Proposals put forward recently by housing minister Darragh O’ Brien, will see rental increases based on inflation rather than any set cap. The new rules will be in place until 2024 and will see rents only rise in line with inflation, which is recorded in the EU Harmonised Index of Consumer Prices (HICP).
End Of An Era
The era of super-low inflation (which has seen little to no increase for ten years) is seemingly coming to an end, with inflation currently at 1.9% across the Eurozone. The sudden rise in inflation is being attributed to the global pandemic and consequent delays & shortages across a wide range of goods and materials. Despite this, the European Central Bank has stated that it aims to keep inflation as close as possible to 2% across all member states.
Taking this into account, potential investors and renters alike will be watching inflation rates like never before. While a rise in line with inflation seems to benefit everyone, a cap of some sort may still be necessary according to some.
Timing Is Everything
While this seems like good news for renters overall and indeed it has been called for for quite some time, timing is everything. As Dr Lorcan Sirr – Senior lecturer in housing at Technological University Dublin – recently told the Irish Independent, that while rent increases based on inflation have been urged for, there is still a need for a cap of some sort.
“The principle of linking rent increases to inflation is a good one, and has long been called for. However, timing is everything and this change comes at a time when inflation is beginning to rise and rents aren’t falling,” he said.
“If inflation continues to rise, and hopefully it won’t, it would be useful to see a cap placed on the ultimate increase no matter what rate the HICP is. It will be interesting to see what impact this new rent indexing will have on institutional investors’ appetite for the Irish market.”
A spokesperson for Minister O’Brien said the new measures will be kept under review.
When Will The Changes Take Effect?
The changes are expected to kick in by July 9 after the passing of the Residential Tenancies (No. 2) Bill 2021.
Mr. O’ Brien said that linking rent increases with inflation would protect the “property rights of landlords” and also ensure “continued investment in the sector by existing and new landlords”.
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