Will the new rental reforms work? Many industry observers are sceptical

Irish Times

5 hours ago

What's happening to the rules governing renting?
A
proposed overhaul
of rules is going before Cabinet on Tuesday morning. It would see a significant shake-up in the rental market in the months ahead.
What are the current rules?
Rent Pressure Zones (RPZs) were introduced in 2016 to cap rent increases in areas where there was a very high demand for housing and rental homes. Initially, RPZs were confined to large urban centres but, as the housing crisis deepened, more and more areas were designated RPZs. In these locations, as it stands, rent increases cannot be greater than the rate of inflation or 2 per cent – whichever is lower.
What are the changes proposed?
The Government is planning to keep the caps for existing tenancies, at least to a large degree, while easing restrictions on rent increases for newly built homes. The plan – and it has yet to be agreed – would see the current RPZ annual caps not apply to new buildings constructed after a certain date, with the rents in qualifying properties instead to be tied to inflation.
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Rent controls to be eased for new builds in planned 'pressure zones' reform
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And why would the Government create what looks like a two-tiered rental system?
In fairness, there is already a two-tiered system, with some properties in RPZs and some not, so what the Government is considering is a three-tiered system.
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What is the market currently like for rents?
Rents are climbing faster than at any point over the past 20 years, with the national monthly average between January and March surpassing €2,000 for the first time, according to a report from daft.ie. That compares to a low of just €765 in 2011.
Why are rents climbing so fast?
Much of that increase is down to a lack of supply. There were just 2,300 homes available to rent nationally on May 1st, down 14 per cent year-on-year and the third-lowest total for May in 20 years. In a properly functioning market that number should be closer to 10,000.
Why is supply such an issue?
There are many, many reasons but the author of the daft.ie report, Trinity College Dublin economist Ronan Lyons, has said changes made to rent controls in 2021 when rent caps were reduced from 4 per cent to 2 per cent 'dramatically reduced the ability of Ireland's rental sector to attract the capital needed for new supply, the ultimate remedy for the shortage'.
And this overhaul is aimed at attracting that capital, is that correct?
That is the rationale, certainly. The thinking is that if rent restrictions are eased for new apartments, more money will pour into the sector and more apartments will be built, which will ease the pressure on the market as a whole.
Will the owners of these new builds be able to charge what they want?
They will be able to charge what the market will bear, for sure. However, there is some good news for people who are renting now: under the proposals the existing cap of 2 per cent will remain in place – at least for existing tenancies, but landlords will be able to increase the rent to the market rate between tenancies, something which is not permitted under the current rules.
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Ireland's rising rents: 'Our budget would have been €1,300 a month, there isn't even anything listed for that'
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Surely that will incentivise landlords to evict their current tenants so they can get new ones in and charge them more?
That is undoubtedly a fear. Under the proposals going before Cabinet, there will be more protections put in place for renters for a minimum of six years. During that period, there will be restrictions put in place on no-fault evictions. At the end of a six-year period, a landlord will be able to reset the rent to the market rate.
Opposition parties have questioned the adequacy of these planned protections.
Will the changes work?
That is the big, big question. It is undoubtedly in the Government's interests that it does work. Part of the Government's pitch to voters in the run-up to the last general election was that the State had turned a corner on housing and that the supply of new homes would hit 40,000 in 2024. Completions instead fell by 7 per cent to 30,000.
Housing commencements, which indicate future supply, have also fallen off a cliff, with housing starts in the first quarter of 2025 eight times down on last year and at their at their lowest level since 2016. The rate of building when it comes to apartments is even worse.
What are interested parties saying about the proposals?
Many are unconvinced. The housing charity Threshold has welcomed the degree of security it will give to tenants if restrictions on no-fault evictions are imposed for a six-year period. However, it stressed that it could actually push more people into homelessness if the RPZs are diluted.
Opposition parties have been lining up to give out about the proposals. Those voices will only get louder between now and next Tuesday when full details are outlined.
The initial reaction from landlords and property investors is that there is little in the plans to support them in the short to medium term. Industry sources have also said that the new measures are 'partial ones' and contain levels of uncertainty that may not encourage the envisaged money to come in to the sector.