There has been a fair degree of commentary in 2025 on rent-pressure zones. It has brought me to thinking about the story of the frog placed in a pot of water at room temperature; oblivious to the fact that the water is slowly heating, the frog will eventually find itself in a precarious situation. When the general election was in full swing last November, despite the forecasts across the industry that said otherwise, the then government predicted that up to 40,000 new builds would reach completion in 2024.
For the government, this was the moment of room-temperature water and, unbeknown to it, the heat had been turned on. The perilous situation culminated when the CSO released the new-build data in January. The target was missed by 10,000 units, and much soul-searching began as the bubbles from the boiling water rushed to the surface.
Further bad news came to the fore for the new Government. Dublin’s chronic apartment shortage will not be resolved in 2025. In our latest report on the living sector, JLL research forecasts that there will be a 25 per cent year-on-year decrease in Dublin apartment completions in 2025, and that is already projected to worsen. The decline in apartment construction stems from complex factors. These include regulatory challenges, the broken planning system, and the gap between delivery costs and final property values.
One positive outcome in the shortfall of housing completions was the long-overdue recognition that significant changes are required to increase new housing construction. Taoiseach Micheál Martin has indicated that the new Coalition will pursue this approach, acknowledging it will require “politically very difficult decisions”. He emphasised the need for the State to “pivot more strongly” towards attracting private-sector investment, recognising the Government’s limitations in solving the housing crisis alone.
The first step to solving a problem is acknowledging it, and this shift in tone indicates that the Government may change policy to support institutional investors’ return to the market and boost completions. Last year, €482 million was invested in the sector, a 55 per cent decline against the 10-year annual average, and early indicators point towards a similar outcome for 2025. Irish Institutional Property (IIP) estimates that €24 billion of investment will be required to reach development targets of 60,000 new builds per annum. The role of institutional investors will be significant as they will account for €18 billion of this investment.
The good news is that there is capital to fund the construction of new homes. Every week, we receive enquiries from overseas investors seeking opportunities in the Irish market. They are drawn to the sound fundamentals of Ireland’s relatively nascent living market. The bad news is that this enthusiasm dissipates once the discussion turns to rent-pressure zones and policy uncertainty. In a time when the global economy is one news cycle away from a complete downturn, regulatory policy should offer stability and simplicity.
To understand the full implications of these policies, it is crucial to critically examine our current policies and their long-term consequences. The rent-pressure zone (RPZ) legislation, introduced in 2016 to control rapid rent increases, has inadvertently exacerbated our housing shortage. With the current iteration expiring at the end of the year, this is a time to reflect and consider what has happened in other markets when policy changes are enacted. We need to deal with a facts-based analysis and not well-intended but ill-informed commentary.
Ireland is not alone. Striking for the right policy is complex, even in well-established living markets.
The RPZ system, which initially capped annual rent increases at 4 per cent and later adjusted to the lower 2 per cent or inflation, was designed to protect tenants from excessive rent hikes. However, Ireland’s experience, mirrored by similar rent-control measures in other European countries, suggests that such policies often lead to unintended consequences that can worsen housing affordability and availability in the long run.
In Germany, Berlin’s rent cap, known as the “Mietendeckel,” implemented in 2020, had significant unintended consequences on the rental market. While it initially reduced rents for many households, with average rents falling by 10.3 per cent, it simultaneously led to a dramatic 51.8 per cent decrease in available rental properties. This sharp decline in supply was particularly pronounced in areas where rent reductions were most substantial.
The policy also caused a shift in the market, with many landlords choosing to sell their properties rather than continuing to rent them out, as evidenced by an increase in for-sale listings. These effects suggest that while the rent cap provided short-term relief for some tenants, it ultimately reduced housing availability and potentially exacerbated Berlin’s housing shortage in the long term.
The Housing Commission has proposed reference rents as a solution for future regulation. I would also echo Ronan Lyons, Michael O’Flynn, and Dermot O’Leary’s response, which argues that such a system is incompatible with the current rental market and if introduced will lead to a continued hiatus in supply.
Sweden is an example of how such regulation creates more issues than it solves. Firstly, the high demand for rent-controlled apartments, coupled with limited supply, has led to extremely long wait times, averaging 9.2 years and up to 20 years in desirable areas. Secondly, the system creates a significant disparity between regulated and market rents, with market rents in Stockholm estimated to be 70 per cent higher than regulated rents. Lastly, the lack of income requirements for tenancy and the stark difference in rents outside the controlled market prevent those in genuine need from accessing affordable housing, undermining the policy’s intended purpose.
Learning from these experiences, it is crucial to consider long-term effects when crafting new policies.
Moving forward, we should focus on increasing housing supply across all sectors. This means creating an environment that encourages, rather than discourages, private-sector investment.
Here are some suggestions that I offer to the Government:
Implement targeted exemptions for new builds:
Consider excluding newly constructed apartments from rent-control measures for a set period. This could stimulate private-sector investment in much-needed new housing stock. Alternatively, link the rent control to the tenancy rather than the property. This will give investors a pathway back to the open market after a period of rent control.
Streamline planning processes:
Reduce bureaucratic hurdles to accelerate housing-development timelines. This would also ensure an extra layer of certainty for investors in the market.
On the topic of certainty:
Establish a clear, long-term housing strategy that gives investors the confidence to make substantial, long-term commitments to the Irish housing market. It should go without saying that markets hate uncertainty, and after a series of successive knee-jerk policy reactions, Ireland has developed a reputation in recent years. It is time to wipe the slate clean and demonstrate that Ireland can strike the right balance between protecting renters and attracting institutional investors to the market.
John Moran is CEO and head of capital markets at JLL Ireland
