Research indicates RPZs are having a moderating effect on rent inflation

Visual of a playground in a neighborhood

Research shows rental price inflation moderated by 2.5%-3% per annum in Rent Pressures Zone areas since 2016

  • High levels of satisfaction in tenant landlord relationships
  • Tenants feel more secure when they know their rights
  • RTB launch national public awareness campaign on changes to rental law

 

Thursday, 11 July 2019: New research commissioned by the Residential Tenancies Board (RTB) shows that Rent Pressure Zones (RPZs) have had a moderating effect on the sector.

This is evidenced by a moderation in price inflation of 2.5%-3% per annum within designated Rent Pressure Zone areas. This was the message from the RTB at a research briefing in Dublin earlier today.

The RTB commissioned the Economic and Social Research Institute (ESRI) and Coyne Research to capture valuable economic, environmental and social insights into the impact RPZs are having on rental trends, including landlords and tenants in Ireland.

The ESRI Research; ‘Trends in Rental Price Inflation and the Introduction of Rent Pressure Zones in Ireland’ indicates that price inflation in RPZs has fallen relative to other areas since the introduction of the legislation in December 2016. Falling from just over 9% for the seven quarters before the regulations to just under 6.4% in the seven quarters since the regulations – a drop of approximately 2.6% points.

In the non-RPZ areas, the average rent growth before and after the policy was virtually the same, with only a 0.24% decline.

Rosalind Carroll, Director of the Residential Tenancies Board opened the seminar and welcomed the research findings;

“Since the introduction of RPZs over two and a half years ago, we’ve seen significant debate around their effectiveness. A core function and strategic priority of the RTB is the provision of accurate and authoritative research and data to provide an evidence base for policy development and promote a better understanding of the sector. We have commissioned this research to gain a better insight on the impact on both landlords and tenants and on rental trends.

This research comes at an important time, with the new RTB legislation coming into effect including new RPZ designation criteria, as well as 19 new RPZs. We also launched our new Investigations and Sanctions Unit which gives the RTB the power to proactively regulate key areas of the legislation, including RPZ restrictions.

There are now 65% of tenancies in Rent Pressure Zones and since their introduction in 2016, we’ve been monitoring the impact reports closely. This is the first in-depth analysis of the impact of the RPZs which will help inform and strengthen future strategy and most importantly government policy going forward.”

A second report compiled by Coyne Research; ‘The Landlord and Tenant Experiences of Rent Pressure Zone Measures’ also found the majority of tenants in RPZs believe they have a positive relationship with their landlords with 80% classifying their relationship as “positive” (46%) or “very positive” (34%). For landlords, 86% were satisfied (32%) or very satisfied (54%) with their current tenants.

Half of all tenants interviewed (51%) indicated that they feel “fairly secure” in their tenancy, with 28% stating they felt “very secure”. Security in tenancy however appears to differ more according to familiarity with rights. Those with lower familiarity with their rights are less likely to feel secure. Amongst tenants who classify themselves as either “very familiar” or “somewhat familiar” with their rights and responsibilities as tenants, 32% feel “very secure” in their tenancy, whereas amongst those with little or no familiarity with their rights just 8% feel “very secure”. For landlords with tenancies in Rent Pressure Zones whilst there was a high level of awareness of RPZs (92%) the research found a mixed understanding particularly around the exemptions to the RPZ restrictions.

Ms Carroll, Director of the RTB added during her closing address;

“This research clearly demonstrates the need for the RTB to continue to support both landlords and tenants in improving awareness about their rights and responsibilities. Today we are announcing a national public awareness campaign on changes to rental law beginning from Monday 15th July and running for six weeks to include radio, outdoor, digital and social media. The objective of the campaign is to support both landlords and tenants in understanding the recent changes and to assist them in complying with the law.”   

To learn more information about the research reports, the RTB or Rent Pressure Zones, please visit www.rtb.ie or follow @RTBinfo

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*Please be advised that this research, does not capture RPZ data from the recently announced 19 new LEAs designated on July 02 2019.

About the Residential Tenancies Board

The Residential Tenancies Board (RTB) is a public body set up to support and develops a well - functioning rental housing sector. Our remit covers both the private rental sector and not-for-profit housing providers also referred to as Approved Housing Bodies.

Our role is to regulate the rental sector; provide information to tenants and landlords; maintain a national register of tenancies; resolve disputes between tenants and landlords; conduct research and provide information to inform policy.

Information, education and research

We provide high quality information to tenants and landlords as well as to the general public to help them understand their rights and responsibilities.

We also provide accurate and authoritative research and data on the rental sector, such as the RTB Quarterly Rent Index, which allows us to monitor trends in the rental sector and also allows individuals to compare rents in particular locations.

Registrations

All private residential landlords and Approved Housing Bodies are obliged to register their tenancies. A public register is available on our website. The registration of tenancies enables us to collect important data on the sector, and is also a key part of regulating and supporting the sector and ensuring landlords and tenants are aware of their rights and responsibilities.

Dispute resolution services

Since 2004, we have replaced the courts in dealing with the majority of disputes between landlords and tenants through our Dispute Resolution Service. This service offers a choice of resolution types to parties – mediation or adjudication.

Sanctions and investigations

The introduction of the new powers of investigation and sanctions on July 1 2019, gives the RTB a more active and direct regulatory role in the rental sector.

