Cost Rental Dwellings

Cost Rental dwellings

The owner of a dwelling may  apply to the Minister to designate it as a cost rental dwelling. The Minister has the power to prescribe the format of such an application, including the allowable costs to be used when calculating the cost-covering rent.

The application process includes two distinct periods: the ‘cost calculation period’ of at least 30 years, which is the length of time over which the owner models the costs to calculate the resulting starting rent, and the ‘minimum period’, which must be at least as long as the calculation period, but with no maximum length prescribed. This latter period defines the owner’s minimum commitment to let the dwellings in compliance with this legislation. It must expire before an owner can request revocation of the cost rental designation.

It is intended that the receipt of any future State support for the delivery of cost rental homes, in the form of funding or land, is conditional on the minimum period being significantly longer than the cost calculation period.

Designation as cost rental dwelling

The Minister may  designate a dwelling as a cost rental dwelling, thereby approving and certifying an application made. The Minister and the dwelling owner  executes a legally binding designation. The Minister has power to prescribe the relevant documentation and the process by which the designation shall be made by the Minister.

The designation process includes registration of the cost rental designation of a dwelling in the Registry of Deeds or the Land Registry, as appropriate. The Minister to keep a record of all designations.

Lettings of cost rental dwelling

The Minister may regulate the letting of designated cost-rental dwellings. The Minister may prescribe eligibility requirements in respect of tenants and their households, along with the process all landlords must follow when advertising vacant dwellings and entering into tenancies.

The Minister may prescribe the use of a lottery element where applications exceed vacancies and may prescribe the form and content of tenancy agreements for cost rental dwellings, including ‘mandatory terms’ for these contracts. This Section also clarifies that a landlord will have final discretion over entering into a tenancy agreement with any prospective tenants who meet the eligibility criteria prescribed by the Minister.

Application of Residential Tenancies Act 2004

With the exception of certain exclusions, the general terms of the Residential Tenancies Act 2004  apply to all tenancies in a cost rental dwelling. Cost rental dwellings owned by public bodies, including Local Authorities, are encompassed within this provision. Cost rental dwellings owned or let by Approved Housing Bodies are not regulated by the specific elements of the Residential Tenancies Act that govern AHB social housing.

In the case of a Part 4 tenancy (all the automatic tenancy that arises by law after the initial period) in a cost rental dwelling, a landlord cannot terminate the tenancy on certain grounds that are generally permitted in the private rental sector, including the sale of the property.

In order to uphold the tenant and household eligibility criteria, the 2021 Act prohibits and voids any attempts to sub-let a cost rental dwelling or to assign the entire interest of the tenancy to a third party, and removes the right of a licensee of the tenant to be added to a Part 4 tenancy.

The Minister may prescribe processes by which, with the consent of the landlord, additional tenants may be added to existing tenancies, and one or more, but not all of the existing tenants may be removed or replaced.

Setting and review of rent in cost rental tenancy

Part 3 of the Residential Tenancies Act 2004 does not apply. The 2021 Act sets out how provisions from other elsewhere in the Residential Tenancies Act 2004 should be applied in the case of a cost rental dwelling. The Minister may  prescribe ways to calculate rents over the entire time a dwelling is subject to this legislation.

The rent on the date of the cost rental designation is the ‘initial maximum rent’ recorded in the designation. The  Minister prescribes formulae for calculating rents at the beginning of new tenancies and when changing a rent during a tenancy through a rent review.

These rent calculations will take account of any increase in the Harmonised Index of Consumer Prices, or an alternative index that the Minister may prescribe, during the intervening period. The rents calculated in this way are upper limits, giving landlords the option to charge lower rents as circumstances allow.

Rent reviews cannot take place more than once every twelve months, or within the first twelve months of a tenancy. Any increase of rent through this review process may only take effect on a fixed date, which by default is the anniversary of the start of the tenancy. A landlord can only initiate a rent review within a certain window of time, from two weeks before this review date to four weeks after it.

The  Minister may prescribe the form of the ‘rent review notice’ with which tenants must be informed of any change to their rent. Disputes about rents may be referred, as in the private rental sector, to the judgement of the Residential Tenancies Board.

