterly report of advertised rent levels, see for example their Quarter 1 2010 Report . Agreed rents may be slightly lower, but this does not devalue the importance of these reports.

I decided to do a comparison between the requested rents and the level of rent supports. In Table 1 the rents quoted are for a two bed unit and the level of rent support is the maximum available for a one child family (one or two parent). The Discrepancy is the percentage difference between requested rent levels and the revised support levels.

Table 1

As can be seen the variation is quite considerable. It would also suggest that outside of urban Cork, Galway & Sligo, all of which have unusually high student populations, the level of rental support may be excessive and indeed acting to prevent rents falling.

In Table 2 the rents quoted are for a three bed unit and the level of rent support is the maximum available for a family with two children (one or two parent). Again, the Discrepancy is the percentage difference between requested rent levels and the revised support levels.

Table 2

The pattern is somewhat similar with the discrepancies in the student dominated markets of Sligo Galway & Cork standing out. In general the discrepancies are less than those in Table 1.

The rents listed above are of course from the first quarter of 2010 and it will be the third quarter before the announced reductions have fed into the system. The reductions in rent supports are to be welcomed but leaving the current levels in place until 2012 seems excessive. A further review of rent support levels in six months could yield substantial further savings to the State.


Nat O`Connor said...

There is certainly a lot of inefficiency in the rent supplement system, however your figures do show that the cuts in some places will bring the payment further below the DAFT average rent asking price (e.g. Cork and Galway cities). That will put a significant number of households in difficulty.

The UK system is more flexible. Housing Benefit is calculated on the basis of data on property size in Broad Market Rental Areas, which is updated monthly. The Local Housing Allowance is set at the mid-point of rents in that area, making half of them affordable.

And there is an incentive for people to shop around. "If your rent is lower than the Local Housing Allowance Rate, you will be able to keep any excess benefit up to a maximum of £15 per week."

The Irish system is based on a cumbersome one-size-fits-all approach with fixed payments tied to large HSE administrative boundaries, not realistic boundaries within the housing rental market. There is also a lack of good data, although the PRTB database could provide a lot of what's needed.

Shoe said...

Nat has a point, but you are factually inaccurate about the influence of student housing in Cork and Galway. 10 or 15 years ago most students in these areas lived in the private rented sector but most now live in campus or private funded section 50 student accomodation. They are not in competition with the normal market rental population.

What is probably influencing lower levels of support in these cities is the smaller city boundaries (esp in cork) coupled with housing stock mostly built for owner occupiers and not always suited to the current demands in private tenancies.