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Could a rent freeze work in Ireland - and what effect would it have?

Rents have increased once again despite 10% more rental properties coming onto the market, according to a Daft.ie report.

Ireland's tallest apartment dock at Capital Dock in Dublin.
Ireland's tallest apartment dock at Capital Dock in Dublin.
Image: RollingNews.ie

WITH EVERY REPORT published about housing in Ireland comes greater concern that urgent new measures need to be introduced to tackle the rising homeless figures and the rocketing rents across the country. 

The latest statistics came in the form of Daft.ie’s quarterly report on Tuesday, which showed a new record high in the cost of renting in Ireland. The average monthly rent for a property now sits at €1,403 per month.

It reports that the cost of renting has more than doubled since 2010, with some tenants paying as much as 125% more than they would have nine years ago.

Much of the Government’s focus has been on increasing housing supply in a bid to ease pressure on the market and hopefully lead to a fall in rents. 

But the latest Daft.ie stats reported a 10% increase in the number of homes available to rent in Ireland compared to this time last year. Rents, however, have continued to climb.

Research by ECA International published in March put Dublin as the fifth most expensive city to rent accommodation in Europe, ahead of Paris, Luxembourg and Amsterdam. 

Rent Freeze

All of this has brought the question of a national rent freeze to the fore once again. 

“It’s time to freeze the rents and introduce maximum rents on a regional basis until enough homes have been built to get to grips with the housing crisis,” Labour Party’s housing spokesperson, Jan O’Sullivan said. 

“In Dublin, renters are paying an average €2,044 per month, which is an extortionate amount especially when you consider the other significant costs faced by families, such as childcare.”

However, speaking in the Dáil this week, Taoiseach Leo Varadkar said consideration has already been given to a rent freeze but that constitutional law might make introducing this “impossible”. 

He said “there’s a real concern about the unintended consequences of a rent freeze” such as a fall in supply. Opposition TDs across a number of parties still insist that the measure should be introduced.

Senior Research Officer at the Economic and Social Research Institute (ESRI), Conor O’Toole echoed Varadkar’s comments and said a rent freeze would come with significant “health warnings”, suggesting the better move would be to increase the supply of housing. 

“The difficulty with housing is always that housing need is immediate. People have housing difficulties today and we just don’t have enough units to deal with that problem,” he told TheJournal.ie.

“It takes that time-lapse as there is a natural time lag and a very big challenge in trying to bridge that gap. 

“We need to be very careful about responding to that with short-term measures like a rent freeze which could have long-term negative consequences.”

“It can be hard to unwind these things if we think we might not need them in the future so you need to be careful about these types of decisions.”

ersi 552_90581099 The ESRI's Conor O'Toole has warned against introducing a rent freeze. Source: Sam Boal

Supply

The Daft.ie report published this week pointed to a 10% year-on-year increase in the number of rental properties entering the market. 

That 10% increase has done nothing to temper the rising cost of rents, however, particularly in areas around Ireland’s cities. Dublin saw a 3.9% increase, while Limerick and Galway saw a 5.9% increase in rents. 

“We have nowhere near enough supply to meet demand,” O’Toole said. 

“You may have had an increase in supply and had increases in price, but that’s because that supply has been outstripped by an increase in demand, which has followed through to rental price inflation.”

When Sinn Féin proposed a rent freeze in Ireland ahead of Budget 2019 last year, Varadkar slapped it down, saying “there will be more people competing for the same number of units, and as our population rises we will need more supply.”

He cited fears that a rent freeze would see rental units fall out of the market altogether. 

Rent Pressure Zones

Instead, the Government has increased the number of locations which are eligible for rent caps under the Rent Pressure Zone regulation – the main measure in place to combat rising rents.

These RPZs limit landlords to a maximum rent increase of 4% in certain areas where the rental market is under significant pressure. 

They were first introduced back in 2016, first in Dublin and Cork, and later extended to other parts including Galway, Kildare, Meath, Louth and Limerick. 

Similarly in Paris, a new ‘reference rent’ came into effect on 1 July which will see the various arrondissements, or districts, in the French capital allocated a rent cap, which landlords must stick to. 

They can then only increase rents by a maximum 20% of that cap. 

dublin scenes 198_90583912 The Dublin skyline is dotted with cranes as efforts are made to increase housing supply. Source: Sam Boal

Berlin

But while the Government and researchers are reluctant to see a rent freeze introduced, other parts of Europe have taken a different approach. 

Last month, Berlin’s state cabinet agreed to a rent freeze for five years from 2020 in a bid to tackle the rising cost of rents in Germany’s capital city. 

Only a small minority of people living in the capital own their own home, and rising rents have prompted long-term renters to leave the city as a result. 

Berlin has seen its housing costs double over the last decade as employees lured by the strong job market move into the city.

The freeze means “protection against rent increases for 1.5 million apartments,” tweeted the Berlin government’s department for urban development and housing at the time. 

Only social housing and new builds that have not been let out would be exempt from this.

The ESRI’s Conor O’Toole insisted that each rental market has its own specificities, however, and said “there is international evidence that short-term measures for tenants won’t solve the housing supply crisis”.

Varadkar told the Dáil in May that the Government was tackling the shortage of supply with a goal of building 25,000 new homes per year here – a fraction of the number of units being built during the Celtic Tiger days.

O’Toole concluded: “The only thing that’s really going to make a material impact for Irish households is [increasing supply], we need more housing, more affordable renting, more cost rental type approaches, and more institutional investment in terms of supplying large-scale investment.”

- With additional reporting from AFP 2019

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