More than a third of landlords applied rent hikes over the level allowed

More than a third of landlords applied rent hikes over the allowable limit in rent pressure zones (RPZs) during the duration of the legislation, a new report has found.

The study by the Economic and Social Research Institute (ESRI) assessed the impact of the controls, which limited rent increases to 4 per cent a year in designated urban areas between 2017 and 2020.

While the controls did have an impact in containing rent increases, the ESRI found that “numerous above-cap rent increases still occurred”.

About 34 per cent of landlords applied rent increases above the 4 per cent cap, it found.

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However,the report said it could not ascertain if these rises were legitimate – landlords were allowed to apply above-cap rises in certain cases if they had invested in the properties – or if they represented breaches of the regulations.

This was because of “data gaps” in the figures from the Residential Tenancies Board (RTB), which the report relied on.

The report found that the controls did limit price growth and that rent inflation in Dublin and other urban areas, where the legislation applied, would have been on average 2 per cent higher had the controls not been introduced.

“Analysis of the research suggests that ongoing pressures in the general housing market, and the robust macroeconomic recovery, would mean that absent the rules, rental inflation would be notably higher,” it said.

RPZ legislation was introduced in late 2016 to curb an overheating rental market and was extended to cover most urban areas of Dublin, Cork and Galway. However, there has been criticism that the legislation did not cover new tenancies, which have been blamed for driving up rents.

The ESRI’s report, which examined similar regulations in other countries, said there was a “ clear economic rationale for price-stabilisation mechanisms” in the rental market here.

Supply-side warnings

However, it noted the benefits of these schemes have been shown to accrue to existing tenants and that these measures come with what it called “supply-side health warnings”.

Rent controls were shown, it said, to lower investment and maintenance in buildings and lower overall rental supply in certain cases.

“This often affects potential new tenants. Exemptions to the rules in the Irish case for new supply and dwelling upgrades are correctly targeted to help avoid these side-effects,” it said.

The industry here has partly blamed rent controls for the mass exodus of small landlords from the sector.

“The adoption of RPZs in an Irish context have helped to limit the scale of rental inflation since their introduction in late 2016,” the ESRI’s Conor O’Toole said. “Indeed, it is likely rental inflation would accelerate further without these measures.

“However, international evidence would suggest that while these type of measures are justified in many contexts, strict price caps risk lowering supply and upkeep in the medium term, which must be borne in mind by policymakers.”