Rent strategy: 4% cap not strict enough, say housing groups

Housing groups have asked why fresh rent restrictions proposed by Housing Minister Simon Coveney are not more stringent.

However, Mr Coveney says if his proposed rent restrictions to stop rates spiralling upwards in Cork and Dublin, were any tougher they would have a “devastating” impact on the sector.

Limiting rent hikes to the Consumer Price Index (CPI) or inflation in general would “trigger” a mass exodus from the sector and “shut off supply overnight”, said Mr Coveney after the Government agreed on plans for rent caps which will allow rates rise by a maximum 4% a year for the next three years.

While many housing groups welcomed the restrictions, there were questions about why more stringent caps are not being employed. Tying rate increases to the CPI was the subject of internal debate in the last Fine Gael-Labour government, with the CPI model proposed by then Housing Minister Alan Kelly being rejected. Instead, a two-year freeze was introduced for rents, which the new government fear has caused rents to shoot up over the last year.

We launched our strategy for the rental sector as part of our Action Plan for Housing and Homelessness today. More: https://t.co/AZWWOe4TBA pic.twitter.com/YbwlXG6GWA

— Fine Gael (@FineGael) December 13, 2016

Mr Coveney said an extra 60,000 tenants had come into the private rental sector in 14 months, bringing the total to over 700,000. Furthermore, some 12,000 landlords have joined the sector.

He said a strict rent cap, as advocated by his predecessor, would have had “devastating consequences” for supply in the rental market. Outlining the changes, Mr Coveney explained why the new restrictions were needed: “What we’ve done is much more nuanced, much more targeted. It allows for increasing rents to be ahead of inflation, but ensures that it is not runaway rents. Really, we’re kind of putting a bridle on the horse that has been almost out of control for the last two years.”

The new measures will lead to “steady, stable, predictable, and potential” rent rises, he said.

It is proposed that:

• Rents in pressure zones of Dublin and Cork City can rise by a maximum 4% a year for three years;
• Measures will come into effect when tenants have rents reviewed or when new tenancies begin;
• New properties, vacant properties being refurbished, and newly rented homes will be exempt;
• The Residential Tenancies Board will accept plans for other rent pressure zones from next March;
• In other areas, rents can only be increased every two years;
• Both tenants and landlords will get stronger rights.

In areas (Rent Pressure Zones) where rent is already high or rising fast, rent increases will be capped at 4% per year for the next 3 years. pic.twitter.com/oeoyq64L0a

— Fine Gael (@FineGael) December 13, 2016

Mr Coveney said the average monthly rent in Dublin is now €1,500 and the rental market can no longer keep going from “boom to bust”.

Speaking in the Dáil, Labour leader Brendan Howlin claimed everyone, apart from the Government and Fianna Fáil, now agreed that rent control was needed.

“As the Taoiseach knows, rent regulation is the norm in Germany, France, Belgium, the Netherlands, Denmark, and Sweden,” he said.

However, Taoiseach Enda Kenny said the housing and rental crisis is complex and “not easy to resolve”.