Peter Burke (Longford-Westmeath, Fine Gael) | Oireachtas source

I cannot accept amendment No. 1, which proposes that the setting of a rent under a tenancy of a dwelling may not occur in a period of three years from the commencement of section 3 of the Residential Tenancies (Amendment) Act 2021. Besides the difficulties with a blanket ban on rent increases, which I will address presently, the amendment as drafted would have significant unintended consequences. As provided for in this amendment, the setting of rent under the tenancy of a dwelling in a rent pressure zone at any time after the commencement of section 3 of this Bill may not occur in the period of three years from the commencement of that section. On the face of it, this means that rent settings cannot legally take place for three years even where a new tenancy commences in respect of a rental property. While freezing rents for existing tendencies, this amendment would also stop new tendencies being agreed for existing rented properties. Now more than ever, we need investment in the sector. We need people to be free to move within the rental sector as their needs change over time.

The proposed imposition of a three-year rent freeze has been debated numerous times in both Houses of the Oireachtas. As has been said before, a blanket ban on rent increases in all likelihood would face significant legal challenge. It would also severely impact on investment in the supply of rental accommodation in the medium to longer term. I am sure Deputies would not want this to happen as it would be an unwelcome unintended consequences of the measure.

While affordability remains an issue, the introduction of rent pressure zones in 2016 and their subsequent enhancement in 2019, in July of this year, and proposed in this Bill have played and will play a key part in moderating rent increases.

Rent pressure zones were a considered measure that balanced the needs of tenants with the legal rights of landlords and the imperative to ensure rental housing supply was not adversely affected. The current rent pressure arrangements, under which annual rent increases are prohibited from exceeding general inflation as recorded by the harmonised index of consumer prices, HICP, were introduced as a balanced set of arrangements that recognised the need to intervene in situations of high and significantly increasing rents, while at the same time taking account of constitutional property rights and the need to avoid disincentivising the provision of rented properties. When introducing these measures the Minister, Deputy Darragh O’Brien, was very clear on the need to carefully monitor inflation. At that time, HICP inflation averaged 0.73% per annum over the previous three years but had risen to 1.6% per annum in the year ending June 2021. The Minister needed to revise the rent pressure zone rent control relatively quickly in July on that basis, which could be independently verified. Given the continuing rise in HICP inflation, up to 5.1% per annum in October, this Bill proposes to introduce a cap of 2% per annum pro rataon any rent inflation in rent pressure zones to ensure that effective rent controls are legally in force when the general inflation rate is too high and over 2% per annum.

I cannot accept amendment No. 2, which proposes to remove a reference to “relevant percentage”, as defined in section 3 of the Bill, and replace it with a flat 2%. This would, in effect, cap any rent increase at 2% regardless of the time elapsed since the previous rent setting under the tenancy. The definition of relevant percentage in the Bill permits a 2% per annum increase since the previous rent setting, whether that setting occurred under the current tenancy or under the previous tenancy. The aim of the definition is to avoid incentivising a landlord to routinely increase rents in a rent pressure zone on an annual basis. The Residential Tenancies Act generally provides the rent review in a rent pressure zone cannot occur any more frequently than once per year. The definition would allow for existing tenants to enjoy occupation of their home under tenancy without annual rent increases should that be their landlord’s wish. The landlord could forgo any annual rent increases for existing tenants in the knowledge that he or she could legally increase the rent by no more than the HICP inflation rate or the new cap of 2% per annum pro rata, whichever is lower, when any replacement tenancy is agreed. For example, if a landlord set a rent at €1,000 for the existing tenant and did not review the rent during a three-year tenancy, he or she could legally set a new rent for the subsequent tenant of €1,060 in line with the new cap of 2% per annum pro rataif HICP inflation is higher.

We do not want to incentivise annual rent reviews in rent pressure zones for existing tenants. We do not want to impede a landlord from charging a reasonable rent for the dwelling based on the time elapsed during the previous rent setting and taking into account the time, value of money and the cost of maintaining and providing rented accommodation. Landlords who own only one or two properties make up 86% of the total and 70% own just one property. We need to encourage landlords to provide much-needed accommodation in the private rental sector. The proposed amendment would unfairly penalise good landlords and drive away investment from the sector. In all cases, section 19(1) of the Residential Tenancies Act 2004, as amended, prohibits any rent being set that exceeds the market rent.

