Cuckoo funds, or Private Rented Sector (PRS) funds, are backed by institutional investors like pension funds. They have recently turned their attentions to farms – with young farmers now being driven off the land as a result. (Photo: Getty Images)
Now Cuckoo funds target farms after being deterred by new housing bulk-buy limits
By John Drennan
Cuckoo funds have turned their attentions to farms – with young farmers now being driven off the land as a result.
The latest twist in the property war between the State and investment funds has raised cross-party hackles, with several politicians concerned by the return of landlordism to rural Ireland.
Ahead of the implementation of new laws limiting the bulk-buying of houses, investors who fear increased taxes will reduce profits in the housing market are turning to agricultural land where prices are soaring and tax breaks are enticing.
Farmers are now warning these ‘rural cuckoo funds’ are squeezing them off the land and turning them into renters too. The situation – which has been likened to a modern-day version of John B Keane’s The Field – is to be raised as a matter of urgency in the Dáil. This is because it is feared these funds are likely to accelerate the buying up of farmland in the wake of the Government’s legislation to limit their ability to bulk-buy new housing developments.
The Government also moved to change the tax status of real estate investment trusts (REITs) after a public outcry over the role of the funds in pushing first-timebuyers off the property ladder.
REITs are attracting millions in investors’ cash as low interest rates mean there is no return at the banks in a 21st-century version of 19th-century landlordism.
Even prior to the legislation, investors have been moving towards greater investment in land – with anecdotal evidence suggesting that up to 40% of land sales now go to investors.
Tom Cross, of GBM Auctioneers, Limerick, who sells more than 1,500 acres a year, noted that rural land availability is declining because more is going into leases.
‘The big attraction for most landowners is they can retain their asset, they can pop it into a longterm lease, they can avail of the tax benefits associated with long leases which are very, very attractive, so effectively they can assume their rental income tax-free,’ he told RTÉ Radio 1’s CountryWide.
‘They can also combine that tax-free income and integrate the Single Farm Payment, so you can see the attraction in it for landowners. They can retain the land in the family, they can avail of the increased rents, by the way, which are very, very evident in recent years as well.
‘That does limit the market and I would say it’s probably reduced the land take going to the market by maybe 30% or so per year.’
The revelation has sparked cross-party anger with Sinn Féin finance spokesman Pearse Doherty warning he would be raising the development as a matter of urgency in the Dáil.
He vowed: ‘We will be following up on this. It would be a matter of serious concern if what we have seen happen in apartments and houses will now squeeze a generation of young farmers out of the husbandry of the land.
‘We have already seen a culture of financialisation arising in forestry where large conglomerates in places such as Leitrim are squeezing out small farmers.’
Fine Gael senator Tim Lombard confirmed the development and said: ‘What is happening in rural Ireland is turning into a modern version of John B Keane’s The Field. There is gathering anger that communities and farmers who have cultivated the land for generations are being priced out of the market by wealthy outsiders. We are watching this like hawks.’
The Cork senator, who is on the Seanad Agriculture Panel, added: ‘The land is different to some commodity, and cuckoos are not welcome in rural Ireland.’
In the play The Field, a farmer called Bull McCabe, played by the late Richard Harris in the 1990 film version directed by Jim Sheridan, is outbid by a wealthy American businessman for land he has been tending to for three decades – resulting in a local war over the small piece of land.
Senior Fianna Fáil TD Barry Cowen also warned: ‘This is a growing issue which will have to be policed carefully. We need to be proactive not reactive. We do not need and we will not tolerate rural REITs pricing a generation out of land ownership.’
He added: ‘We had quite a bad experience of landlordism in the past. Its return would not be appreciated or supported.’
Independent TD Michael McNamara also raised the spectre of landlordism, noting: ‘It is unacceptable that any return of a culture of landlordism would be sponsored and facilitated by current tax policy. We need to examine, as a matter of urgency, the capacity of REITs to acquire and hold significant farm holdings.’
Mortgage arrears advocate David Hall said: ‘The State will be open to serious criticism if cuckoo funds are to be allowed leave their urban nests and feather new and different nests in rural Ireland.
‘Homeowners have had quite enough of vulture funds without having their ilk now branching out into land ownership.’
The rural ‘cuckoo’ funds have been attracted by rising profits in land where prices rose by 15% last year. But, where there are winners, there are losers, too, and the biggest losers in this game of investment chess are young and active farmers looking for more land. One of these is Kieran McDonnell, a young farmer outside Dundalk, Co. Louth, who is currently milking 64 cows on a small family farm of 40 acres. A further 12 acres are rented almost 10km away, while 27 acres were bought in 1982.
In an indication of the scarcity of land in rural Ireland, four decades ago was the last time they were able to supplement their farm.
Mr McDonnell told CountryWide that he had graduated from agricultural college four years ago, but it was proving impossible for him to get hold of more land and to provide two incomes.
For a long time now, he said, ‘in this area, land is very scarce. The last time there was any land for sale in the nearby area was in 2019, two blocks. One block went for €18,000 an acre, another block went for €20,000, very high’.
Brexit has also had a big impact. with Mr McDonnell noting: ‘Recently, since Brexit, I’m only six miles from the border, we have a lot of competition from the North as well.’
Mr McDonnell said his was not a unique scenario, noting: ‘A lot of my friends I went to college with, a lot of them have gone home to farm with their parents and buy or lease land and they just can’t get it. So, it’s very difficult for them to enter into full-time farming.
‘For them, it would be until their early 40s before they’d be able to take over the farm fully till their parents retire.’
Auctioneer Tom Cross told CountryWide: ‘If you let a house, you pay tax on the rental income, at marginal rate of 42% plus PRSI, so for a higher-rate taxpayer, half on the income goes in tax.’
By contrast, he said: ”The benefits of land-letting, you can assume your rental income tax-free.’
He said: ‘What we’re also seeing is a return to the market of businesspeople who are beginning to raise their eyebrows and look at land as being a potentially good investment. They see it as a very, very good safe haven for their money which they are now being charged for in banks.’
