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

I wish to flag at the outset that the Government will be making a consequential technical amendment on Report Stage to section 3 of the principal Act.

Unfortunately, I cannot accept amendment No. 1, which proposes that the setting of a rent under tenancy of a dwelling may not occur in the period of three years from the commencement of section 3. 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 a rent under the tenancy of a dwelling in a rent pressure zone at any time after the commencement of section 3 may not occur in the period of three years from the commencement of that section. On the face of it, this means 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 tenancies, this amendment would also stop new tenancies being agreed for existing rental properties.

Now, more than ever, we need investment in the sector and people must 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 previously, a blanket ban on rent increases in all likelihood would face significant legal challenge. It would also severely impact investment in the supply of rental accommodation in the medium to longer term, and I am sure Senators would agree this would be an unwelcome and unintended consequence of this measure.

While affordability remains an issue, the introduction of rent pressure zones in 2016 and their subsequent enhancement in 2019, in July this year and as proposed in this Bill, have played and will play a key part in moderating rent increases. Rent pressure zones were a considered measure that would balance 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 zone arrangements, under which annual rent increases are prohibited from exceeding general inflation as recorded by the harmonised index of consumer prices, were introduced as a balanced set of arrangements which recognise the need to incentivise in situations of high and significant increases in rents while at the same time taking account of constitutional property rights and the need to avoid disincentivising the provision of rental properties.

When introducing these measures the Minister was very clear about the need to monitor inflation carefully. At the time, the harmonised index of consumer prices 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 the basis that it could be independently verified. Given the continuing rise in the harmonised index of consumer prices inflation up to 5.1% per annum in October, this Bill proposes to introduce a cap of 2% per annum pro rata to any rent inflation in a rent pressure zone to ensure 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 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 rent increase since the previous rent setting whether the 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 in a rent pressure zone, RPZ, annually. The Residential Tenancies Acts generally provide that a rent review in an RPZ 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 the landlord so wish.

The landlord could forgo annual rent increases for the existing tenants in the knowledge that he or she could legally increase a rent by 2% per annumpro ratawhen annual replacement tenancy is agreed. For example, if a landlord had set the 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 of €1,060 if lower than the harmonised index of consumer prices inflation for the subsequent tenant. 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 since the previous rent setting and taking into account the time value of money and costs in maintaining and providing rental accommodation. Some 86% of landlords own one or two properties. We must encourage landlords to provide much-needed accommodation in the private rented sector. This amendment would unfairly penalise good landlords and drive away investment from the sector.

I cannot accept amendments Nos. 3 and 4. I appreciate that they propose, in effect, to reduce the quantum of any rent increases that may lawfully be imposed in a rent pressure zone. However, as with amendment No. 1, the proposed amendments would effectively freeze rents at their current levels. Any proposed measure that impacts on private property rights requires detailed consideration and scrutiny, having regard to the provisions of Article 43 of the Constitution and the associated legal complexities. On Second Stage, the Minister explained that this Bill will cap any rent increase in a rent pressure zone at 2% per annum pro rata. 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 a desired impact in 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 proposed rent increase cap of 2% per annum pro ratain rent pressure zones, if lower than the HICP or inflation, in the Bill has regard to the constitutionally protected property rights of landlords. It takes account of local rental market factors providing certainty to tenants and landlords with regard to medium-term rent levels.

Throughout this pandemic we have asked landlords to show forbearance towards their tenants where they may struggle financially with some requiring State support. In order to better enforce rent pressure zone legislation, the Residential Tenancies (Amendment) Act 2019 provided the Residential Tenancies Board with enhanced powers and resources to carry out investigations and sanction landlords, if required, for any contravention of a rent increase in a restricted rent pressure zone. The maximum sanction is €30,000. Alternatively, a tenant may wish to refer a dispute for resolution to the board so 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 Residential Tenancies Board keeps the operation of the rental market under constant review. It is important to have transparency in the system, with fair rent and certainty for tenants and landlords alike.