Housing Assistance Payment

The Housing Assistance Payment is notpayable in respect of a cost rental dwelling, unless a member of the household has been a tenant of that cost rental dwelling for a continuous period of more than six months. This six-month rule aims to facilitate the targeting of cost rental dwellings at households above the social housing income limits, but also to take account of potential changes in circumstances that may reduce or remove the ability of a household to pay a rent set under the 2021 Act.

The above provision seeks to balance the need for the cost rental model to be generally self-financing with a desire to make cost rental a secure long-term accommodation option. The six-month rule for HAP also aligns with the six-month point at which a tenant gains statutory Part 4 protections under the Residential Tenancies Act 2004. Compliance with the six-month rule for a cost rental dwelling does not constitution discrimination in the provision of accommodation, as defined in the Equal Status Acts.

Cost rental tenancy not social housing support

A tenancy in a cost rental dwelling is not in itself a form of social housing support, notwithstanding that the landlord may be a Local Authority or an Approved Housing Body. However, the payment of Housing Assistance Payment in respect of a cost rental dwelling,  is deemed to be an appropriate form of social housing support for the household in question.

Obligation of owner to provide information

The Minister may, for the purpose of monitoring compliance with the legislation and the compilation of statistical data, perform audits of cost rental tenancies. The Minister may prescribe that the owners of cost rental dwellings keep certain records and make them available to the Minister on request. In cases where ownership of a cost rental dwelling has changed hands, a former owner may have a time- limited obligation to keep records and make them available.

Extension of minimum period

The owner of a cost rental dwelling may apply to the Minister to extend the ‘minimum period’ that binds a dwelling under the 2021 legislation. The ‘minimum period’ will have initially been set at the time of the cost rental designation, but an owner may choose to extend this commitment. The Minister may prescribe the process for this extension. Any extension is be reflected in the details registered for the dwelling in the Registry of Deeds or the Land Registry.

Termination of cost rental period

The 2021 Act provides for the circumstances in which the cost rental designation of a dwelling may be ended by the Minister through a ‘cost rental revocation’ document, the form of which the Minister shall prescribe. This is an opt-out mechanism, whereby the owner of the dwelling may request a revocation once the ‘minimum period’ has expired, and the Minister must consent to the revocation in such circumstances.

If the ‘minimum period’ has expired, the provisions of the 2021 Act  continue to apply to the dwelling until this formal opt-out process has been completed. Any extension of the ‘minimum period’ at the request of the owner will delay this option.

The other path to revocation is through an application by the owner, to be judged by the Minister, that it is in the public interest that a cost rental designation be revoked on ‘exceptional grounds’. This would be because unforeseeable circumstances mean that the intention of the legislation cannot be achieved in the case of a certain cost rental dwelling, at least not on the terms of the original designation. The intended to be  used in the normal course of events, but it is provided for in the legislation to deal with extraordinary cases.

The Minister may place additional conditions on any revocations under these ‘exceptional grounds’. The registrations in the Register of Deeds or Land Registry are to be updated to reflect the revocation of a cost rental designation.

Cost rental tenancies subsisting on termination of cost rental period

The position of a sitting tenant is protected, notwithstanding revocation of a cost rental designation, if the tenancy is protected by Part 4 of the Residential Tenancies Act 2004 at the point that the Minister revokes the designation. A tenancy gains these Part 4 protections when a tenant, or at least one among multiple tenants, has resided in the dwelling continuously under a tenancy for six months.

The  owner of the dwelling can only validly terminate the tenancy in accordance with both the statutory Part 4 protections and also the provisions of this legislation, which continue to have effect until such termination. Since many of the grounds on which landlords may terminate a Part 4 Tenancy are excluded for cost rental dwellings by Section 33, a tenant in this situation may be able to live in the dwelling concerned for up to five and a half years after the revocation of the cost rental designation, until the end of the six-year Part 4 Tenancy cycle.

Loans to approved housing bodies in support of cost rental dwellings

The Housing Agency  makes loans to Approved Housing Bodies to fund the provision of dwellings to be designated as cost rental dwellings, out of funds provided for that purpose by the Minister. It is intended that these provisions is used to implement the Cost Rental Equity Loan (CREL) scheme funded under Budget 2021, along with any future iterations of this scheme.

The Minister may prescribe the conditions of such loans, including security arrangements. The Minister must give his prior consent to any loan the Agency makes to an AHB. The Minister may direct how the Agency will handle funds from the repayment of such loans by AHBs.