The introduction of rent restrictions in areas where prices have risen significantly is seen in Government as a temporary measure and is unlikely to be renewed when a new scheme announced on Tuesday expires.
Government sources said the plan to cap rents in Dublin, Cork and possibly other high-pressure areas, is seen as a stop-gap measure until housing supply catches up with demand.
It is understood that Minister for Housing Simon Coveney delivered this message at a meeting of the Cabinet subcommittee on housing earlier this week where he outlined his strategy on the private rented sector.
It sets out proposals for immediately designating Dublin and Cork city as so-called “rent pressure zones” and imposing limitations on the level of rent increases allowable on residential properties in these zones.
The designation will apply for three years, Mr Coveney said, and would mean landlords can only increase rents by 4 per cent per year for that period. Once that period lapses, annual rent reviews will continue to apply but the price cap will be lifted.
The Minister said the "straight forward" 4 per cent figure was based on the Irish Strategic Investment Fund's "reasonable rate of return", but Fianna Fáil has objected to this rate.
Rent reviews
Previous plans introduced by Labour's Alan Kelly when he was minister during the last Dáil, which only provided for rent reviews every two years, will be allowed to lapse in 2019.
While he called the restriction plans "counter-intuitive", Mr Coveney said such moves were necessary. He said he had worked closely over the past week or so with the Department of Finance "to try and get the numbers right".
He said they wanted to ensure there was “an incentive to invest and to stay in the rental market, while at the same time we have sensible, practical measures to protect vulnerable tenants”.
The Residential Tenancies Board will be able to recommend to the Minister for Housing that certain local electoral areas be designated a “rent pressure zone” if the annual rate of rent inflation has been more than 7 per cent in 12 of the previous 18 months.
The Minister can then designate such areas rent pressure zones but they will automatically cease to be rent pressure zones after three years.
Ministers believe supply will have caught up with demand by then and reduce rental prices.
