A cap of 4 per cent on annual rent increases in Dublin and Cork was the most eye-catching proposal involving the private rental sector announced by Minister for Housing Simon Coveney. As a response to the price-gouging of tenants by some landlords that led to homelessness, long commutes and rising wage demands, it was a reasonable reaction that allowed for future leasing profits. But the central problem – a shortage of apartments and housing units – remains.
For people facing the prospect of a new year rent review, following a two-year pause under existing legislation, this will be a welcome development. The proposed changes are, however, tentative and excessively complicated. “Rent pressure zones” will be confined to local authority areas within Dublin and Cork. And while the Residential Tenancies Board may include other cities and towns if rents continue to rise rapidly, this hesitancy has attracted criticism from Fianna Fáil and other Opposition parties. A reduction in the 4 per cent rent ceiling is also being demanded.
The complex nature of the proposed changes has Department of Finance fingerprints all over it. Two years ago, it resisted linking rent increases to the Consumer Price Index, claiming this would discourage investment and affect landlords in negative equity. A two-year rent review was introduced and rents shot up. To encourage investment on this occasion, new-build accommodation will be excluded from the cap.
A 4 per cent rent increase in areas that have already witnessed double-digit rises, at a time of minimal inflation and low interest rates, appears generous. Last night the Government was refusing to back down on the 4 per cent figure though a move to extend the “rent pressure zones” was being discussed. Taoiseach Enda Kenny said the 4 per cent figure was core to the strategy. There is a tight timeframe if legislation is to pass through the Oireachtas and take effect in the new year.
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It has been five months since Mr Coveney unveiled his Rebuilding Ireland strategy that was based on an urgent need for social and low-cost private housing. Supplying developers with local authority and State-owned land, in order to keep prices down, was a key element. The Residential Tenancies Board was promised additional powers; tenants would have greater security of tenure and the tax treatment of landlords would be considered. Those matters remain under review.
Housing policy has shifted towards long-term leasing, rather than home ownership. The rental market is, however, dysfunctional and a rebalancing of landlord/tenant rights is required. Unfurnished lettings, safety inspections, long-term leasing and provision of family-friendly accommodation with adequate storage represent the European approach. This scheme, which requires builders to maximise housing units on local authority land, is flawed.