Reform of the rent pressure zone rules was always going to be one of the trickiest issues facing the Cabinet. It is difficult to get the balance right between protecting tenants and encouraging development. And the topic is politically toxic, allowing the Opposition to make charges of incompetence and favouring international capital over hard-pressed renters.
The backdrop is clear, even if the solutions are not. There is a supply crisis in the rental market. Doing nothing is not an option. The shortfall cannot be dealt with through State investment alone – private capital is also needed. Yet just scrapping rent pressure zones and allowing market rents across the board is not an option, as this would place an unacceptable burden on many renters.
The Government has tried to square this circle by allowing market rents to apply for new developments – and to increase with inflation – while leaving current rental price protections for existing renters. Built around this are some new protections for tenants, including the extension of rent pressure zones to the entire State.
Not surprisingly, the reaction is mixed, with warnings of new pressure on some renters and investors warning that the changes are not enough. The Government, too, knows pain lies ahead . Average rents are likely to increase, at least in the short term, and new supply will be unaffordable to many. Fixing a broken market is not easy.
The hope is that an increased level of development and new supply will eventually lead to more properties and falling rental costs. But in the short term a key question for investors will be whether there are enough people able to pay rents which are sufficiently high to give them the return they are looking for. The extent to which the loosening of the rules will bring forward new investment thus remains to be seen.
In this mix, a significant issue is that current renters will remain in a better position than future ones, unless in time higher supply brings down new rental costs. To have enough properties affordable for lower and middle earners, this means that the Government needs to increase the supply of cost rental properties – as well as social and affordable housing – to provide options for those who cannot pay market rents.
If the plan is to to lead to any kind of sustainable rental market, this type of State-led investment is essential. And other reforms are also needed to speed both private and public development.
Here we are in familiar territory. The chronic shortages of infrastructure must be tackled. The planning system needs to operate much more efficiently. And further efforts are needed to bring down the costs of development.
These fundamental factors are much more important than considering yet more financial incentives for developers. If the Government is to move the dial, a relentless push is needed.
