A report on rent stability in the private sector has warned that the introduction of rent regulations in Ireland would reduce supply in the market, increase black market activity, and have a negative impact on the very people the measures would attempt to assist.
The warning comes in one of two reports prepared by DKM Economic Consultants for the Government’s Housing Agency on behalf of the Private Residential Tenancies Board.
The first report analysed six rent-regulation options with a view to addressing the recent escalation in rents. While the options examined included pegging changes in rent costs to the consumer price index, the report’s authors say that none of the options generate a better outcome for tenants compared with the unregulated free market.
The report warns that while rent regulations may have an initial benefit to tenants, the longer-term impact would see landlords leave the market, reducing supply and ensuring an upward pressure on rents.
“Given where the Irish housing market is at present, the introduction of rent regulations in Ireland is likely to exacerbate the current problems being experienced in the market,” the report says.
“A whole series of negative impacts are likely, including a reduction in new supply of rented property as well as an exodus of existing landlords from the sector.
“New foreign investment, which is currently being encouraged to address the supply shortage, is likely to be discouraged. A supply-constrained market can also result in landlords being selective about their choice of tenant, thus generating black market activity. This issue may already be a feature of the market. Moreover, the introduction of rent regulations would see the impact falling disproportionately hard on the very people that the rent regulations are trying to assist.”
Meanwhile, the second report on the future of the private rented sector has found that there has been a two-tier growth in rent prices, with the rate of increase in Dublin far exceeding that of the rest of the country. While average rents decreased nationally by over 25% from the end of 2007 to the start of 2013, they increased again by 3.5% from 2013 to 2014.
Dublin rents began to recover during 2012, with the annual rate of increase accelerating throughout 2012 and 2013, and were up 9.2% in the first seven months of this year. Outside of the capital, the PRTB index shows the annual growth in monthly rents is much more subdued, recording growth of 0.8% for the start of 2104 compared to the same period in 2013.
The report also found that:
-73% of tenants intend leaving the sector over the next two years;
-36% of landlords surveyed are considered ‘accidental landlords’ who inherited their property, moved in with a partner and rented out their first property, or had to move as their first house was in negative equity and they could not sell it. Nearly one in five of all landlords fall into the latter category;
-The rented sector has nearly doubled in size between 2006 and 2011, with approximately one-in-five households now renting their home in the private rented sector.
The authors claim there is a need to change the perception that renting in Ireland is only seen as a transition to home ownership if the rental market is to have a sustainable and positive image in the future. Suggestions include improving regulation, protecting the existing rented stock, and improving its quality and promoting investment and supply in the sector.
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