Threshold on RPZs and what comes next
The Week in Housing 02/05/25
I’m really pleased to feature this guest post from Threshold on the all important issue of RPZ reform. I’m expecting there’ll be an announcement from Government on this very soon. Thanks to Gareth and Emily for putting the below together. In other news, I had an opinion piece in the Irish Times earlier in the week looking at immigration, housing and far right politics. Also, if anyone is interested in doing a masters, check out the programmes we offer at the School of Social Policy, Social Work and Social Justice: Equality Studies, Gender Studies and the Masters in Public Policy.
The only way to successfully achieve long-term stability and affordability in the rental sector is a transition to a unitary, or an integrated, housing system. This requires, as recommended by the Housing Commission, a targeted increase in the proportion of social and cost-rental housing to 20% of the national stock.
Until we have such a system, rent regulations, such as Rent Pressure Zones (RPZs), will be necessary, to keep rent increases within reasonable limits. Despite its flaws, the RPZ system has tempered rent increases: without it we can anticipate substantiable rent increases, pushing more renters into financial distress and possible homelessness. As the RPZ legislation is currently set to expire at the end of 2025, decisions need to be made as to whether the system will continue.
The RPZs must remain for the foreseeable future. What should have been temporary measures must now remain in place longer while real attempts are made to increase the availability of housing at affordable prices. Data published by the RTB shows that sitting tenants in RPZs experience relatively low rent increases compared to new tenants, while increases are in the double digits for those outside of RPZs. Removing RPZs could expose all renters to such increases. This is all at a time of record high rents when approximately 60% of new tenants in Dublin, and 40% of existing tenants in Dublin, are paying more than €2,000 a month in rent[MB1] [GR2] [GR3] .
In the medium-to long-term, Threshold sees merit in the Housing Commission’s recommendation that we move to an alternative system that pegs rent increases to local ‘reference’ rents for dwellings of similar quality. You can read Threshold’s full evaluation of this policy recommendation here.
The provision of localised reference rents, based on the quality and amenities of the accommodation, would help landlords to set an evidence-based rent and ensure that tenants are being charged fairly, and getting value for money. For example, a property which meets the basic minimum standards with no additional amenities will likely be at the lower end of the rental market while those of higher standards with additional amenities will be at the higher end.
In such a scenario, the criteria of what constitutes ‘higher standards’ and ‘additional amenities’, would need to be clearly scrutinisied. Some examples of these could include;
· Size of the property in square metres,
· Modern appliances, energy-efficient washers and dryers, energy-efficient windows, and smart home devices,
· High-end fixtures in kitchens and bathrooms,
· Access to on-site parking (total rent would be inclusive rather than separate to),
· Luxury facilities like a well-equipped gym, concierge services or exclusive on-site outdoor spaces.
As such, a system of local reference rents could allow landlords to increase their rent if they can demonstrate it falls below the local rent level for comparable dwelling units.
It is extremely important that any reference rent system is defined by comparing amenities and building quality rather than using blanket measures. The Building Energy Rating (BER) of a property is an example of a prescribed quality measure. In contrast, a blanket measure would be counting the number of bedrooms to determine the size of a home; in this instance, square metres is the better measure. Another type of blanket measure is the reference to ‘comparable areas’, as per Section 22 of the Residential Tenancies Act 2004 for rent setting, when Local Electoral Area would be more appropriate.
Quality data will be key in making any such system effective. A property-specific rent register as well as a database of local reference rents, based on the rents being paid, not advertised, would be required.
A register is one way to make tenants aware of the rental history of their home and therefore be confident that their rent is a lawfully permitted amount. Without one, regulation can only fully protect sitting tenants as rents are de facto decontrolled between tenancies. One option, to overcome this challenge, would be for the RTB to provide the tenant with the rental amount that was provided as part of the tenancy registration process. This would allow the tenant to notify the RTB if the rent they are being charged differs, thus prompting the RTB to engage with the landlord to ensure they only charge the lawfully permitted rent.
To introduce a new rent-setting system, it is paramount to address a notable gap in rent-setting policy in Ireland. A definition of ‘rent’ is needed to ensure tenants are not charged extras, or ‘non-core price payments’, on top of their rent, for example administration fees, car parking fees or Local Property Taxes. Charging tenants such fees undermine the RPZ regulations at present, and it would do the same to a reference rent system or any rent setting system.
Another key concern is that tenants experiencing material deprivation could be disproportionately negatively affected at the initial introduction of the system. Worse even, more tenants could be at risk of homelessness.
This could occur in instances where the rent is below the reference rent, and the landlord, on the introduction of a reference rent system, increases it to the new permissible level. This could result in some households being priced out of their homes. To mitigate this, HAP rates will need to be set in line with reference rents and consistently adjusted to match the real-time market rent. The rent register will ensure staff in local HAP departments have the information necessary to determine the rent amount to approve under HAP. Additional restrictions on substantial increases may be required for a time to fully transition to the new system.
In Germany, rent increases during a tenancy are limited to the local reference rent, which is the average rent paid under newly agreed and existing contracts for comparable dwellings (by type of dwelling, location, size, condition and equipment including energy consumption) over a number of years. These are not based on current market rent but on the long-term trend of local rents with an emphasis on historic rental costs. This is known as Miet Spiegel (rent mirror’). Most municipalities have their own database of reference rents in place.
Structurally, this system has resulted in ongoing increases in rents, as the reference rent is regularly higher than the average rent recorded locally.
This system has been criticised for its issues with accuracy of data and transparency. The Miet Spiegel comes from stakeholder knowledge rather than robust data, which may not reflect actual rents paid and is not consistently updated. The existence of the RTB data and the work of the ESRI can ensure the availability of up-to-date and accurate reference rents, countering some of the challenges faced in Germany.
In the Netherlands, rent setting is applied using the Woningwaarderingsstelsel (Residential Assessment System), also known as the ‘point system’ to assess housing quality and determine the maximum price for renting a dwelling. The Dutch Huurcommissie, or rent tribunal, has a tool which can determine how many points a property has. In Threshold’s view, this is the most comprehensive and easily assessable online rent price check.
Each part of the house is awarded points for the size of rooms, number of heated rooms, kitchen amenities, bathroom amenities, energy performance, outdoor space and property value. Every point corresponds with a rental amount in euros.
As of July 2024, if a property is worth 143 points or less, a tenant should be paying no more than €886.07 in rent, excluding service costs. If a property is worth 144 to 186 points, it is a middle market rental, where a maximum rent of €1,157.95 is applied. Properties worth more than 186 points are classed as the ‘free sector’, for which there is no rent ceiling.
In Threshold’s view, regardless of what the next step for rent regulation in Ireland is, RPZs should be extended until a comprehensive alternative model plan is in place. It is imperative that a cliff-edge scenario is avoided as 83% of tenancies are located in RPZ’s. A sudden end has the potential to put many more at risk of homelessness when there is already a record high number of individuals currently in emergency accommodation.
Ultimately, Threshold advocates for a system that not only regulates rent between and during tenancies, but ensures the rents being charged are fair, reflective of the quality of the accommodation, transparent and informed by good-quality data.
Events & news
The next in our ‘Making Rental Housing Affordable: International Perspectives’ webinar series will be presented by Solveig Raberg Tingey, BL (Denmark) . Solveig will present on ‘Non-profit and affordable housing – the Danish experiences’, Wednesday, 21st May at 1pm. Register here.
What I’m reading
A new ESRI report on short term lets. Some good posts on this Substack for those interested in US housing, check out this one on declining affordability for renters. A new Geary Institute paper on land and data in Ireland.