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news on Rent Pressure Zone

26 April, 2021

Rent Pressure Zones (RPZ) were introduced (without advance notice or warning) in December 2016 by then Minister Simon Coveney. It was an emergency measure to slow the rate of rent increases in a market where supply massively outstripped supply. Daft.ie quarterly reports showed that rental suplpy had reduced from 26,000 nationally in 2009 to as low as 3,000 in recent years. The Rent Pressure Zones were created for 5 years, due to expire in December 2021.

 

Those 5 years are nearly up, we had another Housing Minister come and go in that time and current Minister Darragh O'Brien (FF) has signalled in an Irish Times article in January 2021 that he will not let the RPZ legislation lapse without replacement legislation ready. His article mentions "Broader protections..." and that plans are being formulated inside his department without consulting with anybody else. This comments leads to some considerable anxiety from the property owners who currently assume plenty of risk in renting their properties out. The minister concedes that property owners are already leaving the rental market. The supply problem has not gone away and further restrictions or legislation will not stop this. So rent controls will continue but in what form?

 

It is entirely possible that rents will be locked where they are, or rent increases will be capped at the rate of inflation. This is not good news for property owners, especially if their current rent is well below market rate. An article on RTE (9th April) states average inflation in Ireland was 0.9% in 2019 and MINUS 0.3% in 2020. So effectively that is either no rent increases allowed or less than 1%.

 

If a property owner has not been regular in reviewing their rent then they are likely to be far below the market rate. Historically in Ireland and before RPZ's, a lot of property owners would have brought their rent back to market rate when their current tenant vacates in between tenancies. That option is no longer allowed. It is often not appreciated that the rent controls apply even if the property is sold and rented out by a new owner. The rent controls stay with the property. Investors are now aware of this and in cases where a rent is far below the market rate then investors who know about the rent controls are not likely to bid on this property or will bid but at lower value.

 

Rent controls affect the actual value of investor type properties. Regular rent reviews are vital to avoid property owners negatively affecting the value of their property 

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