Plans to target 'rent pressure zones' with new housing rules could stymie supply

The government has launched its plan to tackle rising rents.

By Fora Staff

AREAS WITH RISING rents in Dublin and Cork are to be targeted in the government’s new rental strategy.

‘Rent pressure zones’, recognising regions where there is sustained tension in the rental market, will be identified by the Residential Tenancies Board (RTB) as part of the plan.

A statement from Housing Minister Simon Coveney’s department said the pressure zones will be introduced with immediate effect in the four Dublin local authority areas, and in Cork city.

What happens in pressure zones? 

The measures will cap rent increases in the designated zones to 4% per year over a three-year period.

According to the department, ”These are areas where annual rent increases have been at 7% or more in four of the last six quarters and where the rent levels are already above the national average.”

The measures are being brought in immediately in all four council areas in Dublin, and in Cork city. From this afternoon’s announcement:

“Rent pressure zones will be designated for a maximum 3 years, by which time new supply will have come on stream and pressures will have eased somewhat in these areas.”

The new plan will also strengthen of the role and powers of the Residential Tenancies Board to provide better services and supports to tenants and landlords.

Despite calls from parties such as Sinn Féin and the Social Democrats, the new rental strategy does not contain a system of national rent control. Rent controls for unlimited periods were ruled out – as it was deemed the measure would undermine wider efforts to create a viable rental sector.

The system of ‘pressure zones’ involves a more targeted, time-bound mechanism to provide for predictable rents in high-pressure areas.

The measures follow changes introduced last year by then-housing minister Alan Kelly, which included longer notice periods for any rent increases and a two-year limit on how often rents could be reviewed.

Since then, rents have continued to climb. Over the past 12 months, prices have gone up 8.6% nationally, according to the latest figures from the RTB.

Irish general election Housing Minister Simon Coveney
Source: Brian Lawless/PA Wire

Reduced incentives

Coveney’s plans, which are being formally announced at a press conference at Government Buildings at the moment, have already been criticised as likely to reduce supply in critical areas.

In a briefing note this morning, Goodbody analysts Colm Lauder and Eamonn Hughes said previous rent controls meant there hadn’t been price increases at many properties for a “significant period of time, while market rents have appreciated considerably”.

“As a result, large swathes of the residential lettings market would be technically under-rented, yet the landlord unable to ‘mark-to-market’,” they said.

“We see this as damaging to professional landlords operating in the Irish market and will provide reduced incentives to growing lettable stock.”

Reporting by Daragh Brophy, Christina Finn and Peter Bodkin

Note: This post has been updated with additional information.