A Chathaoirleach, may I, at the outset, tell you that it is a very great pleasure for me to come to this House and to introduce here the first Bill for which I have been given responsibility in the Oireachtas?
This is a comprehensive measure which repeals and re-enacts, with various modifications, the present law on the subject of rent control. It has three main objects. Firstly, it proposes certain relaxations in the scope of control which the Government consider to be required in the public interest and which can be effected without hardship to tenants. Secondly, it provides an up-to-date and easily ascertainable basic rent for all property which is now let. Thirdly, it proposes to increase controlled rents in cases where landlords are liable for repairs with a view to providing some compensation for the increase in the cost of repairs. I propose to confine myself to these main issues though the Bill contains a large number of other amendments of the existing law. These are of relatively minor importance and are, perhaps, more appropriate for discussion on Committee Stage. They are indicated in paragraphs 12 to 20 of the explanatory memorandum which has been circulated with the Bill.
I think it would be helpful if I pointed out at this stage the types of accommodation which are not affected by this Bill and are outside the scope of the Rent Acts altogether. These are all forms of accommodation provided by local authorities, all houses built since 1941 and all houses over £60 P.L.V. in Dublin or £40 elsewhere. None of these categories has ever been controlled and we are not concerned with them in this Bill.
As regards the relaxations of control which the Bill proposes, the Government, when they came to consider the matter after taking office, found themselves faced with two conflicting reports. On the one hand, the Report on Rent Control presented by the Conroy Commission in 1952 advocated not only the retention of the existing controls but also their extension to all property whether let furnished or unfurnished and whether now in existence or to be built hereafter. On the other hand, the 1957 Report of the Capital Investment Advisory Committee recommended, by a majority, the progressive repeal of the Rent Restrictions Acts over a period of ten years.
Conditions have altered materially since the Conroy Commission reported. At the time the Commission were considering the problem, conditions in this country, as in others, were affected by the Korean crisis. There was a severe housing shortage and general instability of economic conditions. Since then the shortage of housing accommodation has largely disappeared.
In the post-war period local authorities have built nearly 60,000 dwellings. In the same period private enterprise built nearly 50,000 new houses and reconstructed, repaired or improved over 50,000 existing houses with the aid of grants under the Housing Acts. In all, therefore, some 160,000 new or reconditioned dwellings have been provided with the aid of public funds, sufficient to house over a half a million people.
Apart from this radical alteration in the supply position, economic conditions have become stable and living standards have improved. It would be wrong, in these circumstances, to base rent control policy on the assumption of a long period of economic instability. Accordingly, the Government have decided that no further extensions of control can be justified in present circumstances and that the public interest requires such relaxations of control as can be effected without imposing hardship on tenants.
The actual proposals in the Bill are that control will be removed from owner-occupied houses, from houses having a valuation exceeding £30 in the Dublin area and £25 elsewhere of which the landlord gets vacant possession and from newly-constructed, self-contained flats. No subsisting tenancies will be affected and control will continue to apply to future lettings of pre-1941 houses not exceeding these valuations—unless they become owner-occupied—and to future lettings of rooms or flats, other than newly-constructed, self-contained flats, in pre-1941 houses. The most important immediate benefit to be derived from these relaxations of control is the improvement of the supply of rented accommodation in the cities, where the shortage is greatest, by converting into self-contained flats the large houses which are no longer economic for use as single dwellinghouses.
These proposals are in pursuance of the policy announced in the White Paper on Economic Expansion and it is proposed to review rent controls from time to time in the light of the housing position and having regard to the need to avoid hardship to existing tenants.
The provisions of Sections 7, 8 and 9 are intended to provide an up-to-date and easily ascertainable basic rent for all premises which are now tenanted. The present position in this respect is unsatisfactory inasmuch as the basic rent is not known unless it has been determined by the Court under the 1946 Act or unless it has been automatically determined under that Act, in the case of premises brought under control in 1944, by virtue of a letting on 7th May, 1941, or within five years before that date. There is, therefore, an element of uncertainty attaching to many of the controlled rents now being paid and there is also the practical disadvantage, from the landlord's point of view, that where the basic rent is not known he cannot increase the rent, even where the law might permit him to do so, without the agreement of the tenant. In such a case the landlord is put to the expense of having the Court determine the basic rent and if the tenant is represented at the proceedings he is put to expense also. Sometimes, indeed, the expense of having the basic rent determined is out of proportion to the increase to which the landlord is entitled and, as a result, he is compelled to forego the increase.
