ESRI says rent pressure zones have been successful in limiting rent inflation
A report by the Economic and Social Research Institute has found that Rent Pressure Zones (RPZs) have been successful in limiting rent inflation.
However, the report says it is not possible to completely separate the impact of broader economic conditions from rental price changes.
The authors say that given the expected recovery in the Irish economy, rent controls are likely to be needed into the future and “should be considered an essential part of the rental market policy tools.”
The report also finds that there have been high numbers of exceptions to rent caps and that this seems to be higher than the number of exemptions notified to the Residential Tenancies Board.
The report finds that between 48-50% of tenancies in zones introduced in 2016/2017 and those introduced in 2019 had increases in rents that were above the average 4% cap.
It finds that 76% of the ‘Type 1’ exemptions were due to the fact that the properties were new builds.
40% of the ‘Type 2′ exemptions were for major upgrades in energy efficiency ratings.
The regulations specify there must be an increase of at least 7 energy rating levels.
However, there have been just 800 exemptions under the ‘Type 2’ rules since 2019.
The report finds that when RPZs were introduced for areas in Dublin and Cork in 2016, 53% of registered tenancies were captured.
By the third quarter of 2019, when RPZs had been extended to other Local Authority Areas, over 70% of registered tenancies came under rent control.
Dr Conor O’Toole, Associate Research Professor at the ESRI, said a degree of rent stablisation has been seen in rent pressure zone areas following the introduction of regulations in 2016.
Speaking on RTÉ’s Morning Ireland, he said the measures are targeted at excess inflation and help limit steep increases in rent.
However, he added that international evidence has found that many landlords, when faced with strict price controls, do not tend to invest in the properties as much as previously.
It is a tight balance between protecting tenants from excess inflation while also allowing traditional investment, he said.
Dr O’Toole said the ESRI report found that a number of properties were still setting rents above the 4% cap but due to data gaps, they were unable to say why that was the case.
There are valid exemption for landlords in certain circumstances, he said.