Minister Simon Coveney has announced the extension of Rent Pressure Zones beyond those introduced for Dublin and Cork cities in December 2016. Analysis of rental data by the Residential Tenancies Board (RTB), has identified the following Local Electoral Areas (LEA’s) as Rent Pressure Zones with effect from today, Friday, 27 January 2017:
- Ballincollig-Carrigaline, Co Cork
- Galway City Central
- Galway City East
- Galway City West
- Celbridge-Leixlip, Co Kildare
- Naas, Co Kildare
- Ashbourne Co Meath
- Laytown-Bettystown, Co Meath
- Ratoath, Co Meath
- Bray , Co Wicklow
- Wicklow, Co Wicklow
There are 26 towns included in these Local Electoral Areas including, Sallins, Rathagan, Slane, Julianstown, Duleek, Dunboyne, Dunshaughlin, Enniskerry, Douglas and Passage West.
Rent Predictability Measures are the 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 in areas where households have the greatest difficulty finding accommodation they can afford. In these areas, called Rent Pressure Zones (“RPZ”), rents will only be able to rise up to a maximum of 4% per annum.
What is the role of the RTB in relation to these measures?
Outlining the process, the Director of the RTB, Ms. Rosalind Carroll, said that the Housing Agency, “following consultation with the Local Authority concerned, proposed a number of areas to the Minister for consideration. The Minister then requested the RTB, which collects and monitors the data on rents, to assess whether the relevant criteria applied to these areas using the rent information that informs the RTB’s quarterly Rent Index. The RTB confirmed to the Minister that out of the 15 LEA’s referred by the Housing Agency 12 have met the criteria set down in the recent legislation. The 3 areas that did not qualify were Greystones, Cobh and Maynooth.”
“To qualify as a Rent Pressure Zone, the average rent of an area must be above the national rent of €973 and have demonstrated high levels of rent inflation in accordance with the legislation. The addition of these 12 LEA’s will mean that approximately 55% of the population in rental accommodation are now renting within a Rent Pressure Zone. No other referrals have been made to the RTB and it is understood that the Housing Agency do not propose any other areas for consideration as Rent Pressure Zones at this time”, added Ms. Carroll.
The criteria for designating an area as a Rent Pressure Zone are:
- The annual rate of rent inflation in the area must have been 7% or more 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). This was €973 in the last published quarter of the Rent Index, Q3 2016.
Not all rental properties in Rent Pressure Zones are covered by the 4% annual rental restriction. Properties that have not been let at any time in the previous two years, and properties which have been substantially refurbished, can be exempted from the measure. However, the pre-existing requirement that the rent set for a property must be in line with local market rents for similar properties in the area still applies.
A ‘substantial refurbishment’ must be a significant change to the dwelling resulting in increased market value of the tenancy. This would involve significant alterations or improvements which add to the letting value of the property; repainting or replacement of white goods would not be sufficient.
For landlords of all new tenancies within the Rent Pressure Zones that commenced on or after 24th December last, they are entitled to review the rent annually. And where rent reviews take place annually the permissible rent increase in each case will be up to a maximum of 4%. If, for example, a landlord opts to review the rent after 18 months (instead of one year) the allowable increase will be 6% (4 % per annum pro-rata for 1 ½ years).
Outside the Rent Pressure Zones, a landlord can only review the rent once in any 24 month period, and cannot review within 24 months of the commencement of the tenancy except in limited circumstances such as substantial refurbishment of the property which affects the letting value of the dwelling. The Residential Tenancies Act prohibits the landlord from setting a rent that is in excess of market rent. If a landlord intends reviewing the rent, they must inform a tenant, in writing, of any review in rent 90 days before the new revised rent is due to take effect. Landlords must show that the rent set is not above the local market rents for similar properties and three examples of rents for similar properties in the locality must be presented to demonstrate this. A valid notice served by the landlord must be in the prescribed form which can be found at www.RTB.ie.
Market rent for properties situated outside of a Rent Pressure Zone is defined as a rent that a willing tenant not already in occupation would give and a willing landlord would take for the dwelling, having regard to other terms of the tenancy and the letting values of dwellings of a similar size, type and character to the dwelling and situated in a comparable area to that in which it is situated.
Commenting on the wide range of changes that have been introduced, the RTB Director, Ms. Carroll, said that “security of tenure for both landlords and tenants is essential, if the rental sector is to be both an attractive option for tenants and a safe and viable investment choice for investors”.
She said that one of the overall aims of the new rental strategy is to move towards a situation where longer term tenancies are the norm. To that end, she points out that among the reforms in the Government’s new legislative package tenancies of four years’ duration are now extended to six year tenancies.
“This will apply to all new tenancies that come into operation on or after 24th December 2016 which includes a Further Part 4 tenancy that comes into existence on or after 24th December 2016”. Landlords currently can terminate within the first six months of a tenancy without giving a reason. Once a Part 4 tenancy comes into existence it can only be terminated by using one of the following grounds, she added:
- The tenant has failed to comply with the obligations of the tenancy (having first been notified, in writing, of the failure, and given an opportunity to remedy it.)
- The landlord intends to sell the dwelling within the next 3 months
- The dwelling is no longer suited to the needs of the occupying household
- The landlord requires the dwelling for own or family member occupation
- Vacant possession is required for substantial refurbishment of the dwelling
- The landlord intends to change the use of the dwelling