Government rules on rent pressure zones have 'failed spectacularly', estate agents say

Under rent pressure zones, the amount a landlord can charge a tenant in rent can only increase by a maximum of 2% a year. Picture: RollingNews.ie

Ireland is experiencing a “deep downside” from rent pressure zone legislation, a group representing auctioneers and estate agents has said, as it welcomed a review of the rent controls promised by Government.

Reacting to the latest Daft.ie report highlighting a severe shortage of supply in the private rental market, the Institute of Professional Auctioneers and Valuers (IPAV) said it showed the Government’s policy in this area had “failed spectacularly”.

“We acknowledge that such controls would need to be eased rather than have any cliff edge change that would adversely impact renters,” said IPAV chief executive Pat Davitt.

But policy makers must not lose sight of the main picture, ramping up housing supply.

Under rent pressure zones, the amount a landlord can charge a tenant in rent can only increase by a maximum of 2% a year. Areas covered by RPZs include all of Ireland’s cities and many areas where rents have been rising significantly in recent years.

Introduced by the Government to help protect renters from significant price increases, then-housing minister Simon Coveney said additional supply would be the right way to address rental pressures.

In the Daft report, Trinity College Dublin associate professor of economics Ronan Lyons said the supply shortages plaguing the market was driving up rents in the open market and “creating a wedge” between existing tenants who get the benefit of the rent controls and those who do not.

Since 2021, the cost of rent for people moving home has gone up by half but rents for people staying where they are living has gone up just 7%.

“As the rental crisis enters its second decade, significant reform is needed to rent controls both to avoid a situation where the pressure in the market falls disproportionately on some renters and, more importantly, to ensure that new supply comes on stream over the coming years,” Mr Lyons said.

As part of the Government’s plans to reform its approach to housing, a review of RPZs is set to be undertaken, despite concern that the cost of renting could soar if controls were removed.

In an interview with the Irish Examiner earlier this month, Taoiseach Micheál Martin said the Government was prepared to look at all options, including the abolition of rent pressure zones.

Mr Martin said last week the Government would "be protecting renters", while Tánaiste Simon Harris said he would need assurances "renters are going to be protected" in any policy change.

Mr Davitt, for IPAV, said policy makers needed to use the “privilege” of RPZs to stimulate supply and get back to what could be considered normality. He said after the last economic crash, rents dropped because of a “record number” of available properties to let.

“The problem now is we’re experiencing the very opposite and deep downside of RPZ legislation, a phenomenon the consequences of which are well-documented academically,” he said. 

And as if to add insult to injury, Ireland chose a very restrictive form of rent controls. 

Mr Davitt welcomed the Government’s review of RPZs and the comments from Housing Minister James Browne over the weekend, who has vowed to appoint a “fixer-in-chief" to fast-track housing delivery.