Extension Of Rent Caps – Unwise Says IPAV

Wednesday 15th May, 2024                       

Extension Of Rent Caps – Unwise Says IPAV

International Monetary Fund report recommended the removal of rent caps

Responding to today’s decision to extend Rent Pressure Zones until the end of 2025, IPAV, the Institute of Professional Auctioneers & Valuers, said on the basis of its own and international experience the decision will not achieve its desired intent of making rents more affordable.

Pat Davitt IPAV Chief Executive said IPAV believes the RPZ legislation has succeeded in having the opposite of its desired effect.

“We believe the RPZ legislation has had the effect of increasing rents that would not have increased to the same level if the legislation had not been introduced.

“To start with it created a rush to raise rents before the door closed on a free market, something we warned of at the time; it then enabled large investors to set high rental levels, catering largely for the upper end of the market, and it has created a two-tier market where those who did not rush to raise rents before the door closed have lost out substantially, losing market value on their properties, and selling up as a result with a flight from the rental market of private landlords.”

Mr Davitt pointed out that the RTB Rent Index shows the number of new tenancies has dropped considerably year-on-year in Q3 2023, going from 22,463, to 14,000, a drop of 37.7%.

He said international experience points to RPZs leading to a lack of maintenance of rent capped properties over the medium to long-term.

“Rent caps were only ever intended to be a short-term measure and the more you extend them, the more likely you are to create further dysfunction in the market,” he said.

“Historically, improved supply has been found to be the most natural method of tapering and often reducing rents. A policy of retaining and extending rent caps amounts to treating the symptoms of an illness rather than the illness itself.”

Mr Davitt pointed to the International Monetary Fund report in November that recommended the removal of rent caps saying: “reducing the complexity and restrictiveness of rent legislations, notably replacing rent caps with more targeted housing support for poor households, would help increase rental housing supply.”

He said the future in relation to rent supply is challenging.

“We need to encourage landlords to invest in the market, not demonise them,” Mr Davitt concluded.