WHAT ARE RENT PRESSURE ZONES
Rent Predictability Measures were new provisions enacted under the Planning and Development (Housing) and Residential Tenancies Act 2016 (the “2016 Act”) that are intended to moderate the rise in rents in the parts of the country where rents are highest and rising and where households have greatest difficulties in finding accommodation they can afford. In these areas, called Rent Pressure Zones (“RPZ”), rents will only be able to rise according to a prescribed formula by a maximum of 4% annually.
Outside RPZ's the existing requirement that the rent set for a property must be in line with local market rents for similar properties and three examples of rents for comparable properties must be presented to demonstrate this, still applies.
The RPZ measures were applied immediately to Dublin and Cork city and covers the 4 Dublin local authorities (Dublin City Council, South Dublin County Council, Dun Laoghaire/Rathdown County Council and Fingal County Council) and Cork City Council. There have been a further two rounds of RPZ designations. In January 2017 a further 12 Local Electoral Areas (LEAs) were added and another 2 were added in March 2017. For more detailed information and examples of how the 4% is calculated click here.
WHAT IS THE ROLE OF THE RTB IN RELATION TO THE DESIGNATION OF RPZ
There are 3 stages involved in designating an area as a Rent Pressure Zone.
Stage 1: The Housing Agency, following consultation with the relevant housing authority, propose in writing to the Minister that an area be prescribed as a Rent Pressure Zone. The areas can be the Local Authority area or a Local Electoral Area (LEA).
Stage 2: The Minister requests the Director of the RTB to assess whether the relevant criteria applies to the proposed areas, using the rent information that informs the RTB’s quarterly Rent Index. To meet the criteria,
- the annual rate of rent inflation in the average amount of rent for the area must be more than 7% in four of the last six quarters, and
- the average rent for tenancies registered with the RTB in the previous quarter must be above the average national rent, in the quarter (the National Standard Rent in the RTB’s Rent Index Report).
The national standard rent was €986 in the last published quarter of the Rent Index, Q4 2016.
Stage 3: Once the request from the Minister is received, the RTB must carry out an analysis of the rental data to assess whether or not the area meets the criteria. If the area meets the criteria, the Director will prepare a Rent Zone Report for the Minister confirming that the criteria for the proposed area is satisfied. The Minister on receipt of the Report, will then by order, prescribe the area as a rent pressure zone for a specified period not exceeding 3 years.
RENT ZONE REPORTS Ballincollig - Carrigaline, Co. Cork Cobh, Co. Cork Galway City Central Galway City East Galway City West Celbridge - Leixlip, Co. Kildare Naas, Co. Kildare Maynooth, Co. Kildare Kildare - Newbridge Ashbourne, Co. Meath Laytown - Bettystown, Co. Meath Ratoath, Co. Meath Bray, Co. Wicklow Wicklow
There have now been three sets of Rent Pressure Zone designations since the provisions were enacted in December 2016.
- In December 2016, the measures were immediately applied to the 4 Dublin Local Authorities (Dun Laoghaire/ Rathdown Council, South Dublin County Council, Fingal County Council, and Dublin City Council) and Cork City Council;
- In January 2017 a further 12 Local Electoral Areas were designated. The analysis of the results for the designation of the 15 proposed areas is in this table.
- In March 2017 a subsequent 2 Local Electoral Areas were designated. The analysis of the subsequent three proposed areas is here.
METHODOLOGY APPLIED TO PROVIDE FOR ASSESSING RPZ CRITERIA
In order for the RTB to be in a position to carry out analysis, our rents data was mapped to an LEA, in order that each tenancy registered with the RTB could be identified at an LEA level. This exercise was undertaken by Eircode which mapped our addresses to Eircodes, which were then mapped to LEAs. A matching rate of 95.74%, was achieved.
A methodology was then applied to provide for a standardised rent index for LEAs. The Economic and Social Research Institute completed this work on behalf of the RTB. The primary focus was to create a mix-adjusted measure of rents; that is, a measure of rents that takes account of the changing mix of properties rented in different time periods.
The data was also examined prior to any mix-adjustment to identify outliers and/or data entry errors. This was not a check of all the variables, but was focused on those that would form a part of the mix-adjustment process.
The existing hedonic regression model used for the rent index had to be amended to take account of the new LEA information. The existing model used rolling data going back over 6 quarters; the new model is a pooled approach using all data since 2007 in one estimation. This was to ensure there are enough observations from which to generate satisfactory results. The specification did entail the assumption that preferences for different property types do vary over time. However, the results were compared to the existing rent index at a national level and it is believed that they were broadly consistent.