Rents in Ireland could rise as Taoiseach suggests review of price cap

The Irish government will review so-called rent pressure zones (RPZs) which limit letting prices in certain areas, said Taoiseach Micheál Martin.

“There’s no security of environment for investors, they don’t know whether it will change from year to year. And that has to stop,” Martin told RTÉ radio on Sunday.

Martin added: “We need to pivot more strongly to getting private sector investment into the market”, noting that the state can’t meet construction targets “all on its own”.

RPZs stop landlords from raising rental costs by more than general inflation – or by more than 2% per year if inflation is higher.

Introduced in 2016, the policy originally capped annual rental rises at 4%.

Ronan Lyons, associate professor in economics at Trinity College Dublin, told Euronews that reform of the emergency measure is now “long overdue”.

“The international evidence on rent controls is pretty clear that they carry large costs in reducing the supply of rental homes, thereby making the underlying problem worse not better,” he argued.

“They also reduce the quality of surviving rental homes, as there is no way for a landlord who improves a rental home to recoup that investment,” Lyons continued.

The Irish Property Owners Association (IPOA), a landlord group, also welcomed the suggestion from Micheál Martin.

“This is a step in the right direction towards restoring balance in the rental market and addressing long-standing inefficiencies,” said IPOA chairperson Mary Conway in a press statement.

“We have long advocated for a rational, balanced approach to Ireland’s rental market, including the abolishment of RPZs in recognition of the damage they have done to the rental market and their role in driving landlords out.”

The roots of Ireland’s housing crisis

If housing investments don’t provide a stable and predictable return, less private funding will be funnelled into construction.

This is arguably exacerbating Ireland’s housing crisis, with affordable supply failing to meet demand.

In Ireland’s boom period of the late 1990s and early 2000s, private construction developed rapidly as banks were eager to grant huge loans.

Between 1996 and 2006, housebuilding grew by 177% – preceding the property crash that sparked an era of austerity.

ADVERTISEMENT

Despite the construction splurge that defined Ireland’s Celtic Tiger years, social housing was neglected in the period that followed – forcing vulnerable individuals into the private rental sector.

Complex planning regulations and the cost of land and labour are now hindering new building, while short-stay holiday lets are reducing long-term rental supply.

Figures from the Central Statistics Office show only 30,330 homes were finished in 2024, an annual drop of 2,195.

A balanced approach

“In terms of replacing the Rent Pressure Zone legislation, or bringing in any new measures around rent certainty, it is really important to find a middle ground between the needs of the market and protecting tenants,” said John-Mark McCafferty, CEO of housing charity Threshold.

ADVERTISEMENT

“With An Taoiseach signalling the end of RPZs later this year, Threshold’s worry is for the impact on low or average earners in the private rental market,” McCafferty told Euronews. “Rent affordability continues to be a key concern for tenants.”

McCafferty pointed to a report from Ireland’s Housing Commission, also referenced by Martin in his interview with RTÉ.

One viable solution proposed by the Housing Commission, according to McCafferty, is to replace RPZs with a “reference rent” system.

In this scenario, rental charges for buildings of a similar quality in the same area would be aligned.

ADVERTISEMENT

Martin has nonetheless stressed that further examination of RPZs will be carried out before a change in policy is implemented.

“The Rent Pressure Zones expire at the end of the year so we have time in between to say: can we develop an alternative system which protects renters but also enables people to have a clear stable environment in which to invest,” he explained.