Rent stability measures may explain price rises, Coveney says

Record rent rises, which have seen accommodation costs in the capital exceed their Celtic Tiger peak, may be the result of rent stability measures introduced last year, Minister for Housing Simon Coveney has said.

A report by property website Daft.ie has found the average monthly rent nationwide is at its highest level on record, with rents rising nationwide by an average of almost 4 per cent in the second quarter of this year. This is the largest three-month increase in rents since early 2007.

In Dublin, the annual rate of rental inflation was just over 11 per cent, the highest level since 2014, with rents in the capital now 5.2 per cent higher than their previous peak in early 2008.

Last year then minister for the environment Alan Kelly introduced measures allowing landlords to raise rents only every two years, instead of every year. Mr Coveney said this may explain the surge in rents reported by Daft.

“Figures from the Daft report today are new rentals – they are not monitoring existing rentals that are in a two year cycle in terms of rent reviews. Some people would make the case that, because rents are now frozen for a two year period, when people are setting new rent prices they are trying to anticipate rental inflation, which has had an impact on the market.”

Those who were already in good quality accommodation had benefitted from the rent stability measures Mr Coveney said, but he said freezing rents would not solve the rental crisis,.

“Ultimately you can decide to freeze rents in the morning but that doesn’t actually solve the problem. The main problem here is there simply isn’t enough accommodation in term of supply so the conditions have to be there to encourage significant investment in large scale rental accommodation.”

Mr Coveney said he wanted to encourage more large scale investors into the market to develop a “continental approach” to renting where people could rent for life if they wished.

“We need to get the balance right between security of tenure and more price predictability around the rental market than we currently have, but also making sure that there is a market there that invites and encourages significant investment around new build and construction.”

The rental market had been dysfunctional for decades he said. “It’s either growing dramatically or collapsing dramatically. Rental prices are either inflating too quickly or they are collapsing in terms of value too quickly. We need a more stable rental market where there is predictability, where there’s calm in order to achieve what we need – a significant increase in supply which I hope you will see in the next two to three years.”