Thursday 27 October 2016

Alan Kelly slams 'cowards' in Fine Gael for criticising him over rent controls

Minister Alan Kelly
Minister Alan Kelly

AN EXPERT economic report for part of embattled Environment Minister Alan Kelly’s own department warned the justification for a rent freeze is “relatively weak”.

Two separate analyses for the Government say bringing in rent controls will actually damage the market for tenants.

The uncertainty caused by the Coalition’s bungling of rent policy is being blamed for driving up rents and limiting investment in property.

But the under-fire minister yesterday hit out at “cowardly” elements in Fine Gael who he says are briefing against him.

Mr Kelly also denied that he rejected a Budget deal which would have benefited lower-income families as he dug in demanding a rent freeze.

And it was claimed a meeting where the plan was to be discussed was cancelled by Taoiseach Enda Kenny on the day before the Budget, thereby stalling any progress.

Government sources have disputed this version of events, saying a “suite of measures could have been announced on Budget Day” and that the meeting with Mr Kenny would only have been significant if a deal was already “sorted out”  –  which it wasn’t.

Mr Kelly is understood to have believed that by agreeing to the pre-Budget compromise he would have weakened his hand when trying to negotiate for rent certainty afterwards.

The Labour Party deputy leader is now being nicknamed ‘Calamity Kelly’. But he said he takes “no notice of anonymous commentary” after senior Government figures criticised his handling of the housing crisis. 

The Irish Independent has now learned that analysis for two agencies attached to the Department of the Environment and Department of Finance’s own in-house experts warned of the consequences of bringing in the rent controls.

A report by DKM Economic Consultants looked at the possible introduction of a range of regulatory options, including full rent control, links to inflation and rent caps.

The report concluded the regulation “could potentially reduce the supply and quality of rented accommodation and thus distort the market further, in the absence of any incentives to stimulate supply”.

The Rent Stability in the Private Rented Sector report was prepared a year ago for the Housing Agency on behalf of the Private Residential Tenancies Board.

It says the “theoretical justification for rent regulation is relatively weak and is attributed to the unintended consequences which arise for tenants”.

Potential negative impacts listed include “black market transactions, lower quality housing, reduced mobility and more importantly a negative impact on new and existing supply”.

Economists in the Department of Finance also conducted “detailed research” for Minister Michael Noonan when the rent control proposal was tabled.

“There are no examples of rent controls delivering a positive outcome. It does have a very negative impact on investment and supply though,” a Government source said.

Sources close to Mr Kelly noted that two other reports, one by the National Economic Social Council and one by the OECD, recently backed regulation. They also argued that the DKM report considered long-term regulation as a negative but was more open to short-term measures.

“The main point is that investors worry far more about volatility than regulation,” the source said.

Speaking in Athy yesterday, Mr Kelly said: “Alan Kelly on his own cannot solve this issue. It’s very simple – I cannot solve this issue without co-operation across a whole range of other departments.”

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