Proposed rent controls in Ireland criticised as being a step too far for landlords
The Irish Government has been accused of interfering for wanting to reduce rent controls in cities where residential rents have been rising fast.
It has proposed temporary controls on residential rents which would limit annual rent increases in Dublin and Cork, the country’s two largest cities to 4% but said it may lower this and even apply it to other cities.
Average rents rose by 11.7% year on year in the third quarter of 2016, the fastest rate of annual inflation in over a decade with rents in some areas of Dublin now 10% above their 2007 peak.
‘We’re putting a bridle on the horse that has almost been out of control for the last two years. This is a really tricky area to get the balance right,’ said Housing Minister Simon Coveney.
Under the plan Dublin and Cork would fall under the category of rent pressure zones, or areas where annual rents have risen by 7% or more in four of the last six quarters and rents would be capped for an initial three years.
However, to encourage supply, Coveney said new housing units and renovated vacant units would be excluded from the controls with rents instead determined by the market rate.
The Society of Chartered Surveyors Ireland (SCSI) accused the Government of tinkering with the market instead of finding real solutions to the lack of rental supply which is pushing prices up.
‘Well-intentioned but ill-advised interventions will have unintended consequences on the market,’ said Claire Solon, SCSI president. She explained that the Government has to ensure that any interventions in the rental market do not make a bad situation worse.
‘The Government is continually grappling with the effects of the housing shortage, not the cause. While rent controls may well curb rent increases in the short term they may also curb investment at this critical time,’ she pointed out.
‘Markets abhor uncertainty and the constant flux around policy, taxation and legislation may well lead to investors exiting the market at the precise moment when we need more investment and supply. We are already seeing signs that the shortage of rental accommodation is acting as a brake on inward investment and the latest moves will only add further to those concerns,’ she added.
The Irish Property Owners Association (IPOA) warned that 40,000 landlords have left the rental sector in the past four years and others were likely to follow if rent controls were introduced.
‘If it’s unattractive, landlords leave, then there’s less accommodation. Short term interference causes long term difficulties undermining the confidence of prospective investors,’ said IPOA chairman Stephen Faughnan.
He believes that rent control measures will further deplete the supply of properties as landlords will not be able to afford to manage or maintain properties and such a move could be a death knell for the sector.
However, housing charities have welcomed the move and some even said it did not go far enough with calls for the proposed rent pressure zones to be extended beyond Dublin and Cork.