Minister for Housing Darragh O’Brien has said he has sought advice on extending rent pressure zones countrywide as renters continue to experience soaring costs.
In an interview with The Irish Times, Mr O’Brien said that there is “hope on the horizon” and that the coming year is “all about delivery”. He said hundreds of new cost rental homes will be delivered in 2022 which will eventually help to dampen costs in the market while the controversial shared equity scheme will now open before June.
Mr O’Brien also said he believes pressures in the rental market will begin to ease from March onwards. Under recently passed laws, rent increases in pressure zones are now capped at 2 per cent or inflation if it is lower.
There has been criticism from Opposition parties, however, about rents rising sharply outside of designated rent pressure zones.
Mr O’Brien said he is pursuing legal advice to potentially broaden the rules.
“Rent pressure zones cover about 76 per cent of renters at the moment and I understand the argument that rent pressure zones extend across the country. I’ve sought advice on that. One of the positives of Covid-19 has been a regional rebalancing. So I understand that argument there and it’s something that I’m continuing to pursue.”
He said he had not yet settled on whether there would be a blanket rent pressure zone or another uniform mechanism for setting rents.
New homes
“I’m guided by legal advice here too but I understand the argument...when I see outside of the rent pressure zones the double digit growth in rent.
“That principle of linking rents to inflation is an important one that I would like to see, if we can do it, possibly extended beyond what is currently the rent pressure zones. There are still 24 per cent of renters outside [of those zones].”
Mr O’Brien warned, however, that he needs to “calibrate the measures that I take and make sure that they’re balanced” so that landlords are not driven out of the system which would have the “unintended consequence of losing more supply”.
He said that he is targeting the delivering of 1,750 new cost rental homes in 2022 out of 4,100 affordable homes. The Government is aiming to deliver, overall, 2,000 cost rental homes a year between now and 2025.
In total the plan is to deliver 24,500 new homes next year and Mr O’Brien said projections show it could be more. He ruled out another construction lockdown, saying that the last lockdown cost up to 800 homes a week.
The Minister also stood behind his shared equity scheme which is known as the “first-home” scheme. That will involve the State taking an equity stake of up to 30 per cent in a new home bought by a first-time buyer. Property price caps will apply.
‘Targeted measure’
The scheme will require the applicant to take out the maximum bank loan – 3.5 times income – and will then bridge the gap to allow a purchase to take place. The maximum State-held equity will be cut to 20 per cent in cases where the buyer also avails of the help-to-buy scheme, which effectively offers a tax refund equal to up to 10 per cent of the purchase price to a maximum of €30,000 up to the end of 2022.
Mr O’Brien said work is ongoing to set up the scheme which will be open by the end of second quarter of this year, around June.
“We are working on establishing the special purpose vehicle… which oversees the equity piece, the State will pay in their money, financial institutions will put in their money. I’d expect the scheme to be up and running by the end of quarter two. So people will be able to make applications to us. It is the first time it’s been done. It’s a very targeted scheme, a very targeted measure.
“I believe in it because it’s going to give people choice. It wouldn’t be a second mortgage. We will have the company set up which manages the SPV, we will have the administrative structures in place in the first quarter of this year. We’ll have staff in place and we’ll have our website launched.”
