Does the Right Hand Know What the Left Hand is Doing?

There has been quite a bit of misinformation and miscommunication around the new rent control caps this week. The proposed new legislation, which limits the rate of increase within Rent Pressure Zones to 2 percent, or the rate of inflation, is due to pass through the Oireachtas in the coming weeks.

The RPZs were originally introduced back in 2016 in an attempt to control the rate of rent price increases, with statutory limits of 4 percent per annum imposed. However, it now appears that landlords who have not increased the rent in recent years will be given an opportunity to ‘catch up’ in advance of the new caps becoming effective. What this means in practice is that landlords within these RPZs can compound the previously allowed increases in a single year, if those increases were not already applied to the rent. While this is causing some political outrage, not to do so would unfairly prejudice landlords. 

Current laws prohibit setting rents which exceed ­market rent. Going forward, the new legislation will link annual rent increases in RPZs to 2 percent or to the Harmonised Indices of Consumer Prices (HICP), whichever is lower. Landlords who have not applied rent increases over the past five years may increase rents by up to 5.9 percent – according to an example given in the Irish Independent this week. In that news article, the options outlined for landlords under the proposed legislation are “to reduce or keep current levels of rent, increase rents lower than the current cap or apply the maximum permissible rent increase”. However, it must be noted that Labour Senators have inserted an amendment to the legislation in order to stop this from happening and the amended Bill has now passed through its Seanad stage, on its way to be considered by the Dáil. And, once again, landlords are left in a position of confusion.

There doesn’t appear to be any meaningful understanding that the unprecedented shortage of available rental properties is driving this upward pressure on the market. Tighter rent controls will only impact supply in one direction – downward, which will put further pressure on renters. 

We know that private investors are exiting the Irish residential market at a ratio of 2:1. Earlier this week, The Irish Times reported that Allianz is “pausing” investments in the Irish residential property market due to concerns about potential reputational risk to its business – unsurprisingly, credible institutions do not like being labelled as ‘cuckoos’ or ‘vultures’. While Allianz has since clarified its stance, there can be no doubt that Ireland’s reputation as a destination for investment is being put at risk by an entrenched political and media approach that fails to acknowledge the critical role institutional capital must play in helping to address the housing crisis. This is simply too big a mistake to allow happen.

Ian Lawlor
086 3625482

Managing Director 
Lotus Investment Group