Rent control fears ‘may be driving price rises’

Officials say rent surges outside Dublin could be due to worries over spread of ‘pressure zones’

 Rent-pressure zones are areas in which rents are permitted to rise by only 4%  annually, and which are experiencing housing shortages generally. Photograph: Getty Images

Rent-pressure zones are areas in which rents are permitted to rise by only 4% annually, and which are experiencing housing shortages generally. Photograph: Getty Images

 

Accelerating residential rents outside Dublin could be caused by landlords increasing their prices before the Government’s rent-control policies are applied in their areas, the Department of Finance has warned.

Officials in the department say sharper rent rises outside the capital could be down to landlords anticipating that their areas could soon be designated as “rent-pressure zones”.

The rent-pressure zones are areas in which rents are permitted to rise by only 4 per cent annually, and which are experiencing housing shortages generally.

All of Dublin, Cork city and some of its suburbs, areas of Galway city and parts of commuter counties around Dublin, such as Meath, Wicklow and Kildare, have been classified as rent-pressure zones.

Fears that landlords outside these areas would raise their prices were expressed by some who were opposed to the initial rental cap plan introduced by former minister for housing Simon Coveney in December.

It is understood, however, that the plan is broadly seen to be working by senior Ministers and officials, and will not be changed as part of Minister for Housing Eoghan Murphy’s upcoming review of Mr Coveney’s signature policy document Rebuilding Ireland.

The concerns are outlined in papers published by the Department of Finance’s tax strategy group, which outlines options for the Government ahead of the budget.

Social insurance

The papers also outline the challenges, as well as the benefits, in implementing Taoiseach Leo Varadkar’s plan to merge the Universal Social Charge and PRSI to create a new system of social insurance.

On the issue of rent, however, the papers say that statistics on rent rises across the country mask regional discrepancies which show that prices are now rising outside Dublin at a quicker pace than in the capital.

Year-on-year growth outside Dublin is 9.8 per cent, compared to 7.1 per cent in the capital, according to the Residential Tenancies Board, the paper says.

This may “be in reaction to rent-pressure zones (RPZs), i.e. those landlords outside RPZs may be raising rents in order to ameliorate the effect of a potential future introduction of an RPZ to their area”.

Earlier this year the Department of Finance ran a public consultation on the tax treatment of landlords. Some 70 submissions were received for the consultation from landlords, representative bodies and individuals, and a summary of the responses was disclosed as part of the publication of pre-budget documents from the Tax Strategy Group.

Landlords are seeking the return of 100 per cent mortgage interest relief and that local property tax be tax deductible as part of a package of measures to support the sector in the upcoming budget.

Capital gains tax

A number of suggestions with regards to capital gains tax (CGT) were also put forward, including a relief from CGT if a property is sold with tenants in situ.

A departmental working group is currently examining the potential options for change outlined in the responses, and is due to finish its work shortly.

Landlords argue that despite the high rents, the level of taxes and other charges levied on landlords can make the activity unviable.

Last year then minister for finance Michael Noonan signalled an increase in the amount of relief landlords can deduct from 75 per cent to 80 per cent, and indicated a full restoration to 100 per cent by 2021. However, accelerating it 100 per cent next year would be welcomed by landlords but would cost an extra €56 million.