Unchecked rent hikes ‘will hurt recovery’

Ireland’s economic recovery and its chances of attracting foreign firms will be put at risk if the Government’s controversial rent reform plans fail to calm surging hikes for tenants, as well as house prices.

The claim will be made in a detailed new report set to go to Cabinet this morning.

It warns the issue is one of a number of factors which could destabilise the country’s finances if not adequately addressed.

Drawn up by the independent National Competitiveness Council and to be published later this week after being endorsed by the Coalition, the report points out while the economy is growing, factors such as housing, taxation, and wages continue to hamper the recovery.

And at the top of the group’s most serious concerns is rent, with fears the high price of accommodation in Ireland is continuing to cause difficulties both for citizens and businesses attempting to attract people to work in this country.

While noting recent attempts by Government to calm the property market, the report is likely to state that unless the issue is taken as seriously as moves to reduce the national debt, and fix the banking system, the burgeoning economic recovery will struggle to properly take hold.

In November, Environment Minister Alan Kelly and Finance Minister Michael Noonan finally agreed a rental reform package which will limit landlords to increasing rents to just once every two years.

While both ministers have insisted the policy was, in effect, rent certainty and will address the chronic problems in the system, critics warned it fell far short of the consumer price index-linked cost reforms Mr Kelly had promised for the previous year.

A separate reform of the mortgage sector by the Central Bank earlier this year now means anyone seeking to buy a house must have at least a 20% deposit saved for the property.

However, while the move had been made in a bid to prevent banks giving people loans they will not be able to repay — a key problem during the property crash — critics again claim it priced ordinary people out of the housing market and thereby helps to keep rental supply and, crucially, prices high.

The National Competitiveness Council report is also expected to make a number of recommendations on Ireland’s existing tax, wages, and infrastructure systems, warning that long-standing issues in the areas are damaging the country’s ability to grow the economy and to encourage people to come to Ireland.

It is believed to argue that tax cuts to reduce the marginal rate below 50% for all workers have also been sought to entice more workers on high salaries to this country and to suggest that transport and broadband service improvements are needed to develop business-related infrastructure.

The report will be presented to Cabinet this morning by Jobs Minister Richard Bruton, who has been at the forefront of a series of high-profile job announcements in recent months that the Coalition insists shows the recovery is taking hold but the opposition claim are little more than PR exercises.