The changing and challenging regulatory and taxation environment is in large part responsible for private non-institutional landlords leaving the rental market, a new report has concluded.
The study also found that Rent Pressure Zones (RPZs), which limit the extent to which rental prices can be increased in an area, have created a two-tier rental market.
The research was carried out by economist Jim Power on behalf of the Institute of Professional Auctioneers and Valuers (IPAV) and the Irish Property Owners Association (IPOA).
It also claims that RPZs have prevented rents from falling as well as rising beyond the limits set.
The report says the share of private investor participation in the mortgage market has fallen from 19.9% of total mortgage lending in 2006 to 1.4% in 2021.
"If private landlords continue to exit the market, the situation is going to get worse," the analysis warns.
The report has found that RPZs have created a situation where maintaining quality accommodation is not economically justifiable.
Jim Power concludes that this is negatively impacting the capital values of properties in these areas.
He also suggests that the landlords exiting the market in greatest numbers at present are those that in the past had charged rents that were less than market rates and are now only able to minimally increase rent on their properties because they are subject to RPZ rules.
Institutional landlords are replacing them with their properties being let at much higher rates of rent.
"We need both but they deserve to be treated equally and fairly and policymakers need to deliver on that," said Pat Davitt, IPAV chief executive.
"Otherwise rent levels into the future will be dictated less by the kind of market forces we've experienced historically and more by trends in complex global property investment vehicles," he said.
A survey of IPAV and IPOA members carried out in tandem with the report found 94% of the 892 respondents blame recent Government policy and regulatory changes for impacting negatively on their attitude to continuing as a landlord.
80% also said they felt that the Government's treatment of private equity funds is unfair when compared to non-institutional residential property investors.
39% said their rental income does not cover all their outgoings, including mortgage repayments, tax and expenses, with 42% reporting that their tax bill is bigger than their annual mortgage outgoings.
As a result, 57% are planning to sell their properties that are located in RPZs and 91% said they or their landlord clients will not invest further in the sector.
"Issues such as penal tax rates and a tax code that discriminates against private landlords in favour of large institutional funds, together with the continually changing and ever more complex regulatory environment all militate against investing in the private rental sector," said Stephen Faughnan, Chairman of the Irish Property Owners Association.
"RTB data clearly shows that private non institutional landlords are by far and away the single largest landlord set in the market and yet Government policy continues to target these same people with policies and regulations that are making it impossible for them to stay in the market," he added.
In a statement, the Department of Housing said it recognises the need to retain small landlords and it said the Government will support the continued participation of small scale landlords in the rental market.
But it added that the Government needs to strike a balance between restricting the level of rents tenants are paying and keeping ordinary landlords in the system.
"The Government will keep the operation of the Residential Tenancies Acts, including its rent control provisions, under constant review, with a view to making any necessary changes," it said.
"It is worth noting that the Residential Tenancies Acts prohibits the setting of a rent that exceeds market rent in all cases, regardless of whether the property lies within a Rent Pressure Zone and regardless of whether the tenancy is new or existing."
Regarding the taxation of rental income, the department said that the management of tax issues is a matter for the Department of Finance.
But it said that under the Housing for All plan a specific action has been set for that Department to review the policy options proposed by the Working Group on the 'Tax and Fiscal Treatment of Landlords' in 2017.
It added that the review will take place in the third quarter of this year.
"The aim is to ensure that the residential rental sector represents a viable investment option within a stable regulatory environment, with a fair and effective balancing of tenant and landlord rights and responsibilities," it said.