This week the Dáil voted by a margin of ten TDs to approve new rules which will mean enormous changes for new renters. Here our Economics and Public Affairs Editor David Murphy explains the changes.
Who is affected?
For a landlord or renter in an existing tenancy there is no change.
Rules regarding evictions do not alter either. The current restrictions which limit rent increases to 2% per annum or the rate of inflation, whichever is lower, still apply.
The new rules only affect tenancies starting after 1 March.
What is happening?
The new legislation coming into force next month is highly controversial. The Coalition argues it is necessary to increase the supply of property and help fix the housing crisis.
But the opposition says it will result in an enormous increase in rents.
What do the new rules say about evictions?
One huge benefit for tenants is a significant tightening of protection against evictions.
Landlords will now fall into two categories: large and small (defined as having three or fewer tenancies).
Large landlords will only be able to evict if the tenants are not meeting their obligations, such as failing to pay rent or if the property is no longer suitable, for example, if it is too small for a family.
Small landlords will also be allowed to terminate if they encounter the following: "Financial or other hardship requiring sale of the property" or if "the landlord or a close family member needs to live in the property," says the Department of Housing.
According to Dr Michael Byrne of University College Dublin, this is an "enormous step forward" for protecting tenants from eviction.
Since the majority of renters have contracts with large landlords, for the first time they will be protected from so-called "no fault evictions" or being given notice to quit when they have done nothing wrong.
What is happening to leases?
There is a significant change here too which benefits tenants.
From 1 March, all new tenancies will have to run for at least six years.
After that, the tenancy will be renewed for another six years and continue for six-year cycles unless the landlord serves a notice to quit.
But new restrictions on ending tenancies will apply in most cases. In effect, if tenants are meeting their obligations, they can continue with rolling six-year leases and the reasons for large landlords ending them are much tighter than before.
That all sounds good for tenants, so why are the new rules controversial?
While there are benefits for tenants – the grounds for eviction are significantly limited – there are significant changes which are expected to result in rents going up for new leases.
Until now rents increases were capped at 2%, even if a property became vacant and new tenants moved into the house or apartment. But after 1 March, with a new tenancy, the landlord can reset the rent to whatever the potential new occupants are willing to pay.
For example, if a home was rented at €1,500 and a tenant moved out, the landlord can now try to charge €2,000.
In many cases, caps have kept the rent artificially lower than rental income a property owner could obtain on the open market. Rent caps were introduced as a three-year measure, but have now been in place for ten years.
Dr Byrne says there is evidence to show they have discouraged some landlords from remaining in the market and this has affected the supply of available accommodation.
Are there exemptions?
Yes, the new rent rules won't apply to local authority tenants or renters who share a property with a landlord, for instance renting a room in a landlord’s home.
Nor will they apply to a property owned by an Approved Housing Body or cost rental accommodation (a State-backed mechanism which offers rental accommodation below market prices).
What is the criticism of the rent rules?
Everyone agrees it means rents for new tenancies will go up.
This week, Sinn Féin Housing Spokesman Eoin Ó Broin argued that 60,000 new tenancies a year could be affected by landlords resetting rents.
He claimed the average additional cost could be €3,000 to €5,000 per annum depending on property size and location.
Mr Ó Broin argues that 25% of tenancies are new leases. On that basis all tenants would be paying higher rents in four years. But the new rules are likely to discourage many existing tenants from moving if they can possibly avoid it.
A significant issue is that rents are already far out of reach for many.
The cost of a lease is eating into a huge proportion of disposal income for thousands of workers. Dr Byrne says the changes "will drive an enormous affordability problem in the rental sector".
Why has the Government made the changes?
The Coalition is handing a significant benefit to landlords by allowing them to reset rent for new leases.
At the same time, it is giving a massive boost to tenants by increasing security of tenure.
However, the Government hopes this concession to landlords will result in more investment and more property – a way of addressing the massive shortfall in housing.
Ultimately, it believes if a greater number of landlords enter the market, rents could fall over time.
In the meantime, it’s likely they will rise. And that will put additional pressure on renters and those at risk of homelessness.