Section 7 provides for fixing the basic rent of any controlled dwelling which was let on 1st February, 1960, or within three years before that date. In such cases the basic rent will be the rent actually being paid on 1st February, 1960, or when the dwelling was last so let, as the case may be. Where the landlord pays the rates, the amount of the current rates will be deducted from the rent being paid to arrive at the basic rent. For example, if the rent is 15/- weekly, the landlord paying rates, and the rates amount to 5/- weekly, the basic rent will be 10/- weekly. If the rent is £1 weekly and the tenant pays the rates direct, the basic rent will be £1.
It is to be expected that virtually all tenants in occupation on 1st February, 1960, were paying rents which approximated or corresponded to the lawful rent. It would be surprising if it were otherwise in view of the existence of control for nearly forty-five years. The Bill recognises that there may be exceptional cases where the rents being paid on that date were excessively low or excessively high. For example, a house might be occupied by a relative of the landlord at a nominal rent; or the present tenant might have agreed to pay an exorbitant rent. In either case it would be inequitable not to afford the landlord or the tenant, as the case may be, an opportunity to have the basic rent revised and Section 8 provides accordingly. In order to avoid unnecessary or frivolous litigation it is proposed that the Court should not disturb the basic rent unless it falls short of, or exceeds, by 12½ per cent. the rent which otherwise would be fixed by the Court. However, if a tenant's rent on 1st February, 1960, exceeded, even if only slightly, the amount of the lawful rent as previously determined by virtue of a Court Order, he may have his rent revised to the correct figure under the provisions of subsection (3) of Section 8.
Normally the criterion to be used by the Court in deciding whether a rent being paid on 1st February was more than 12½ per cent. too high or too low will be the 1941 level applicable to premises to which Chapter 2 of Part II of the Act of 1946 applied, but there are two cases in which the lower level applicable to the older controlled houses will continue to be the criterion.
These are the cases envisaged by paragraph (b) of subsections (1) and (2) of Section 8. Subsection (1) provides for the eventuality that an excessively low basic rent has been determined under Section 7 and enables the landlord to apply to the Court to have it revised. Subsection (2) deals with the converse case, that is, where the tenant applies for revision of an excessively high basic rent. Where such an application is made by a landlord of one of the older controlled dwellings, or by a tenant of such a dwelling with a valuation not exceeding £10, it is provided that the Court is to look to the rents of comparable dwellings, that is, those dwellings which have remained under control since 1915 and whose rents are related to 1914 levels, and not to the higher levels applicable to the dwellings which became controlled in 1944.
In some cases, no basic rent will be automatically fixed under Section 7 and it will be necessary for the Court to fix it. This will only be necessary for the comparatively few controlled dwellings which were not let on 1st February, 1960, or within three years before that date or about which evidence of such a letting is not forthcoming.
Section 9 provides that in these cases the criterion to be adopted by the Court in fixing the basic rent will be the basic rents of comparable premises which were controlled under Chapter 2 of Part II of the 1946 Act, that is, premises which became controlled in 1944 on the basis of the rents prevailing in 1941. This means that premises coming within the scope of Section 9 and which at present would have their basic rents determined in relation to the 1914 level will have the basic rents determined by reference to the higher 1941 level of rent.
As I have said, Section 9 will apply only to the relatively few cases where there is no letting at present or where no evidence is obtainable about such a letting. For example, it will apply to a future letting of a room or flat, other than a newly-constructed flat, in a house which is owner-occupied at present. And the 1941 level of rents, though higher than the level of rents applicable to the older controlled houses, is not excessive.
The provision of a new basic rent for all dwellings now tenanted will introduce a desirable element of certainty into the rent restrictions code and will reduce considerably the necessity for incurring legal expenses in having basic rents determined by the Courts.
The third main object of the Bill is to allow an increase in controlled rents to landlords who are liable for the whole or part of the repairs. The present levels of controlled rents are well below economic levels and, in the case of the dwellings which have remained under control since 1915, there has been no general increase since 1926, when landlords who were liable for all repairs were receiving an increase of 30 per cent. on the net 1914 rents and landlords who were only liable for part of the repairs an increase of 25 per cent. As regards the property brought under control in 1944, that is, mainly houses built between 1919 and 1941, the rent is restricted to the 1941 level.
