Housing & PlanningAnalysis

Q&A: Rent prices - Why are Rent Pressure Zones not working? And is there any hope in sight for renters?

New report from Daft.ie shows average rents in Dublin reached €2,395 in the first three months of the year

Supply. It’s that one annoying word that keeps coming up in a country sick-and-tired of its lingering housing crisis Photograph: Alan Betson

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Mark Hilliard
Mon May 20 2024 - 19:05
What is going on with the cost of renting in Ireland?

Everybody knows how expensive it is to rent a home here, particularly in Dublin and urban areas, although recent data has shown an easing.

Private home rents rose by just 0.6 per cent on average in the first three months of 2024, the lowest rate of growth in more than three years. Still, that won’t be good news for everyone – a new report from Daft.ie has shown average rents in Dublin reached €2,395 in the first three months of the year, up 2.5 per cent on the same period in 2023. In Cork, it jumped 8 per cent to €1,870 a month.

[ Rent increases likely to accelerate as supply of new homes dries up, says property report ]

So what effect has this market change had?

It’s all down to supply, and the amount of available homes has driven down costs and inflation generally. Ronan Lyons, who wrote Daft’s latest report, explained that increasing supply, even at the upper end of the market, relieves pressure everywhere. Construction of new rental homes in Dublin has slowed inflation considerably over the past 18 months.

Graphic from Daft rental report q1, 2004 - showing nationwide rent rises

Great! So it’s all good news for renters.

Unfortunately not. That soothing supply injection looks to be flattening out and the same report warns of an inevitable increase in rents once again – bad news for those with lower incomes in particular.

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But wait, aren’t there supposed to be some sort of rent caps?

There are: Rent Pressure Zones (RPZs). These areas have strict limits on annual rent increases for existing tenancies in line with the rate of general inflation, or at 2 per cent a year, whichever is lower. Since their introduction in 2016, they have been expanded to cover almost all private tenancies and they will remain in place until at least the next general election.

They don’t seem to be making much of a difference.

That can depend on how you look at it, and who you ask. Commentators will tell you they are working – merely by existing they are putting the brakes on far higher increases in a market saturated by demand. Minister for Housing Darragh O’Brien obviously thinks they work – he recently sought a Cabinet-approved extension of the rules until December 2025.

However, new supply of rental properties – for example the many build-to-rent schemes appearing – are not subject to the caps when they set their initial rents, and so these begin at a high level. In theory, a rental market increasingly dominated by new supply can further drive inflation.

Graphic from Daft rental report q1, 2004 - showing changes in Dublin in more detail

Is there anything that can be done to make the RPZs more effective?

Social Democrats housing spokesman Cian O’Callaghan believes a big flaw lies in enforcement. In fact, he points to “hard data”, held by the Residential Tenancies Board (RTB) which monitors RPZs, that shows many price increases have exceeded their 2 per cent cap.

“Basically they need to now be enforcing the law,” he said. Tenants can, of course, complain about unwarranted rent hikes. “But like a lot of renters aren’t going to do that because they’re afraid if they do that they’ll be served with an eviction notice,” O’Callaghan said.

The RTB has said it takes noncompliance very seriously and has various ways of identifying offenders. It continues to investigate and operates compliance and enforcement processes as provided for in the Residential Tenancies Act, it said.

So if supply is slowing, the RPZs are not perfect, and things are going to get more expensive, isn’t there anything else we can do for renters?

Supply. It’s that one annoying word that keeps coming up in a country sick-and-tired of its lingering housing crisis. But of course it’s more nuanced than that.

Lorcan Sirr, senior lecturer in housing at TU Dublin, said the Government has “shot themselves in the foot” by putting such an emphasis on rentals, to the detriment of supply in the housing-for-sale and social housing markets. While there is an economist and investor argument for rental supply, he estimates about 400,000 renters would prefer to be owners.

“What you need to do is reduce the demand for rental accommodation,” Sirr said. “Start building housing-for-sale to take those who don’t want to be renters out of that sector.”

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