Report claims rental cap 'paradox' exacerbating housing crisis

Irish Examiner

11-05-2025

Rental caps designed to protect housing tenants could inadvertently be exacerbating Ireland's housing problem, according to a report by a leading Irish investment firm.
Elkstone launched its Private Market Report on Monday, analysing trends in the Irish and global investment industry.
The report suggests there is a "paradox" in Ireland which is deeping the housing crisis, with regulation intended to protect tenants stalling future housing supply.
It said Ireland's real estate sector shows prime yields stabilising at 5% for offices/logistics and 4.75% for residential assets. "However, international investors are unable to invest in Ireland's residential development sector while the regulatory framework remains uncertain and subject to political pressures, despite an increasing appetite to deploy capital in European housing markets."
The report said that the sector is stalling precisely when new housing is most desperately needed, creating both challenges and opportunities for innovative financing solutions.
'Rental caps introduced with the intention of protecting vulnerable tenants in our tight housing market, have created an unintended consequence, by capping growth for rent and investments," said Elkstone chief investment officer Karl Rogers. "Increasing construction and financing costs are becoming locked into projects, making many developments financially unviable for developers. This roadblock will continue to impact new housing supply and ultimately prolong the housing shortage.' Elkstone specialises in investments in alternative assets, including real estate, venture capital, private equity, private credit, and hedge funds. In real estate Elksone oversees 2,700 student beds, 2,500 homes, and 1,200 private rental sector units across Ireland, with developments in Dublin, Cork, Limerick, Belfast, and Galway.
Mr Rogers said that the State is one of the few funding options to increase supply, through the Land Development Agency and approved housing bodies' capital allocations. 'To break this cycle, Ireland should create a new long-term regulated vehicle for institutional investment that would provide much-needed certainty on regulation, fund design, and tax rates — establishing a framework that can attract investment capital while maintaining appropriate protections for tenants,' said Mr Rogers.
The report said that investing capital into housing, infrastructure, and indigenous innovation will insulate Ireland from US tariffs and external shocks. "By channeling domestic capital toward our most pressing challenges – housing, infrastructure, and indigenous innovation – we can build a more resilient economy less dependent on external factors,' Mr Rogers said.
The report notes that Ireland's GDP is forecasted to grow at 4.2% in 2025, outpacing the wider Eurozone's projected 1.4% growth, highlighting economic resilience.
The report cautions that while growth projections are impressive, they mask vulnerabilities in an economy heavily dependent on foreign direct investment, with tariffs creating significant uncertainty for Ireland's multinational-driven economy.
The report says these potential vulnerabilities could be counterbalanced by developing a stronger domestic tech ecosystem through the venture capital sector. 'By cultivating domestic innovation, nurturing homegrown talent, and creating policies that attract private investment into key areas, Ireland can build a more resilient, self-sustaining economy and lay the foundation for long-term prosperity.'
The report also states that energy grid constraints for data centres create investment opportunities. "The data centre moratorium isn't about Ireland missing the boat – it's a consequence of our early success in attracting global tech firms," said Mr Rogers. "This represents a prime opportunity for public-private partnerships to modernise our energy infrastructure."