Government approves 2% cap on rent increases in RPZs

From Department of Housing, Local Government and Heritage 

- Ban on rent increases exceeding inflation under Harmonised Index of Consumer Prices (HICP) will continue, subject to a new cap of 2% p.a. on any rent increase in a RPZ

- Measure will result in far lower rent increases for tenants

The Minister for Housing, Local Government and Heritage, Darragh O’Brien TD, has received Government approval to cap rent increases at 2% p.a. in Rent Pressure Zones (RPZ). This new cap will only operate when general inflation is higher than 2%.

Key provisions are now being drafted as a matter of priority and are set to form

part of the Residential Tenancies (No. 3) Bill 2021, to be published as soon as possible this month for urgent enactment thereafter. The cap will apply immediately upon enactment.

The previous cap of 4% on annual rent increases was replaced on 16 July 2021, with rent increases in RPZs currently prohibited from exceeding general inflation as recorded in the Harmonised Index of Consumer Prices (HICP). The aim was to bring about far lower rent increases for the estimated 74% of all tenancies which are in RPZs. HICP averaged 0.73% over the three years to July 2021. Given the unexpected rise in inflation, a rent increase cap of 2% p.a. will apply under this Bill when the HICP inflation rate is higher.

Commenting Minister O’Brien said, “When introducing the legislation to link any rent increases to HCIP in July, I was very clear on the need to carefully monitor inflation. At that time, HICP inflation averaged 0.73% p.a. over the previous 3 years but had risen to 1.6% p.a. in the year ending June 2021. Given the continuing rise in HICP inflation I quickly moved to engage with the office of the Attorney General and to secure Government approval to introduce a 2% cap on rent increases in RPZs. This measure respects the constitutionally protected property rights of landlords and aims to safeguard continued investment in the sector by existing and new landlords to deliver the requisite supply of high-quality rental accommodation.

“In addition to significantly reducing the level of rent increases in RPZs, the Bill will also address long-term security of tenure by introducing tenancies of indefinite duration. This was a key commitment in Housing for All, our new housing Plan for Ireland.

“This Government is fully committed to improving the situation for renters in Ireland and we are making strides in this regard. We have tenants in situ in our first cost rental homes availing of rents which are up to 50% below the open market rate. Applications for other schemes have recently closed and from seeing the volume of applications we know that we need to significantly scale up cost rental in Ireland. Housing for All sets us on a path to achieving 18,000 cost rental homes between now and 2030 – an ambitious but achievable target,” he concluded.