Section 24 of the Residential Tenancies Act 2004-2019 defines market rent for the purposes of rent setting and rent review to mean, in relation to the tenancy of a dwelling, the rent which a willing tenant not already in occupation would give and a willing landlord would take for the dwelling, in each case on the basis of vacant possession being given and having regard to the 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. Section 19 of those Acts provides that in setting a rent under a tenancy of a dwelling, the rental amount shall not exceed market rent. In a Rent Pressure Zone, a rent increase restriction of 4% per annum applies.
With effect from 27 March 2020, new emergency measures were introduced into law to protect tenants during the COVID-19 emergency period. Rent increases are prohibited and tenants cannot be forced to leave their rental accommodation, other than in exceptional circumstances, during the COVID-19 emergency period. Initially, these emergency laws will last for a period of 3 months, but they may be extended if the Government considers it necessary.
The Government’s Strategy for the Rental Sector recognised that rental inflation is the most significant challenge to security of tenure in the rental sector. To address this, the Planning and Development (Housing) and Residential Tenancies Act 2016 provided for Rent Pressure Zones (RPZs) to moderate the rate of rent increases in those areas of the country where rents are highest and rising quickly. Currently, almost 73% of approximately 364,000 tenancies in the private rental sector are covered by RPZ designations and benefit from the rent increase restriction of 4% p.a.
In order to support more robust enforcement of the RPZ regime, the Residential Tenancies (Amendment) Act 2019 provided the Residential Tenancies Board (RTB) with additional powers and resources to carry out investigations and sanction landlords, if required, for any contravention of the 4% rent increase restriction in RPZs.
Ultimately, the most effective way to make rents more affordable in the medium to long term is to increase supply and accelerate delivery of housing for the private and social rental sectors. The Government is tackling housing affordability in a number of ways to help ensure that people can provide themselves with a home - whether for rent or purchase.
Acknowledging that renters in Dublin and other major urban centres are facing significant housing access and affordability challenges, the Government is committed to the establishment of a cost rental sector in Ireland. Cost rental is housing where rents only cover the cost of delivering, managing, and maintaining the homes. Cost rental lacks the profit margin involved in the private rental sector and rents are not set by the market according to supply and demand. Cost Rental represents a new form of rental tenure for Ireland and a new State intervention into the rental market.
A working group on cost rental involving my Department, the Land Development Agency (LDA), the Housing Agency, and other stakeholders, is developing the policy framework for a broad cost rental model and examining how a sustainable financing structure can be established to deliver cost rental units at the necessary scale. Detailed operational and eligibility criteria for cost rental will be informed by this evidence building and policy work. The Group's work will also be assisted by support, including in relation to research, which is being undertaken by the European Investment Bank (EIB) on the Group's behalf. The EIB has extensive international experience in affordable housing and is providing technical assistance in assessing the potential market for cost rental in Ireland.
Cost rental work is also being supported by two pilot projects, at the former St. Michael's Estate in Inchicore and at Enniskerry Road in Dun Laoghaire-Rathdown. The latter of these has already commenced construction, supported by EIB funding, and the first homes are anticipated to come on stream from 2021. Additionally, the LDA and some local authorities are actively considering cost rental as an option for sites within their land portfolios. An example of this can be seen in the planning application which has been submitted for lands at Shanganagh in Dun Laoghaire Rathdown, where the LDA is working in partnership with the County Council to deliver over 350 cost rental homes.
The selection of further sites for cost rental consideration will be informed by emerging policy and by the financial and operational model that will develop from the evidence building that is currently underway.
The Government has also introduced a number of affordability measures to support people who wish to purchase their own homes. In particular, the Rebuilding Ireland Home Loan, introduced with effect from 1 February 2018, enables credit-worthy first time buyers to access sustainable mortgage lending to purchase new or second-hand properties in a suitable price range. The low rate of fixed interest associated with the Rebuilding Ireland Home Loan provides first time buyers with access to mortgage finance that they may not have otherwise been able to afford at a higher interest rate.
Additionally, the Help To Buy (HTB) incentive, announced in Budget 2017 and set to run until the end of 2021, is designed to assist first-time buyers with the deposit required to purchase or self-build a new house or apartment to live in as their home. The incentive provides for a refund of Income Tax and Deposit Interest Retention Tax (D.I.R.T.) paid over the previous 4 tax years, limited to a maximum of 5% of the purchase value. The HTB refund is capped at €20,000. As of 30 April 2020, a total of 18,854 HTB claims have been made, of which 18,207 are approved. The estimated total value of approved HTB claims to date is in the order of €271.4 million.
Increasing the supply of new homes at affordable prices is a key pillar of the Rebuilding Ireland Action Plan. Under Rebuilding Ireland, the Government introduced the Local Infrastructure Housing Activation Fund (LIHAF). The objective of the LIHAF is to provide public off-site infrastructure to relieve infrastructure blockages, thereby enabling the accelerated delivery of housing in Dublin and in other urban areas in high demand. Funding of €200m has been allocated across 30 projects over the period to 2021 and work is underway to deliver the infrastructure with an associated housing delivery of up to 20,000 units. About 40% of these homes will be sold at rates which provide a discount on market prices. More than 3,000 will be social housing homes and the remainder will be sold at market rates.
In addition, €310m is also available under the Serviced Sites Fund over the period to 2021 for infrastructure works on local authority lands that will support the delivery of housing for rent or purchase at rates which provide a significant discount on open market costs. Two calls for proposals have been made to date, which have resulted in ‘Approval in Principle’ being given for an allocation of c. €127m in funding for 35 projects, which will deliver some 3,200 more affordable homes. It is anticipated that a further call for proposals will issue in 2020.
