It will be years before any increased housing supply brought about by rental market reforms lowers the cost of renting, the Coalition was told before agreeing to overhaul the sector.
In the meantime, average rents may increase in the short term, according to a research paper published on Tuesday as the Government unveiled reforms of the rental sector.
Cabinet agreed to extend Rent Pressure Zones (RPZs) nationwide, as well as increasing tenant protections from so-called “no-fault evictions”.
It also agreed that rents in new tenancies after next February can be reset every six years, with newly built apartments to be carved out from the RPZ legislation and allowed to impose higher rent increases in line with inflation.
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Minister for Housing James Browne said the 200,000 tenants currently renting in existing RPZs “will see no change” to their rental conditions. “Existing tenants will still rent under the current RPZ, which is 2 per cent or inflation, whichever is lower,” a spokesperson for the Minister said.
The Government hopes that the removal of “severe” aspects of the RPZ regime, which was due to expire at the end of the year, will encourage investment.
A report drawn up by the Housing Agency for Mr Browne said that reforming the RPZs along the lines of the Government decision should act as a stimulus to investment and help keep smaller landlords in the sector.
However, it also warned that “standardised average rents would increase in the short term” and outlined “it will take at least three to four years for this investment to result in more homes being built”.
In the longer term, any increased supply of rental properties should have a dampening effect on rising rents, it said.
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Mr Browne said he could not put a time frame on when he expected rents would begin to fall, but that this could only start to happen if the Irish market was made more attractive for international investors.
“I expect rents to fall over time. What that particular length of time is, I wouldn’t be able to predict,” he said.
There has been a collapse in institutional investment in Irish apartment development in recent years, prompting renewed concern that housing output will dramatically underperform targets.
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The Housing Agency review recommended that the existing system be modified, finding the current rent cap of 2 per cent and the inability to reset market rents in between tenancies was “severe”.
It recommended reforms and added protections for tenants.
The steps sparked clashes in the Dáil, with Sinn Féin leader Mary Lou McDonald telling Taoiseach Micheál Martin the Government was “screwing renters” and “doing it brazenly”, while Mr Martin insisted the new plans for tenants are a “balanced set of proposals”.
Ms McDonald also claimed that the resetting of rents every six years to full market rate “is essentially the death knell of rent pressure zones” and that students “will be amongst the first hit by your actions”.
Mr Martin insisted, however, that existing tenants will not face rent increases beyond 2 per cent and that RPZs will be extended across the State. He said the fundamental objective was policy certainty for renters and increased supply.
Social Democrats housing spokesman Rory Hearne said the plan would lead to “skyrocketing rents”, with more families and children being made homeless.
Labour Party housing spokesman Conor Sheehan said the measures were “piecemeal” and predicted institutional investors would continue to lobby Government until all protections are lifted from the private rented market. He said the new proposals would lock in unaffordable rent increases.
Mr Browne said the Coalition would press ahead with further reforms designed to encourage homebuilding in the weeks ahead. He said currently, a lot of investors “won’t even look at this country to invest”, believing they could make a loss on construction projects here.
