Measuring rental income from maintenance costs
With an aging housing stock and over 60% of households renting (compared to 35% nationally), Brussels is experiencing an acute housing crisis. Between 2010 and 2020, rents rose by 20% more than inflation (measured by the health index). Rents now account for more than 45% of the budget of households belonging to the poorest 25%, who forgo other essential expenses in order to find a place to live. However, while a number of surveys have been carried out among tenants, our knowledge of landlords remains limited. In particular, the cost of maintaining and repairing a rented property, and the extent of the rent received by landlords, are still poorly documented. Through an exploratory study, geographers Margot Dior Peelman and Hugo Périlleux (Université libre de Bruxelles) provide some initial insights in the 205th issue of Brussels Studies.For the study, 15 landlords shared data on their rental income and expenditure associated with maintenance work on 22 rented dwellings: roof repairs, boiler, elevator, insulation, etc. These figures, collected over periods ranging from 1 to 15 years, were discussed in interviews, during which the landlords also estimated the time spent managing and maintaining their rental property(ies).
Using this data on maintenance costs, the authors estimated the rent received by landlords by deducting all rental costs (maintenance costs, property taxes and insurance) from the rent received. The median maintenance cost obtained from the 15 landlords surveyed was 10% of income. Furthermore, taking into account property taxes (estimated at 25% of rent), insurance and any management costs, the size of the rent received for the properties studied was estimated at between 50 and 60% of rental income.
At a time of intense regional budgetary tensions, this study is of twofold interest. On the one hand, an assessment of actual maintenance costs could contribute to the debate on rent control and the funding of housing renovation. Secondly, because the maintenance costs of a rental property are used to calculate property taxes, through the definition of cadastral income. The latter is also taken into account as taxable income for the lessor. Rental income is therefore not taxed on a real basis, but via the cadastral income itself, calculated by estimating a fictitious rent from which maintenance and repair costs are deducted, set at 40% of the rent by the public authorities (compared with 10% in the study). A reassessment of the maintenance portion, more in line with reality, would therefore modify the calculation of cadastral income, with possible repercussions on taxation and public finances.