Rent Pressure Zones: Pressure on Government as it proposes to link certain rents to inflation

Irish Times

2 days ago

There is intense pressure on the Government as it proposes to carry out an overhaul of Ireland's
Rent Pressure Zone
(RPZ) system which could see certain rents tied to inflation.
Opposition parties have already heaped criticism on the proposals – due to be discussed at the highest level of the Coalition this evening – and the plans have met a mixed response elsewhere.
Under the proposals, the
current RPZ annual caps would not apply to new buildings constructed after a certain date
and rents in the newbuilds would instead be linked to inflation.
It comes as The Irish Times has learned that cost-rental tenants may benefit from lower rents in future amid discussion within Government on whether the
Land Development Agency
(LDA) should remain subject to corporation tax.
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The LDA has opened a number of cost-rental developments for people who do not qualify for social housing. With private sector rents now exceeding an average of €2,000 per month, the lower cost-rental rents are in high demand.
A potential tax exemption for the LDA is being considered by the Departments of Finance and Public Expenditure.
Coalition leaders are due to consider the separate proposals for reforming the RPZ system when they meet later today in advance of a final decision on the plans due to be brought to Cabinet by Minister for Housing
James Browne
tomorrow.
Currently rent increases in RPZ areas cannot be greater than the rate of inflation or 2 per cent – whichever is lower.
There is concern that RPZs have negatively impacted the level of private investment in new housing developments. The proposal to get rid of the RPZ cap for newbuilds and tie the rent level to inflation is aimed at increasing private sector investment to deliver more housing.
RPZs should be continued until a comprehensive step-down plan is put in place
—
John Mark McCafferty of Threshold
The current 2 per cent rent increase cap would remain in place for existing tenancies, though landlords would be able to change the rents between tenancies, which is currently not permitted.
The changes to the RPZ system would be accompanied by enhanced protection for renters in relation to security of tenure amounting to a minimum of six years.
There would be a restriction on no-fault evictions during this six-year period – a measure that will require legislation.
The landlord would be allowed to reset the rent every six years to the market rate.
Sinn Féin TD
Eoin Ó Broin
argued that the changes would create a 'four-tier rental market', with different rent-setting and eviction rules for four types of tenants depending on whether or not they live in RPZs, when their tenancies begin, and when their homes were built.
He claimed this was 'utter madness' and suggested the changes would 'incentivise landlords to evict tenants in existing rental stock to avail of the ability to reset rents', raising particular concern over the potential implications for tenancies that began under rules in place before 2022.
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Social Democrats TD
Rory Hearne
argued that without a no-fault eviction ban, lifting the 2 per cent rent cap would lead to increased evictions and homelessness.
John Mark McCafferty of housing charity
Threshold
said that without RPZs tenants would likely face substantial rent increases, pushing them into financial distress and 'even possible homelessness'. He said that regardless of the next rent regulation steps, 'RPZs should be continued until a comprehensive step-down plan is put in place'.
Trinity College professor of economics Ronan Lyons said that while the proposals were a 'qualified positive' step, there would still be some rent controls for newbuilds in the form of linking rent to inflation, which could still present some 'challenges' for investors.
Irish Property Owners' Association (IPOA) chairwoman Mary Conway expressed concern at the potential for a 'two-tier market' with 'old rents versus new rents coming in'.