The government’s recent decision to ‘reform’ rent caps lays bare whose interests they are most eager to serve: the institutional landlords and investment funds they seek to lure into the housing market.
Last week, it was announced that rent pressure zones (RPZs), initially rolled out in Dublin and Cork in 2016 due to soaring rents and later expanded to cover 83% of tenancies, will now cover the entire country, adding a fifth to overall tenancies.
The stated aim?
To bring ‘certainty’ to the market.
Yet, the rollout has been about as ‘clear’ as President Donald Trump’s tariff policy. The last-minute shift from a March 2026 start to mere weeks, coupled with frantic press release rewrites, has left landlords and tenants utterly baffled – the opposite of the intended clarity.
So, what’s in these reforms?
The current 2% cap or inflation (whichever is lower) holds for rent on existing tenancies.
To boost apartment supply, rents for new builds with commencement notices will rise only with inflation, but the metric shifts from the EU-wide Harmonised Index of Consumer Prices (HICP) to the national Consumer Prices Index (CPI), the latter of which is generally higher, go figure. No-fault evictions will be banned for ‘large’ landlords (four or more properties), while smaller landlords (three or fewer) face tighter eviction rules, including, but not limited to, breaches of tenant obligations.
Yet, a sense of foreboding looms for tenants: after six years, landlords can reset rents to market rates above caps, ignoring the Housing Commission’s call for a rent register to peg increases to similar properties. However, resetting rents will only be allowed if tenants moved out voluntarily.
Before the announced reforms, Taoiseach Micheál Martin mentioned that moving away from the current rental caps would bring “certainty” to investors who provide apartments. In an interview with the Irish Examiner he called out those who scapegoated such investors: “There’s been a tendency in the debate in Ireland to attack funds, for example, pension funds,” he said.
“I think a mistake was made in the last four years where they became the subject matter of total negativity.”
Housing minister James Browne struck a similar note saying investors “won’t even look at Dublin” because of the 2% RPZ cap.
The narrative for the reforms hinges on RPZs allegedly scaring off supply. Irish Institutional Property’s (IIP) Pat Farrell argued that the 2% cap caused a ‘marked reduction’ in new builds.
But is this accurate?
UCD Assistant Professor of Social Policy, Michael Byrne, notes that the private rental sector grew 6% from 2016 to 2022, with increases concentrated in RPZ areas.
This aligns with statements made by the RTB’s Rosemary Steen who confirmed that since 2016 “the RTB has grown.”
However, while there was no quantifiable impact on supply when the cap was set at 4%, from 2021 when the lower 2% rent cap was implemented there was a slight uptick in landlords ‘selling up’ meaning more homes on sale rather than rent, with 10% fewer rentals and 14% more sale listings. For a party that prides itself on home ownership, it’s ironic to see the Soldiers of Destiny decry such a development given their previous commitment to ban build-to-rent.
Some attribute the falloff in the construction of new apartments to RPZs often citing national planning permissions coming down by 39% and permissions in Dublin down by over 50% last year. However, Ireland’s drop in apartment permissions is not unique and follows an international trend linked more to interest rates than specific Irish rental regulation. Almost all apartments are financed by institutional investors. Those investors are looking for high yielding investments. When interest rates were at record lows they needed something to invest in as traditional fixed income investments such as government bonds were no longer offering high returns. Hence, there was an explosion in build-to-rent (BTR) construction investment during this period achieving high returns of close to 10%.
For instance, in Q3 2021, 54% of all dwelling types were apartments – a 40% increase year-on-year. But as central banks worldwide increased interest rates many of these investors faced higher financing costs and scaled back.
The United States, which has the world’s biggest BTR market, last year saw its lowest level of apartment units under construction since 2018 at 560,000, with 2012 levels of completion at 230,000 – 30% below pre-pandemic levels.
Looking at our closest neighbour the U.K, which has virtually no rent regulations, construction in BTRs fell dramatically from over 25,000 units in 2022 to just under 10,000 last year.
From the data it’s quite clear that the supply uptick in apartments during the low interest rate environment was more of an investor response to low borrowing costs, and that the high interest rate environment is causing a reduction in supply, with rent controls being an insufficient explanation.
Indeed, the idea that an uptick in apartment completions would somehow magically lower prices is absurd. Researchers working at the Bank of England in 2019 found that interest rates, not scarcity, drove house price rises. So, the government’s supply-boosting can feel like a smokescreen for its efforts to woo institutional investors. The IIP’s Farrell let the cat out of the bag recently when he said that rent caps have lowered ‘the rate of return on investment’ in housing making it less ‘lucrative enough for the build-to-let sector in Ireland’ thus revealing the priority: investor profits over tenant welfare.
But while RPZs had no noticeable impact on supply, what it did manage to curb was long-standing affordability issues; the ESRI shows RPZ areas saw lower rent increases than those outside. Counties such as Roscommon, with virtually no RPZ tenancies, saw a 6.7% annual increase in rent for one-bed apartments.
In 2016, the year RPZs were implemented, the CEO of largest landlord in the State Ires Reit David Ehrlich mentioned off the back of rents 10% above their peak that, “We’ve never seen rental increases like this in any jurisdiction that we’re aware of”, before mentioning that he ‘truly feels badly for the Irish people’.
Yet while rents have shot up nationally by over 80% since the crash – the third highest increase in the EU – this is music to the ears of the ‘institutional investors’ the govt is keen on attracting with even higher rents.
Despite rent pressure zones, in the 12 months to May last year, rents increased by over 5% for existing tenancies and 9.1% for new renters with the average Irish tenant spending a third of their income on rent averaging over €2,000 per month.
Now that the State has decided to deregulate rents between tenancies in order to incentivise even more investors into the housing market we will see new renters paying even higher rents and competing with cash-rich institutional landlords.
As Professor Lorcan Sirr of TUD mentioned: “These renters will be paying the pensions of comfortable, retired homeowning teachers in the US and elsewhere as they face years in housing – and wealth – oblivion.”
All in the name of increasing the supply of apartments in the hope prices will magically drop. As UCD’s Byrne outlined: “It is criminally simplistic to jump to the assertion that increasing build-to-rent luxury apartments in the South-East coast of Dublin or the Docklands is going to solve the rental affordability problem at a national or even city level.”
Perhaps the Minister for Housing, in his enthusiasm for a commemoration to the Norman conquest, should rearrange that infamous line that heralded their invasion – “By the creek of Baginbun, Ireland was lost and won” – to suit the current conquest of foreign institutional investors with: “By the creek of the Dublin City’s docklands, renters lost and landlords won.”
Like Ehrlich, I truly feel sorry for them.