I move: "That the Bill be now read a Second Time."
I am grateful to the Chair and to all Deputies for facilitating debate on this urgent rental legislation in Dáil Éireann. I also wish to record my thanks to the Chief Whip and to the members of the Joint Committee on Housing, Local Government and Heritage for enabling the Residential Tenancies (Amendment) (No. 2) Bill 2021 to be read a Second Time here, following its passing in the Seanad last week.
I am asking the House to pass the Bill to enable its early enactment to provide for the transition to providing residential tenancy protections on the basis that any new tenancy that commences six months or more from the passing of this Bill shall continue as a Part 4 tenancy for an unlimited duration, unless terminated within the first six months of its commencement; amendment of the current prohibition on any rent increases in a residential pressure zone, RPZ, from exceeding general inflation, as recorded by the harmonised index of consumer prices, HICP, to insert a new condition that the last rent set cannot inflate by more than 2% per annum pro rata; and a temporary fee waiver in the immediate aftermath of the roll-out of the requirement for annual registration of tenancies with the Residential Tenancies Board for certain tenancies registered.
The Government is particularly keen to enact and bring into operation the new rent increase caps in rent pressure zones without delay. The most recent HICP inflation data for Ireland shows an inflation rate of 5.1% for October 2021 and the November data is due to be published in mid-December. The fast-rising inflationary trend requires fast counter-action by Government. This Bill, once enacted, will stop rent inflation beyond 2% per annum in RPZs.
It is not lost on me that this is the sixth time since the formation of the Government that we have asked Dáil Éireann to amend our residential tenancy laws urgently. Most recently, the Residential Tenancies (No. 2) Act 2021 introduced new measures in July 2021 to better protect tenants with affordability challenges by extending the operation of RPZs until the end of 2024 and prohibiting any necessary rent increases in an RPZ from exceeding general inflation, as recorded by HICP.
The link to HICP aims to safeguard continued investment in the sector by existing and new landlords to deliver the much-needed supply of high-quality rental accommodation, while protecting against significant increases in rental inflation in the coming years.
When introducing these measures, the Minister was clear on the need to monitor inflation carefully. At that time, inflation had averaged 0.73% per annum over the previous three years. We needed to revise the RPZ rent control relatively quickly in July on a basis that could be independently verified. The quarterly economic commentary for autumn 2021 of the Economic and Social Research Institute, ESRI, outlines that despite the ongoing effects of the Covid-19 pandemic, both domestic and foreign sources of growth have contributed to the Irish economy's robust performance in 2021. As public health measures are eased considerably, the ESRI anticipates a return to more normal economic activity by the end of the year. The recovery has contributed to inflationary pressures, along with global supply chain problems and energy prices. While the current expectation is that these factors are largely temporary, further domestic inflationary risks remain relating to the rapid recovery in household spending. At this juncture, the ESRI expects that inflationary pressure will peak in quarter 4 of this year and then abate during 2022. However, the ESRI also cautions that any sustained easing of the inflation rate could be compromised by a continuation of global price pressures for energy products, as well as by a faster than expected recovery in the domestic economy.
Section 3 of the Bill aims to address the rent affordability challenges that are building on foot of the unexpectedly fast-rising inflation rate by introducing a cap on rent increases in RPZs of 2% per annum to operate in conjunction with the current restriction based on HICP inflation. As Minister of State, I only want to see the supply of rental accommodation increase, and thus I intend to implement legally and economically sound policy proposals onto the Statute Book. Every action the Government takes in the rental sector causes a reaction. We must also recognise that the very tenants whom we are trying to help could be left worse off if the wrong policy choices are made.
With the time available, I will outline the specific provisions of the Bill, which contains eight sections.
Sections 1 and 8 contain standard provisions dealing with definitions, the Short Title and collective citation of the Bill.
Section 2 provides a consequential technical amendment to section 6 of the principal Act, which relates to the service of notices.
Section 3 amends section 19 of the principal Act in the context of the setting of rent subject to a maximum permissible rent increase in an RPZ. This proposed section, if passed, would amend the current prohibition on any rent increase in an RPZ from exceeding general inflation as recorded by HICP to insert a new condition that the rent set increased by more than 2% per annum pro rata. This will mean that rents may only increase by the rate of recorded HICP inflation or 2%, whichever is lower. The new cap on rent increases in RPZs is considered necessary, given the prevailing high level of inflation. An inflation rate of 5.1% was recorded in the year to the end of October 2021. With inflation on the rise, the original 4% rent increase restriction provision in RPZs has been breached by reference to the October HICP values and is likely to also be breached by future HICP values into 2022.
