Opinion: the challenge with rent controls is in balancing the rights of sitting tenants, new tenants and landlords

Rent controls are a fiscal policy that governments around the globe incorporate to control and regulate the amount that a landlord can charge for a lease of a property. The challenge lies in finding a balance between the rights of sitting tenants, new tenants and landlords. Rent regulation that is too strict can have a negative impact on the market, but complete deregulation can also have negative effects as it will push people into home ownership even where it is not feasible.

In Ireland, rent control was first introduced during the First World War, when it became imperative to regulate the rent to meet the growing need for housing. Subsequent legislation like the Rent Regulation Acts of 1960 to 1981 placed restrictions on the rights of the property owners in a few controlled areas. A major drawback of these acts was that they fixed the rent below the market rent which made repossession very difficult for the owners. Market rent is the equilibrium level of rent, the level of rent that a new tenant is willing to pay and the rent that is acceptable by the landlord.

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From RTÉ Radio 1's Morning Ireland in 2017, Fintan McNamara from the Residential Landlords Association on why rent control in Ireland is 'the most draconian form in Western Europe'

The Residential Tenancies Act (2004) altered the law for rent controls, and stated that the rent charged must comply with the open market rate of rent. The act also stated that rent may not be reviewed before a period of 12 months. In cases where substantial changes had been made to the dwelling, a further rent review may be permitted.

Post the review, landlords are required to give the tenants a 28 days-notice (now 90 days), in writing, clarifying their intentions of changing the rent. The Residential Tenancies Act (2021) amended the previous Act and formalised that the rent for a controlled property could not increase beyond the relevant percentage (which is calculated based on the Harmonised Indices of Consumer Price.

The introduction of rent controls also led to the introduction of Rent Pressure Zones. These are areas where rent increase has to be proportionate to general inflation. The zones are usually located in parts of the country where rents are the highest, and the supply of rental properties is the lowest.

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From RTÉ News in 2022, ESRI report says rent pressure zones have limited rent inflation

After 2008, the issue of rent controls came to the fore due to the exponential rise in rent as a result of a fall in the supply of rental homes. This led to the commissioning of a report by the Private Residential Tenancies Board to initiate some form of rent stability. The main concern then was that any form of regulation would lead to a fall in the supply and quality of accommodations, which would further distort the market unless some measures were adopted to induce a higher supply.

Ireland now finds itself in a similar situation yet again and makes one question if rent controls and other such measures can make affordable rental accommodation available. At a very basic level, these measures draw support for the political party proposing them.

But at an economic level, such measures distort the value of the property disproportionately. A rent pressure zone makes property undesirable, as it seriously impedes the landlord’s ability to receive market rent, and it also makes it harder for that landlord to resell the property.

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From RTÉ Radio 1's Morning Ireland, rents in Ireland rose by 82% in last 12 years compared to EU average of 12%

Under the current law, a landlord is permitted to evict a current tenant (following fair notice) and raise the rent above the market rent if substantial refurbishments are made to the property. There have been several instances where the landlords have used this clause to evict tenants to carry out "refurbishments" just to find new tenants who are willing to pay a higher rent. This shows that there are ways to circumvent the legislation. Housing charity Threshold has repeatedly highlighted that landlords are constantly flouting the laws and getting away with it.

Lessons from Europe

Two main trends - deregulation and linking consumer price inflation with a variety of rent indices - are now surfacing across Europe in the private rental sector. While the EU is yet to adopt uniform provisions for housing law, a number of laws indirectly affect tenancy law such as European consumer and tax law, and most importantly the European Convention on Human Rights.

The European Commission has questioned the effectiveness of rent regulation and suggests that the costs outweigh the benefits and that there is little evidence of welfare gains. It has also suggested that rent controls can have a destabilising effect on the housing market.

An easy solution would be to give more bargaining power to the tenants. A publicly searchable index of the rents charged by landlords on a property-by-property basis would help to ensure that landlords cannot raise rents beyond a justifiable threshold when taking in new tenants. However, this is not a practical solution as rental data for an individual address cannot be published due to GDPR requirements.


The views expressed here are those of the author and do not represent or reflect the views of RTÉ