Enda Kenny (Mayo, Fine Gael) | Oireachtas source

I thank Deputy Martin for his question. This situation is unprecedented. It has been around for a very long time. Particular aims are set out in the Minister's comprehensive, targeted and focused rental strategy programme, which is the first intervention in the housing market here to be made by any Government. A great deal of discussion is going on with Deputy Martin's spokesman, whom I heard speaking this morning and at other times about the three issues Deputy Martin has just raised. The Minister, Deputy Coveney, has responded to the three issues in question. Deputy Martin will be aware that the Minister for Finance has set up a working group on the taxation issue. In this year's budget, the Minister, Deputy Noonan, said he intends to increase the deductibility limit in respect of landlords until it gets to 100%. He set out the timescale for that.

Deputy Martin also asked about contiguous areas of the cities of Dublin and Cork, which have been included in the Minister's proposals. It is clear that this will be assessed on the basis of local electoral areas by the Residential Tenancies Board. The Minister, Deputy Coveney, is confident that the areas in question can be extended. He will have an answer to that question by February, by which time he will have received the board's assessment.

The decision to set the cap at 4% was made for a number of specific reasons. First, there is a need to ensure there is a reasonable rate of return on investment so that there is no spike effect at the end of the period of the designation. In other words, a lower limit could have the effect of storing up a sudden upward correction for tenants after three years. Second, the Government previously endorsed a limit of 4% per annum on a rolling five-year basis as a reasonable rate of return in the target portfolio set out in the ISIF investment strategy report, which was published in 2015. Third, the level we have chosen is 20% lower than this country's long-run annual rent increases over seven decades. Fourth, the maximum allowed inflation in rental pressure zones will be less than half of the current rate of annual rent inflation nationally. It is below the allowed rental inflation in a number of other countries where rents are indexed, including Germany, where rents may be increased by a maximum of 20% over a three-year period;-----

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