The State-wide system of rent pressure zones (RPZs) has been “effective” in controlling rents but has led to a fall in the supply of private rental accommodation, a study by the Economic and Social Research Institute (ESRI) has found.
The report, which tracked more than 180,000 properties between 2022 and 2024, found that rents nationally grew by an average of 2.6 per cent over the two-year period with 60 per cent of tenancies seeing no rent increase at all.
It also found that ongoing tenants experienced annual rent increases of 1.3-1.5 per cent on average in rent pressure zones Dublin and 1.4-1.7 per cent in RPZs in other parts of the State, compared to increases of 3.5-4 per cent in areas outside rent pressure zones.
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The system, which was introduced in 2016, caps annual rent increases in 66 designated areas at 2 per cent or at the rate of inflation, whichever is lower, even if there is a change of tenant.
Rent pressure zones were originally introduced in Dublin and Cork but now apply to urban areas in 17 of the 26 counties. With the RPZ legislation due to expire this year, a review of the system is under way.
The ESRI’s study said while the system had “had a clear impact” in limiting rent inflation, the measures were “not costless”.
It cited several international studies that linked rent controls to reductions in the supply of rental properties, reduced tenant mobility and a fall-off in new construction, concluding that “some of these factors appear to be present in the Irish market”.
Property website Daft said last month there were fewer than 2,300 homes listed for rent on its website at the start of February.
The ESRI also claimed the rent pressure zone system had created a two-tier rental market “with large gaps between the average rents paid by new and sitting tenants”. It also said the “current calibration of the RPZs” was likely to be acting as a barrier to new investment, linking it to a 24 per cent fall in apartment completions between 2023 and 2024.
The think tank said linking the rent caps to monthly inflation figures had caused “frequent fluctuation in, and confusion around,” allowable rent increases while not allowing rents to rise in real terms.
Alternatives
It put forward three possible options to replace the current system. The first involved a revised system of rent caps to be applied nationally and set at “an appropriately calibrated level that aims to balance the trade-off between stability for tenants, encouraging landlords to remain and new investment”.
An alternative would be to cap rent increases within tenancies while allowing landlords to “reset” rents between tenancies – whenever they get a new tenant into a property.
A third option would be to move to a system of reference rent “that pegs rent increases to a reference rent for local dwellings of similar quality”. The last option was mentioned in a report last year by the Housing Commission, which is reviewing the system.
The Government is under pressure to address a slowdown in housing supply, with new home completions falling by 7 per cent last year. It is understood to be considering several options, including a loosening of rent controls.
The construction industry claims the 2 per cent limit on annual rent increases is too draconian and is blocking investment, while Opposition parties claim it keeps already high rents in check.