In relation to both classes of controlled property, rates have increased considerably in the meantime and the landlord, where he pays the rates, may pass on the increases to the tenant though the landlord does not personally benefit by such an increase. Landlords who have incurred expenditure on structural alterations or improvements, or on repairs caused by acts of waste by the tenant or, since 1945, on putting the premises into reasonable repair have availed themselves of the provisions of the present Acts enabling them to increase the rent further by adding to the rent a percentage of the excess of their expenditure over two-thirds of the basic rent.
The Conroy Commission, which reported in 1952, expressed themselves as being satisfied that in 1950 repair costs were five times 1914 costs and double 1941 costs. The Commission quoted examples which showed, they said, that landlords who were liable for repairs and who had made any reasonable effort to fulfil their obligations had suffered a serious reduction in their net income and were entitled in justice an increased rent. The Commission stated that it was in the public interest that house property should be kept in a reasonable state of repair and that landlords who were liable for repairs should be compensated for the enormously increased costs that that responsibility entailed.
The Commission recommended that controlled rents, less rates, where the landlord paid them, should be increased by 25 per cent. where the landlord was liable for all repairs and by 12½ per cent. where the landlord was liable for part of the repairs. The Commission proposed that the increase should not be allowed on any portion of the rent which was attributable to an addition under the Rent Acts for expenditure on exceptional repairs. The Commission stated that these increases would not quite restore the return a landlord had got in 1914 from the older class of controlled property and that, as regards the property which became controlled, or recontrolled, in 1941, they would give the landlord somewhat more than the 1941 return.
In the interests of uniformity, the Commission suggested that the increase should be the same for both classes of controlled premises. They rejected specifically any increase in the net income of landlords beyond that necessary to compensate them for the greatly increased repair costs. The Commission said that it might be necessary to allow a higher percentage increase having regard to any further increases in repair costs since 1950. In fact, while no official index of repair costs is available, an index of general building costs, covering materials and wages, indicates an increase of 40 per cent. between 1950 and 1959.
In these circumstances, the Government considered that an increase in controlled rents is necessary in the public interest and after careful consideration they decided that the increase should be 12½ per cent. of the basic rent where the landlord is liable for the whole or part of the repairs. The basic rent is, of course, normally the rent being paid on 1st February, 1960, less rates where the landlord pays them.
In accordance with the recommendation of the Conroy Commission, it is proposed that the increase should not be allowed on any portion of the rent which is attributable to an addition under the present Acts for expenditure on putting the premises into a reasonable state of repair. It is also proposed that the increase will not apply at all where a landlord who put premises into a reasonable state of repair did not avail himself of the grants available under the Housing Acts.
The increases in rent secured by such landlords are considerably greater than in the case of a landlord who did avail himself of the grants and whose percentage increase was calculated only on the portion of the expenditure he contributed himself, usually one-third of the total. In the Government's view, landlords who have secured such large increases are adequately catered for under the existing Acts and a further increase of rent would not be justified in their case.
These, then, are the main proposals. In general, they are an endeavour to reconcile two major conflicting ideas which dominate the entire background to this Bill. On the one hand, we have the principles of sound national economics which require us to do everything possible to preserve a valuable national asset in the form of the existing stock of houses. On the other, we have the obligation which most Governments accept to-day—to ensure social justice and to protect the weaker sections of the community. The Bill represents a fair compromise between these two demands.
Accordingly, while the proposed relaxations in the scope of control will make for the best use of the houses available and for an improvement in the supply of rented accommodation in the cities, they will not affect any sitting tenant. And the increase in rents, though not such as to entail hardship, will help to maintain rented houses in good repair, especially when taken in conjunction with the provisions allowing a generous return on expenditure on exceptional repairs.
So far as the remaining proposals for changes in the law are concerned, most of them are in accordance with the recommendations of the Conroy Commission and are designed to remove defects or anomalies which experience of the working of the Acts has revealed. Many of them are of a technical character. As I have said, I think they would be more appropriately discussed on Committee Stage but if any Senator wishes to have any particular one of them clarified I shall endeavour to do so when replying.
I should not like to conclude without expressing appreciation of the Conroy Commission's work not only on the rent restrictions problem but also on reversionary leases. In 1958 the Oireachtas passed a Bill to implement the recommendations in the Commission's Report on Reversionary Leases. In the case of their Report on Rent Control, it has not been possible, owing to the altered circumstances since the Report was prepared, to accept the Commission's proposals for an extension of the scope of control but the majority of their recommendations have been incorporated in the Bill. On behalf of the Minister for Justice and his predecessors and on my own behalf, I wish to thank the Chairman and the members of the Commission for having discharged a particularly burdensome task and for having produced two comprehensive and lucid reports on a difficult branch of the law.