The operation of the new 2% cap will be subject to a review after 12 months, with a written report to be provided to the Oireachtas after a further three months. This amendment of the principal Act also provides for the deletion of the Minister’s power to prescribe an index other than the HICP for the purposes of restricting rent increases in RPZs. This power is no longer necessary, given the new provision of the 2% per annum pro rata rent increase cap. Consequential technical updates are also provided for.
Section 4 of the Bill provides technical referencing amendments consequential to section 3, section 22 and Schedule 2 of the principal Act.
Section 5 proposes to amend Part 4 of the principal Act, regarding security of tenure, to provide for enhanced tenancy protections on the basis that after six months duration a Part 4 tenancy is established for an unlimited duration, and not subject to expiry at the end of a six-year term should the landlord exercise his or her right to terminate the tenancy as currently provided for under section 3B of the Principal Act. This is a commitment under Housing for All - a New Housing Plan for Ireland, and is being addressed in accordance with the advice of the Attorney General and taking account of constitutionally protected property rights. The provision will apply prospectively in respect of tenancies commencing six or more months after the passing of this Bill. The intention is to enhance security of tenure for tenants and to simplify the operation of the 2004 Act.
In addition, where any existing six-year Part 4 tenancy is renewed, rather than commencing a further Part 4 tenancy, it will become a tenancy of unlimited duration. Existing tenants may also seek the consent of their landlord to have their current tenancy treated as a tenancy of unlimited duration. However, the landlord will not be compelled to grant his or her consent. Where consent is not granted, the existing protections of the Act will apply. The aim is to transition to tenancies of unlimited duration, while respecting the constitutionally protected rights under section 4 of the Residential Tenancies Acts, 2004 to 2021. Only new tenancies commencing six or more months after the passing of this Bill must be on the basis of an unlimited duration. Naturally, however, all Part 4 tenancies over time will be of unlimited duration. As existing and further Part 4 tenancies terminate, expire over time or are renewed, this process will involve the creation of a new tenancy of unlimited duration in respect of a dwelling, should it remain in the rental sector.
Section 6 provides for technical amendments to sections 3, 29, 30 and 64B of the principal Act to reflect the transitions to tenancies of unlimited duration. In particular, the amendment to section 64B provides that the duration of tenancy under any tenancy of unlimited duration and under any preceding Part 4 tenancy and-or further Part 4 tenancy would be treated as one tenancy in calculating any termination notice to be given. This is an important technical amendment to maximise the tenancy termination notice period to be given to a tenant. Section 6 will commence at the same time as section 5, namely, "on the day that falls 6 months after the date of the passing of" the Bill.
Section 7 amends section 134 of the principal Act, regarding the obligation to apply to register a tenancy, to provide that, subject to conditions, where a landlord applies to register a further Part 4 tenancy before the commencement date of the requirement for annual registration under sections 22 and 23 of the Residential Tenancies (Amendment) Act 2019, regarding a commencement date expected in quarter 1 of 2022, and where that tenancy still exists on that date, no annual registration fee shall apply in respect of that further Part 4 tenancy only. Any new tenancy of unlimited duration that commences will be liable to an annual registration fee.
To be eligible for the temporary fee waiver, any outstanding registration fee associated with the relevant application to register a further Part 4 tenancy prior to the roll-out of the annual registration must be paid within one month of the commencement of the requirement to register tenancies annually. The temporary annual registration fee waiver is being provided for existing further Part 4 tenancies in recognition of the registration fee payments already made to date in respect of relevant tenancies. The intention is to commence section 7 of the Bill at the same time as the commencement, in quarter 1 of 2022, of the requirement under sections 22 and 23 of the Residential Tenancies (Amendment) Act 2019 for annual registration of tenancies with the Residential Tenancies Board, RTB.
As legislators, we have shown how we can work together quickly and react to suppress the spread of Covid-19. In that spirit, I again thank Deputies for all their co-operation on this Bill, which will make a real and significant improvement for renters upon enactment. I commend the Bill to the House.