At first it sounds like good news: If proposals from Minister for Housing Simon Coveney come to fruition, then landlords will not be able to increase rents on a whim, but will have to abide by a limit of up to 4 per cent a year, or 12 per cent over three years.
This should offer beleaguered tenants, if not quite relief, then some element of certainty, or “rent predictability”. At present, the proposals are being limited to “rent pressure zones”, areas where rents have increased at above-average market levels for 12 of the past 18 months. It is expected that large areas of Dublin and Cork will be designated as such.
If the proposal comes to pass, landlords who are entitled to a rent review from January will have to limit any rent increase to 4 per cent.
For example, Ireland’s largest landlord, Ires Reit, has a sizeable number of its 2,000-plus apartments coming up for rent review next year; 10 per cent in the first quarter and about 20 per cent in each of the remaining quarters, with the balance up in the first quarter of 2018 for the most part.
Without this measure, landlords could avail of the opportunity to apply two years worth of increases in one fell swoop, leaving tenants struggling to meet the higher rents.
Outside of the “rent pressure zones”, the existing measures, which only allow for rent reviews to take place every two years, will continue to apply.
Higher than average
Annual price growth has been of the order of 11.7 per cent nationally, while some landlords have obtained even higher rents. Ires Reit, for example, achieved annual price growth of 16 per cent at The Marker in Dublin’s docklands in the year to June 30th, and growth of 10 per cent at Landsdowne Gate.
In Cabinteely in south Dublin, to give another example, rents rose by 30 per cent from €1,183-€1,546 a month between Q3 2014 and Q3 2016. Under the new proposals, an increase of up to 4 per cent (€61.84 a month) can be applied in the years 2017, 2018 and 2019.
How about Cork city? From September 2015 to September 2016, rents rose by 10 per cent to €988. If a rent increase is capped, then tenants should expect a rent rise of up to €39.52 a month.
In Dublin 4, average rents have risen to €1,644 a month, so landlords will face a cap of €65.76 a month.
Landlord incentive
While any limit on rents will likely be welcomed by put-upon tenants, giving 4 per cent as a limit could in fact act as an incentive for landlords to apply this rate of an increase at a time when there are signs that rental price growth, though still extremely high, has finally begun to moderate.
In September, for example, the Residential Tenancies Board reported the first decline in quarterly Dublin house rents since Q1 2013, although the pace of growth outside Dublin picked up. Targeting price growth of 12 per cent over the next three years, on top of the staggering price growth of recent years, may be too much.
More telling, perhaps, was a note from asset management firm Investec on Tuesday. According to economist Philip O'Sullivan, the broker's forecasts for rental inflation at Ires Reit "already assume rental inflation below the limits" indicated so far in Coveney's proposals.
So if economists expect rents to rise by less than 4 per cent at more than 2,000 Dublin properties, it begs the question: why is the Minister suggesting price hikes higher than the market anticipates?
