Monday 20th May, 2024
Rents Q 1 2024 - Rent Caps Continue To Hamper Market As Evidence Mounts
Responding to the Daft Rental Price Report for Q1 2024, which predicts likely further increases in rents due to a stalling of improvements in supply availability, IPAV the Institute of Professional Auctioneers & Valuers said unfortunately policy on rents has been notable for the absence of any quality data underpinning it.
Pat Davitt IPAV Chief Executive said his organisation has maintained for several years that Rent Pressure Zone legislation has succeeded in hampering supply and increasing rents, the very opposite of its desired effect.
“Increasingly we are being joined in that view by others,” he said.
“The International Monetary Fund report in November recommended the removal of rent caps and this morning (Monday) Professor Ronan Lyons of Daft cites very strong evidence that they lead to higher rents for those not protected and to lower supply and poorer housing quality.”
Mr Davitt said last week’s Government decision to extend RPZs until the end of 2025 was regrettable.
“RPZ legislation, introduced in 2016, has had the effect of increasing rents that would not have increased to the same level if the legislation had not been introduced. It created a rush to raise rents before the door closed on a free market, something we warned of at the time.
“It also 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 the problem rather than the problem itself.”
He said the future in relation to rent supply is challenging.
“We need to encourage landlords to invest in the market, not demonise and disincentivise them,” Mr Davitt concluded.
Ends