Cost of renting will be linked to inflation
Published 01/06/2015 | 02:30
The cost of rent will be tied to the rate of inflation as the Government moves to address spiralling accommodation costs, particularly in urban areas.
The move, which is aimed at tackling "scandalous" rent hikes by landlords, will effectively see rent bills frozen over a period of time.
The news will come as a huge relief to tens of thousands of struggling households who are now facing rent bills not seen since the peak of the boom.
The rent control measures have recently been given the green light by Attorney General Maire Whelan and are expected to go before Cabinet in the coming weeks.
But the rent package set to be unveiled by Environment Minister Alan Kelly will also include incentives for landlords who agree to enter into long-term 'continental-style' leases with their tenants. "At the heart of this is preventing people from falling into rent traps," said a Coalition source.
The plan will also see the beefing up of the powers of the Private Residential Tenancies Board (PRTB) to resolve disputes quickly.
New figures from the PRTB reveal that rent prices are reaching levels not seen since the boom. It now costs €829 a month to rent a property nationally. This compares with just over €1,000 a month at the peak of the housing bubble at the end of 2007.
In Dublin rental costs shot up by almost 10pc, with the Economic and Social Research Institute (ESRI) blaming the new mortgage-lending restrictions imposed by the Central Bank for pushing up rents.
The think tank said the lending limits will restrict the supply of housing and push younger and relatively poorer people out of the mortgage market.
Dublin rents were €104 more expensive at the end of 2014 when compared with the previous year. This meant the average rental payment was €1,183.
But setting rent prices against the rate of inflation will be introduced as a temporary rent control measure.
Mr Kelly has consistently said he will unveil a package that will give "rent certainty" to tenants. However, the move is likely to cause concern in Fine Gael, whose ministers are sceptical about introducing measures that will be dubbed as "rent controls".
But Labour Party sources insist the move is essential in ensuring young couples do not fall into so-called "rent traps".
An estimated 305,000 households are currently renting in Ireland, with a third unlikely to be able to afford a home in the future.
Tackling spiralling rent prices is seen as one of the last major Government policy decisions required before the Coalition calls an election.
"By tying rent to inflation, you are giving families certainty over their bills for a number of years - that's crucial to giving them a sense of security," said a Government source.
Mr Kelly is also in favour of providing tax incentives to landlords in certain cases.
He is being guided by a report by the National Economic and Social Council (NESC) which recently called for "controlled incentives" for landlords - subject to them adhering to the property standards and terms.
But the report by NESC, which advises the Government on social policy, also recommends the introduction of new rules to prevent landlords from ejecting tenants when they plan to sell the property.
Tenants would thus "accompany" the property in a sale, as they typically do in the commercial property sector.