Rent Pressure Zones

What is a Rent Pressure Zone (RPZ)?

A Rent Pressure Zone (RPZ) is a designated area where rents cannot be increased by more than 4% per annum. This applies to new and existing tenancies (unless an exemption is being applied).

Rent Pressure Zones are located in parts of the country where rents are highest and rising, and where households have the greatest difficulty finding affordable accommodation. They are intended to moderate the rise in rents in these areas and create a stable and sustainable rental market that allows landlord and tenants to plan financially for their future. 

For more information on RPZs, please visit; https://onestopshop.rtb.ie/rent-pressure-zones/

 

Key Research Findings

The Economic and Social Research Institute (ESRI) Research; ‘Trends in Rental Price Inflation and the Introduction of Rent Pressure Zones in Ireland’ (June 2019)

 

In 2018, the ESRI was commissioned to understand and document the trends in rental prices in Ireland before and after the introduction of RPZs. The key findings are;

Price inflation is falling in RPZs

Price inflation in RPZs has fallen relative to other areas since the introduction of the legislation. The magnitude of the moderation in inflation nationally has been in the order of 2-3 percentage points per annum when comparing the seven quarters since the policies to the seven quarters before.

Regional differences exist

Larger reductions in rental inflation are evident in counties Louth and Galway than in Cork, Dublin and the rest of the Greater Dublin Area.

Some issues exist with evidence of breaches but new powers of RTB will help to address this where it does occur

The ESRI explored the extent to which inflation at the property level has converged to the 4% limit allowed under the legislation. They found that the share of properties whose annualised rental increase was greater than 4% decreased from 73.2% in Q4 2016 to 42.5% in Q3 2018 in RPZ areas.

To view the full ESRI Research Report please see here.

Coyne Research; ‘The Landlord and Tenant Experiences of Rent Pressure Zone Measures’ (June 2019)

In 2018, Coyne Research was commissioned to design and execute a research programme in order to assist in developing this understanding.

The key findings are;

High levels of satisfaction in tenant landlord relationships

The research indicates that the vast majority of tenants in Rent Pressure Zones believe they have a positive relationship with their landlord; 80% classify their relationship with their landlord either as “very positive” (46%) or “somewhat positive” (34%). For landlords, 86% were satisfied (32%) or very satisfied (54%) with their current tenants.

Knowing their rights is important for tenants to feel secure

Half of all tenants (51%) indicate that they feel “fairly secure” in their tenancy, with a further 28% “very secure”.

Security in tenancy appears to differ more according to familiarity with rights, rather than location. Those with lower familiarity with their rights are significantly less likely to feel secure. Amongst tenants who classify themselves as either “very familiar” or “somewhat familiar” with their rights and responsibilities as tenants, 32% feel “very secure” in their tenancy, whereas amongst those with little or no familiarity with their rights just 8% feel “very secure”.

There is limited awareness of RPZs and landlords seems to be frustrated by them – more information needed

Roughly half of tenants within Rent Pressure Zones (48%) are aware that there are restrictions in place around rent increases in their area.

The claimed impact of RPZ restrictions is high amongst tenants; once prompted with an explanation 3 in 4 RPZ tenants (75%) responding to the quantitative survey claim it makes them feel more secure in their tenancy. Further evidence of this frustration can be seen in the quantitative results, where the majority (55%) believe that RPZ restrictions are unfair.

 

Dispute Resolution is good but landlords are cynical and this must be addressed

The interviews suggest that most tenants are unlikely to seek out information about their rights and obligations as tenants unless they are in some sort of dispute or experience some other trigger to want to inform themselves.

 

Regarding dispute resolution, just 11% of tenants have been involved in a dispute which was brought to the RTB’s Dispute Resolution Service, but encouragingly the majority of tenants in RPZs (71%) claim they would be likely to avail of the service if they believed their landlord was not complying with the law.

 

To view the full Coyne Research Report please see here.

 

Research methodology:

ESRI Research, June 2019; Trends in Rental Price Inflation and the Introduction of Rent Pressure Zones in Ireland

A range of methods have been used to undertake this assessment, including analysing the trends and developments at an LEA level using the quarterly Rent Index official series as well as an analysis at the property level using a matched sample from the RTB database.

 

Coyne Research, June 2019: Landlord & Tenant Experienced of Rent Pressure Zone Measures

Qualitative Research (see pg 6): As part of the first phase of research, 31 in-depth interviews were conducted via telephone amongst both tenants and landlords living and renting in Rent Pressure Zones.

 

17 tenants were interviewed – with a spread of those from different regions, social classes and a mix of those who had begun their tenancy before the introduction of RPZs and those who had done so since then. 14 landlords were interviewed – with a mix of “small”, “medium” and “large” landlords, as well as 2 representatives from “institutional” landlord companies. 

 

Quantitative Research (see pg 7): Phase Two consisted of an online survey conducted amongst both tenants and landlords.

 

A sample size of 500 tenants was achieved via online panels – all were currently renting from a private landlord, as Approved Housing Bodies and Local Authority tenants are not subject to RPZ measures and have different rental systems.

 

The sample of tenants included a spread across age and region which is in line with the most recent CSO census data, and a spread across RPZ and non-RPZ residents which is in line with the Residential Tenancies Board’s data.

 

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