I cannot accept Opposition amendments Nos. 3 to 7, inclusive, which, similar to amendment No. 1, propose to freeze rents at their current levels. As Deputies know, any proposed measure that impacts on private property rights merits detailed consideration and scrutiny having regard to the provisions of Article 43 of the Constitution and associated legal complexities. On Second Stage, I explained that this Bill will cap any rent increase in a rent pressure zone at 2% per annum pro rata, where HICP inflation is higher. This measure has the approval of the Attorney General and the Government is confident it is fair to both tenants and landlords and will have the desired effect and impact on the rental sector.

The Planning and Development (Housing) and Residential Tenancies Act 2016 introduced the rent predictability measure to moderate rent increases in those parts of the country where rents are highest and rising fast. The proposal in section 3 of this Bill for the rent increase cap of 2% per annum pro ratain a rent pressure zone if HICP inflation is higher has regard to the constitutionally protected rights of landlords and takes into account local rental market factors, providing certainty to tenants and landlords with the medium-term rent levels.

Throughout this pandemic, we have asked landlords to show forbearance towards tenants where they may be struggling financially and requiring State support. In order to better enforce rent pressure zone legislation the Residential Tendencies (Amendment) Act 2019 provided the Residential Tenancies Board, RTB, with enhanced powers and resources to carry out investigations to sanction landlords, if required, for any contravention of the rent increases restriction in rent pressure zones. The maximum sanction is €30,000. Alternatively, a tenant may wish to refer a dispute for resolution to the RTB and a lawful rent can be enforced and damages of up to €20,000 can be awarded to the tenant. The Department, the Housing Agency and the RTB keep the operation of the rental market under constant review.

It is important to have transparency in the rental system, with fair rents and certainty for tenants and landlords.

On Second Stage, I was very clear in stating that the rental market is dysfunctional and that rents are too high. I was also very clear about the solution to increasing supply. In any marketplace where demand significantly outstrips supply, prices go up. If you look at the facts and evidence in the supply data that is currently coming in, commencement notices are up more than 48%, or 30,947, up to October 2021, which gives major confidence about supply coming into the marketplace considering the year we had in 2020 with the Covid pandemic and the associated repercussions of the lockdown earlier in the year. When quarter 3 of 2021 is compared with quarter 3 of 2020, it can be seen that the commencement notices are up 60%. That means bulldozers are on sites and houses are being delivered for workers to try to ensure we meet the demands of the economy in line with the ESRI report.

I will be very clear that there is a solution that is backed up by multi-annual funding of €4 billion, which is targeted at delivering more sustainable and high-quality units for our citizens in this State. That is the key response and what the arm of the State is trying to do. We are bound by the law officer of the Government under the Constitution, who is the Attorney General, and we are obliged to act upon his advice. Many Deputies can quote different legal opinions in respect of various proposals, but the Government has to be very clear about the advice it has to take to ensure that any proposals it brings to the House will stand up. That is very important.

A previous rent freeze that was imposed in this State in 2015 was mentioned. That was actually a deferral of a rent review. When the point came at which rent was reviewed two years after that freeze, it was only a deferral. People could charge what they wanted, in essence, with the increase. We have to be honest about statements we make in the House about there being a rent freeze for a period. The truth and the fact of it was that it was a deferral of increases. We have to be honest about that.

Covid-19 has been a major imposition on the people of the State, but it gave us the opportunity to bring in a number of Bills to protect tenants in their homes and to ensure that they were not evicted in what were very difficult circumstances for every citizen that found himself or herself in them. On rent supplement, we really got into gear through the network of community welfare officers in this State, who responded to very vulnerable citizens within three days on average.

I absolutely understand this issue. I hear Deputies speaking about constituents coming to their clinics. I have clinics every week in my constituency and I meet people daily who are in very vulnerable positions, trying to retain a tenancy or to get a new one, which is very frustrating considering the current dysfunctional state of the market. One thing I can give citizens is hope. When I look at my home town, I see a number of sites that are currently being developed, some of which include more than 100 houses, and will be delivered over the next number of months. There is hope there. I know it is very frustrating, but the actions of the Government, the investment we have right behind that and the protections we are trying to bring in are the best balance at this point in time. I acknowledge - I am not tone deaf - what people are going through in this society with rent levels. I used the term "dysfunctional" to describe the market. The Government has intervened in the marketplace.

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