Cantillon: Uncertainty abounds in rent control debate

Sometimes a line sticks with someone throughout their career, and Swedish economist Assar Lindbeck will probably never be allowed forget his famous observation that “ next to bombing, rent control seems in many cases to be the most efficient technique so far for destroying cities”.

Clearly Fine Gael and the Department of Finance have taken this view on board, arguing that attempts by Minister for the Environment Alan Kelly to give “ rent certainty” by tying rents to the consumer price index would hurt investment and housing supply. It is the classic argument between the free market view that supply will only be driven by the prospect of return on one side and the view on the other side of the argument that, left uncontrolled, the market can malfunction and cause real social problems.

Officials in the departments of Finance and Environment continue to explore what should be done, but there is no sign of Minister for Finance Michael Noonan backing down and it is not clear how this one will be solved. Minister for Public Expenditure Brendan Howlin yesterday expressed some support for the “rent certainty” idea, pointing out that it would take 18 months or more to tackle the supply issue, and in the meantime families were vulnerable as landlords increased rents. The consumer price index would be an understandable thing to which to tie rents, he said.

There is no sign of a quick solution here, with both sides dug in and a range of complex issues to be addressed. Among the policies likely to be explored are some incentives to encourage landlords to give tenants more certainly in terms of the length of their lease, perhaps via adjusting rent relief rules. Then there will be the well-advertised supply measures to try to bring more properties on stream as quickly as possible. There was much tic-tacking with Nama in advance of the Budget about how quickly it could bring properties on stream, but no set targets were in the speech. Expect some noise about this as part of the package, and a particular focus on parts of the Dublin Docklands.

However, the question remains about whether some temporary measures may be included to control rents, at least over the next year, while additional properties come on stream. The Labour Party is continuing to hold out for something here.