It has always been something of an anomaly that we can have double-digit rent inflation – it was running at 11.7 per cent in the first quarter of 2022, according to property website Daft.ie – when the majority of rental properties are located in so-called Rent Pressure Zones (RPZs) and therefore subject to strict controls.
The 2016 RPZ legislation limited landlords in designated areas from increasing rents by more than 4 per cent per annum. These areas quickly grew to cover most urban centres and therefore most rental properties. The 4 per cent ceiling was changed in 2021 to a limit that could not exceed general inflation – or a maximum of 2 per cent if inflation was higher than that – an important caveat in the current context.
The measures should have kept a lid on inflation on rents but they haven’t. There are a number of possible explanations. Some landlords may simply be flouting the rules. The Residential Tenancies Board, which regulates the sector, said last November it was “aware of a level of non-compliance by landlords with rent-setting regulations”.
Other landlords may be availing of legitimate exemptions. Under the rules, landlords getting work done to their properties are allowed apply rent increases over and above the regulations.
The more likely explanation, however, is that the RPZ net is failing to capture the requisite amount of properties to limit headline inflation. Under the rules, new rental stock never let before and new tenancies in properties that have not been let in the previous two years are exempt from the controls. Landlords of these properties are free to charge whatever the market will bear.
Most of the newer properties are being funded by build-to-rent investors and pitched at the higher end of the market. A report by economist Jim Power for the Institute of Professional Auctioneers and Valuers claimed the RPZ rules conferred an unfair advantage on institutional entities who, it said, were replacing the smaller players and the replacement properties were being let at much higher rates of rent. The Government may have to look again at fine-tuning the legislation.