Rents to be increased only every two years under housing plan

Landlords will only be allowed to increase residential rents every two years under a housing plan to be announced by the Government.

The plan, which has been agreed between Minister for the Environment Alan Kelly and Minister for Finance Michael Noonan, is due to go to the Cabinet next Tuesday. It has emerged after weeks of difficult negotiations which have caused tensions between Fine Gael and Labour Ministers.

Mr Kelly and Mr Noonan have reached broad agreement on a package to increase housing supply and address the issue of rent increases.

Mr Kelly’s initial plan to link rent increases to the Consumer Price Index has been abandoned.

But the current situation where annual rent reviews are permitted is to be changed, so that rents can only be reviewed every two years. This is expected to continue for the next four years, after which annual reviews may be permitted again. Government sources said they believed the change would go a long way towards giving tenants a degree of certainty about their rents.

It effectively means that anyone who had their rent increased in the summer this year will not face another increase until summer 2017. Increases will then only be allowed at the market level, and landlords will have to prove the increases are justified by making comparisons with rental properties in the same area.

Following yesterday’s agreement between Mr Kelly and Mr Noonan, officials are working on a memorandum to be presented to Ministers at their weekly meeting next Tuesday. Mr Noonan and Mr Kelly are not expected to meet again before the Cabinet meeting.

The package include steps to boost the number of apartments to be built in Dublin through changes to planning standards that would reduce the construction cost by €20,000 per unit.

Mr Kelly will be able to use his powers to override local authority standards as part of an effort to speed up market activity. The changes to standards would allow for the construction of smaller apartments to suit city living.

A significant element of the entire package, according to sources, is “harmonisation” of planning standards that would bring all “local authorities back to a national level”.

The loosening of the planning standards would allow for the construction of smaller apartments and reduce the need for apartments to be dual aspect, reduce the number of elevator shafts required and reduce the number of car parking spaces needed, particularly in developments close to public transport links.

At present, the same planning standards apply to student accommodation as to family apartments but the new approach would allow for the development of smaller apartments suitable for city living.

It is also intended to reduce construction costs to ensure that apartment building is viable again for private operators, with most development in Dublin at present backed by Nama.

Development levies for starter homes in Dublin and other pressure areas priced below €300,000 are to be scrapped, although sources said the exact details are still being worked on. The cost of this will be met by existing funds.

Landlords will be able to claim 100 per cent tax relief on mortgage interest when they rent to someone receiving rent supplement or housing assistance payment and they commit to maintaining the rent level for three years. The tax relief is currently capped at 75 per cent.

A spokesman for Taoiseach Enda Kenny said there is “still more work to be done” but added: “There is confidence that the package will boost supply of rental accommodation and housing more generally, which is the only way to slow rapidly rising rents”.