Landlords in Europe A Comparative Analysis Launch Event 12 - PowerPoint PPT Presentation

Landlords in Europe A Comparative Analysis Launch Event 12 November 2013 European Parliament

About UIPI:  Union Internationale de le Propriété Immobilière (UIPI) – Founded in Paris during 1923 – Headquarters transferred to Brussels in 2006  The UIPI represents: – 5 million property owners – Covering more than 20 million dwellings – Through 30 member associations – Across 28 countries  Our members include: – 3.5 million private landlords (both domestic and commercial) – 1.5 million home-owners and condominium co-owners

UIPI Member Associations:  Albania  Ireland  Austria  Italy  Belgium  Monaco  Bulgaria  Norway  Croatia  Poland  Cyprus  Portugal  Czech  Romania Republic  Serbia  Denmark  Slovakia  Estonia  Slovenia  Finland  Spain  France  Sweden  Germany  Switzerland  Greece  UK

Objective of the Analysis:  Increase knowledge of the Private Rented Sector (PRS) – Academic and theoretical research already exists – Focus on PRS from a practitioners point of view – Highlighting the key issues which landlords face  Improve understanding at all levels of Government: – At Local, Regional, National and EU levels – All with different legislative frameworks  Promotion of housing policies which create: – Good quality, affordable private rented housing – And a stable and sustainable sector across the EU

Relevance for Policy Makers:  The Private Rented Sector plays a crucial role in: – Providing essential accommodation for European citizens – Supporting the European economy  Increasing interest in the sector from Government: – Credit crunch caused affordability issues for home-ownership – Resulting in a significant increase in the demand for rented housing – 18.1% of European households lived in the PRS in 2011  European context: – Although not within EU competence – Increased focus on housing market and property taxation – Through policies such as European Semester – And work undertaken by URBAN Intergroup

Scope of the Analysis:  The analysis focuses on: – The main characteristics – Strengths and weaknesses – In national regulation  Looking in particular at: – Legislative Frameworks – Property Taxation – Planning and Zoning

12 Case Study Countries:  Austria  Belgium  Czech Republic  France  Germany  Greece  Ireland  Italy  Norway  Slovakia  Spain  UK

Legislative Frameworks: Creating a Tenancy  Determining the rent: – Only 5 countries have laws regulating the initial rent – Limited right to increase rents during the tenancy in 7 countries  The form of tenancy agreements and negotiable clauses : – More than 80% of countries require written tenancy agreements – Most countries allow parties to negotiate clauses in the tenancy – Additional requirements on the contents in some countries – Registration of the tenancy is necessary in 5 countries  Security deposits: – Security deposits are common across all countries – 10 countries have regulations governing the amount, use and repayment of deposits to tenants.

Legislative Frameworks: During a Tenancy  Contractual duration: – Regulations governing tenancy duration exist in all countries – Freedom to negotiate is stronger in 3 countries – Fixed term contracts exist in most countries – Minimum statutory period on tenancy exist in 8 countries – Unlawful to set a minimum duration in Germany  Maintenance and repair obligations: – Landlords are usually responsible for maintenance and major repairs – Tenants are required to inform landlords of defects

Legislative Frameworks: Ending a Tenancy  Termination practices: – It is much easier for tenants to end tenancies than landlords – Fixed-term tenancies end on expiration in some countries – Most countries require landlords to provide legitimate reasons – France and Italy do not allow termination by the landlord; only the refusal to renew the contract  Regaining possession through the Courts: – Landlords must usually follow a two-stage process – Process takes between 6 months and 3 years – This can be sometimes an extremely expensive process – Some countries have accelerated procedures for rent arrears

Legislative Frameworks: Residential Overview Pro-landlord Neutral Czech Republic Pro-tenant United Kingdom Greece Slovakia Austria Norway Belgium France Germany Ireland Italy Spain

Legislative Frameworks: Commercial Tenancies  Significantly different to residential tenancies: – No weaker party, so no need for protective provisions – Greater contractual freedoms to negotiate clauses – No regulation of initial rent levels – Rent increases only regulated in 4 countries – Less restrictive termination rights  Exceptions and restrictions: – Restrictions on minimum duration vary considerably – Greece has the longest minimum tenancy duration – Refusal to prolong tenancy requires compensation in 2 countries – Belgium and France have stricter provisions than residential tenancies

Legislative Frameworks: Commercial Overview Pro-landlord Neutral Czech Republic Pro-tenant Germany Austria Norway Ireland Belgium Slovakia France Spain Greece United Kingdom Italy

Taxation: Buying and Selling  Purchasing property: – All countries levy a tax on the purchaser except Slovakia – Either a Registration Fee, Stamp Duty or Transfer Tax – Most countries base tax on purchase price – Actual property value is used in some countries  Selling property: – Capital Gains Tax (CGT) exists in all countries – Most countries treat CGT as income tax at the same rates – However, a separate Capital Gains Tax is levied in 4 countries – Most countries have some exemptions or reductions to CGT  KEY: Housing stock is most efficiently used in countries with the lowest transaction taxes

Taxation: Using the Property  Rental Income: – Taxed at the same rates as other income in many countries – Rates depend on whether landlord is an individual or corporate entity – Spain and Norway use net income as tax base – Common expenses can be offset in these countries  Recurrent Property Taxes – No trends exists within case study countries – Tax is based on property value in most countries – Rates vary significantly (percentages or fixed fees) – Most are levied on landlord (except UK)  Other indirect taxes have not been addressed – Value Added Tax (VAT), Inheritance Tax (IHT), etc.

Planning and Zoning:  Planning regulation: – Planning policy is designed to create enjoyable environment – Regulation is overly complex and not effectively used – Stringent obligations placed on landlords at all stages – Property owners play limited role in policy formulation – Greece has an extremely complex planning system  Obtaining consent: – Implementation of planning regulation is decentralised – Planning permission required for new buildings in all countries – 4 countries have mandatory requirements to consult local residents on all applications

Expropriation:  Strict rules exist on Expropriation: – Universal Declaration on Human Rights – European Convention on Human Rights  All countries have some powers of Expropriation: – Governments must demonstrate public need outweighs human right – Fair compensation must be provided – Expropriation must take place in a timely manner  Compensation for property owners: – Determination of compensation is problematic in many countries – Expropriation is very rarely used in Germany or UK

Conclusion:  Europe has a diverse rental market: – “ O ne size fits all” policies will be detrimental to most markets  Stable and sustainable renting: – Onerous legislative and tax burdens result in diminished supply of affordable housing – Complex legislative frameworks discourage investments in the private rented sector  Future policy considerations: – Simplify tenancy, planning and building norms – Avoid excessive taxation of property compared to other forms of capital – Balance the needs of all housing tenures and not to distort the market

Many thanks for your attention! International Union of Property Owners (UIPI ) 76, Rue du Lombard, Brussels, 1000 Belgium Tel: +32 2 502 23 18 Email: brussels@uipi.com Web: www.uipi.com