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Tenants can benefit from lower rent increases under new rent pressure areas legislation.
Housing Minister Darragh O’Brien’s proposals would mean that annual rent increases will be based on inflation rates instead of set caps.
Current laws mean that rents in Rental Pressure Zones (RPZ) can only increase by a maximum of 4% per year.
Under the new rules, which will apply until 2024, there will be no cap on rent increases and, instead, rents will only be allowed to increase based on general inflation. , as recorded in the EU Harmonized Consumer Price Index (HICP).
The European Central Bank (ECB) aims to keep inflation at or near 2pc in member states.
If the 2pc calculation is applied, it means that tenants would see their annual rent increase cut in half.
However, the trade disruption and global shortages of all kinds of commodities from the pandemic have triggered a surge in inflation this year, prompting speculation that the era of ultra-low inflation is dawning. finished.
There had been almost no inflation over the past decade, despite the ECB’s wish to see it turn around 2pc. However, this target now appears to be exceeded this year.
The latest RTB rent index covering the months of October to December shows that the average rent in Dublin now stands at € 1,745 per month.
With existing legislation and the 4pc caps, people living in RPZs would have to pay increases of up to € 70, meaning they would pay € 1,815 per month next year.
However, since the current inflation rate is 1.9% in eurozone countries, that would mean that rents would increase by € 33, so they would pay € 1,778 per month next year.
Lecturer in housing at Dublin University of Technology, Dr Lorcan Sirr, told the Independent Irish that although rent increases based on inflation have been advocated for some time, a ceiling is still necessary.
“The principle of linking rent increases to inflation is good and has been demanded for a long time. However, timing is everything and this change comes at a time when inflation is starting to rise and rents are not going down, â€he said.
“If inflation continues to rise, and we hope it does not, it would be useful to cap the ultimate increase, regardless of the HICP rate. It will be interesting to see what impact this new indexation of rents will have on institutional investors’ appetite for the Irish market.
A spokesperson for Mr O’Brien said the new measures would be kept under review.
The changes are expected to come into effect by July 9 after the adoption of the Residential Tenancies Bill 2021 (No.2).
Mr O’Brien said the 4% cap on rent increases has become a “goal rather than a limit”.
“We are now taking steps to ensure that tenants will only pay rent increases, if necessary, which are in line with general inflation, which is currently below 2pc.”
He said tying rent increases to inflation would protect “landlord property rights” and also ensure “continued investment in the sector by existing and new landlords.”
The new legislation will also limit upfront payments to tenants when first securing a tenancy.
To secure a home, tenants will now not have to pay more than two months’ rent – this normally includes one month’s rent and a deposit.
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