When they were introduced in 2016, rent pressure zones (RPZs) represented a courageous move by Simon Coveney and Fine Gael, a party that prefers to let the market determine what happens in housing. The first generation of RPZs limited rent increases to 4 per cent annually in 21 locations.
These increases were subsequently reduced to a maximum of 2 per cent annually. RPZs now encompass 83 per cent of all tenancies. Owners of properties in a RPZ being rented for the first time, or after two years’ vacancy, can set a market rent but are then restricted to the percentage limit. Outside RPZs, rents can be set every two years to the market rate.
Have they worked? Although too often ignored, the rules have mostly been successful, maintaining some affordability and keeping people housed. Have they reduced the supply of new properties for rent? Anti-rent regulation proponents are convinced they have. But although apartment development has slowed down, there is no concrete evidence this is due to rent controls. Similar trends of funds leaving the rental sector have been observed in other countries where there are fewer rent controls, so it’s plausible that different factors have convinced investors to punt their cash elsewhere.
Ignoring recommendations of the Housing Commission, the Government is now to keep the 2 per cent rent increase maximum for existing tenants, which is welcome. For new-build rental housing, increases will be linked annually to consumer price inflation. After March 1st, 2026, landlords of new “tenancy arrangements” will be allowed reset the rent to market rates at the end of every six-year tenancy. The entire country will now be an RPZ, effectively negating the concept.
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These changes are linked to increased security of tenure from March 2026, which will mean landlords with more than three properties cannot evict a tenant except in limited circumstances, and smaller landlords can evict at any time due to some “particular hardship” (examples given in the Government’s press release include somebody facing bankruptcy, marriage breakdown or homelessness, but the concept is almost certainly open to abuse); for use by an immediate family member; and for sale at the end of a six-year tenancy.
There are several likely impacts of the Government’s plans.
The first is that there will be multiple categories of renters: those with an existing pre-June 2022 tenancy who are currently vulnerable to being legally evicted for any reason after six years; those in an existing post-2022 tenancy; and those in a new-build rental property. This will create more “rent insiders” and “rent outsiders”, who are generally younger people.
Critically, the ability of landlords to reset rents to the market at every new tenancy arrangement should alarm tenants. In the last six years, average new market rents nationally have increased by 41 per cent (to €1,680), and by 31 per cent in Dublin (to €2,177). Many thousands of renters who have to move each year (say, for work or study) will get hammered by this provision, while other tenants are more likely to stay put.
Inflation-linked rent rises are attractive when rates are low and economies booming, but not when inflation is high and economies and employment may be at risk. The new system will be so complicated vulnerable renters such as the elderly and those whose first language is not English are far more likely to experience exploitation. Already a challenge, enforcement will increasingly be an issue.
Will new rent rules help or hurt tenants - or fix the housing crisis?
The Government will bring its latest housing fix to Cabinet today when it presents new rules on rent levels for approval.Aimed at boosting supply – by encouraging large institutional investors to build and small landlords to stay in the market – the plan primarily concerns rules around Rent Pressure Zones (RPZ).Presented by Bernice Harrison. Produced by Declan Conlon.
These changes are all driven by one overarching aim: a desperate desire to attract the international investment the Government thinks it needs to increase rental supply and help resolve the housing crisis. If new rental supply is triggered by rent inflation, our rising rent problem is apparently going to be solved by allowing rents to rise. Flann O’Brien is now writing housing strategy.
On Tuesday, Minister for Housing James Browne couldn’t say when rents would fall on foot of these changes, hardly a ringing endorsement of his own policy. (Hint, Minister: no realistic amount of new supply will reverse the 100 per cent increase in rents in the last decade.)
The Government also seems content to funnel a generation into long-term expensive renting, while simultaneously overseeing a commensurate decline in home ownership. As UCD professor Aidan Regan has said, for the first time ever this generation of young people may be poorer than its parents.
These renters will be paying the pensions of comfortable, retired homeowning teachers in the US and elsewhere as they face years in housing – and wealth – oblivion. The Government is trying to expand a rental sector already twice as large as it should be, and for which there is little public desire compared to housing for sale. The Government is conveniently ignoring its own research which shows that 87 per cent of renters aged 25-49 want to be homeowners.
Do we even need this international money? The Society of Chartered Surveyors Ireland has suggested the establishment of a specific private savings fund devoted to housing to allow citizens to invest some of the €143 billion sitting in low interest-paying deposit accounts. So too has Fianna Fáil’s own Barry Andrews MEP. Such a fund should be used to build affordable housing for sale, the housing we need.
This is also financially efficient: build, sell, recycle the money, go again. You don’t need gazillions of international euro to build housing for sale.
Better on security of tenure than affordability, the proposals to reform Ireland’s imperfect but functioning rent control feels very much like a Government in panic. This impression is not helped by a mismanaged launch, including patchy performances in TV interviews and a botched press release, which had to be reissued a few hours later. By incentivising the rental industry, the Government is anxious to see house completion numbers increase quickly after last year’s politically arrogant broken promises – but at the expense of a generation of aspirational homeowners. Once again Government is trying to control a market it can’t.
Only two things are certain beyond death and taxes: the private sector will not solve our housing problems and, barring global mayhem, rents are not coming down any time soon.
Dr Lorcan Sirr is senior lecturer in housing at the Technological University Dublin
