There is perhaps no other issue which illustrates more clearly the trade-offs involved in setting housing policy than the vexed question of rent pressure zones. The dilemma was set out neatly by the Economic and Social Research Institute (ESRI) this week. The rules have helped to hold down rent levels for those with an existing tenancy, it found, but have also contributed to the creation of a two-tier market and limited supply.
An official study of the legislation is underway to see what should be done when the exiting rules expire at the end of this year. There is no right answer to what should be done. But a few points are clear. One is that tenants needs protection in a situation where rents are already among the highest in the EU. Another is that the rules appear to be part of the reason why private landlords have left the market and new investment has slowed. And, finally, any changes to the rent pressure zone rules must not be seen as a separate issue but rather as part of a wider policy picture, the goal of which is also to increase supply.
The ESRI researchers put forward a number of possible reform options to the RPZ regime. The Housing Commission has also recommended change, and its proposal of reference rents is one of those covered by the ESRI. There is a case for change, based not only on experience here but also a raft of international studies. The Irish market is now characterised by lack of supply, a low level of movement and a two-tier structure where existing tenants are protected but new tenancies are increasingly rare and cost more. Choosing the correct reform route is not straightforward and a free-for-all is not an option.
It is vital that whatever decision is made is set in a wider policy context. Gabriel Makhlouf, the governor of the Central Bank, was correct this week when he said that the first thing the Government should do was to look at all the interventions it was already making in the market. A number of schemes are in place to increase apartment supply. Is it the case that these are just slow to get going, or that they simply do not work? And how will future changes – including those relating to rent pressure zones – fit in with what is there already and with any new policies?
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There is a clear sense now that the Government – caught out by the low housing completion figures last year – is casting around for solutions, rather than taking a holistic view. It is paying for the last government’s summary dismissal of the Housing Commission report and a mistaken view that significant progress was being made.
This leaves it vulnerable to throwing money at the problem in response to what it is being told by the property lobby. Billions will, indeed, need to be spent, but the money must be well-directed. What to do with rent pressure zones must be seen as part of this wider picture.
