Landlords with multi unit flats pay less with the new property tax

Multi unit flats pay less tax.

Landlords with multi unit flats pay less with the new property tax than on the current NPPR and household charge.  Although the budget was tough across the board and the details of PRSI on rental income has yet to be seen, landlords with multi unit flats such as Pre 63 houses fair better with the new property tax

Take an example of a house in 10 flats that sold this week inDublinfor €350,000.  Currently the landlord’s tax bill is €3,000 per year – NPPR at €200 per flat and €100 per flat for the household charge. From 2014 this landlord’s property tax bill will be €630 per year, a saving of €2,370 per year.

Landlords with properties valued at €150,000 will pay €315 per year, €15 more with the new property tax. Savings are made at lower value properties with a landlord’s tax bill of €180 per year on a €100,000 property, saving €120 per year.

Savings will be reduced as PRSI will now be payable on rental income. We will have to wait until the finance bill to get the details but assuming similar rules as the USC charge, landlords will pay even if they are making a loss.  Paying tax while making a loss in an injustice tax system.

In addition, the new property tax is paid by the owner of the property and not the occupier. In most countries the occupier pays. I assume the decision on this was more to do with the fact that it would be easier for the government to collect the tax from the owners rather than the occupiers. Hardly a fair way to decide on who is liable for the new property tax.

Tenants may feel that they have escaped the property tax but this will be shown in a relatively short space of time to be incorrect. As with any business, landlords need to make profits to stay in business. More landlords will get out of the business as they are not making money.

Shortage of supply of rental properties will push rents upwards. We are already seeing increases in rents due to higher demand when no new properties have been built for many years. Also the banks are being pressurised by the Central Bank to resolve Buy to Let mortgage arrears.  Next year will see banks dealing with this sector with many rental properties put up for sale. As there are fewer investors, these rental properties will be bought as family homes.

Couple this with new regulations coming into force in February 2013 which will see many bedsits gone from the market and rents will start to rise quite quickly.  Unfortunately the first people to really feel this will be rent supplement tenants. The government have pushed down the rent allowance thresholds this year and already in parts ofDublin, especially for studios and self contained bedsits, the thresholds are too low.