Investment funds are getting around the rules regulating rent increases and are setting rents “that go beyond the maximum” allowable level, the Institute of Professional Auctioneers and Valuers (IPAV) has claimed.
The current Rent Pressure Zone (RPZ) legislation aims to cap rent increases at 4 per cent in designated locations.
However, landlords bringing new rental properties to the market or new tenancy agreements are exempt from the rules and free to charge what they like.
IPAV's chief executive Pat Davitt said the derogation is allowing "big players" to set rent levels "on a continuous basis that go beyond the maximum annual 4 per cent allowable under the rules".
“So we don’t know if the RPZs are working or if it’s the new properties that are driving rents higher,” he said.
Mr Davitt said the Residential Tenancies Board (RTB), which tracks rent inflation, is not, as yet, able to differentiate between new and existing rental stock.
Expiry due
This is “creating confusion” as to what is driving the current acceleration in rents and may lead “to ill-informed policy decisions at a time when the RPZ legislation is due to expire at the end of this year”, he said.
The RTB rent index, compiled by the Economic and Social Research Institute, measures new and renewed tenancies – as opposed to new rental properties which are exempt – inside and outside the RPZs on a quarterly basis.
The figures show rents have been increasing by more than the 4 per cent cap and continue to do so, Mr Davitt said.
“Landlords offering properties for rent for the first time are free to charge whatever rent they can achieve on the first rental even though the property may be inside a designated RPZ area, as it was deemed landlords should be encouraged to bring either existing properties to the market or purchase or build for rent,” he said.
Rent cap
“Commentators invariably question why this is but tend to overlook the fact that new rentals not subject to the rent cap are also included in the figures,” he added.
The published data by the RTB does not include the detail of how many of these new leases apply to properties rented for the first time which are exempt from the RPZ controls.
“Until this information is tracked it’s very difficult to see what is actually happening in the rental market,” Mr Davitt said.
The current RPZ legislation is due to expire at the end of this year and the Minister for Housing, Darragh O'Brien, has promised a new system of controls and protections.
Mr Davitt warned that if the RPZ rules are removed landlords with properties rented under the current market value are likely to increase their rents “on the basis of the readily available comparables”.
“This could increase many current rents by up by 50 per cent and possibly even more,” he said.
