Changes to the State’s system of rent pressure zones (RPZs) will have a positive effect on supply but will be painful for renters, the Central Bank has said.
The reforms, which will allow landlords increase rents to market rates between tenancies, are likely to be positive “in terms of the level of supply you would expect to see from the PRS [private rented sector],” the bank’s director of economics and statistics Robert Kelly said.
“But the social costs and the pain felt by households is not even, due to the housing crisis.”
Mr Kelly was speaking at the launch of the bank’s latest quarterly bulletin on Wednesday.
Under the proposed reform of RPZs, landlords would be able to reset rents at the going market rate when a tenant leaves.
Smaller landlords with three or fewer units will have to offer rolling six-year tenancies. Large ones will not be able to evict a tenant who has complied with their obligations except in very limited circumstances.
[ Rent pressure zones could be in place across country by Friday, Dáil toldOpens in new window ]
But Opposition parties say the changes will trigger a raft of evictions.
Mr Kelly said rent controls were “a particularly difficult policy lever” for the Government as it seeks to strike a balance between incentivising supply and protecting renters.
“The reforms, definitely, are a step towards incentivising [supply] as they do have rent resets within them,” he said.
However, despite predicting the RPZ reforms would have a positive effect on supply, the Central Bank downgraded its forecasts for new home completions in the near term.
It predicted completions would increase to 32,500, 37,500 and 41,500 in 2025, 2026 and 2027 respectively but this represents a downward revision on its previous forecast in March.
The downgrade was driven by a fall-off in completions and commencements in the first quarter of this year, the bank said.
Housing projections are subject to “considerable uncertainty” given current bottlenecks in supply and infrastructure, it added.
“Increasing productivity in the construction sector is essential to enable it to fulfil the increasing demand for housing and related water, energy, transport, communications and infrastructure,” the regulator said.
In a special article published alongside its latest quarterly bulletin, the Central Bank modelled the potential threat to Ireland from US tariffs, warning that, in an extreme scenario, they could punch an €18 billion hole in the public finances.
In this scenario, greater trade protection results in a significant fall-off in corporation tax receipts and a slowdown in multinational investment, leaving the State with a budget deficit of 4 per cent, equivalent to €17.7 billion, by 2030.
In its report, the Central Bank downgraded its growth forecasts for the Irish economy to 2 per cent in 2025 and 2.1 per cent on average in 2026 and 2027 on the back of the current uncertainty around US trade policy, which it said was dampening investment and consumption.
“With the global economic backdrop continuing to shift, there is heightened uncertainty on the outlook for the Irish economy,” Mr Kelly said.
“As a small, open economy with significant trading and investment relationships with the US and EU, Ireland is experiencing the fallout from changing geoeconomic relationships and priorities,” he said.
In its report, the bank noted that the exceptionally strong exports and gross domestic product (GDP) out-turn – it rose by almost 10 per cent – in the first quarter was driven by multinationals front-loading product in the US ahead of the imposition of tariffs.
