I thank the Leas-Chathaoirleach for his kind welcome. It is like I never left.
I am grateful to Senators for facilitating the debate on this urgent rental legislation. I also wish to record my thanks to the Chief Whip and to the members of the Oireachtas Joint Committee on Housing, Local Government and Heritage for enabling this Bill to be read a Second Time here in Seanad Éireann.
I am asking Senators to pass the Residential Tenancies (Amendment) (No. 2) Bill 2021 and to enable its early enactment to facilitate 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. It would amend the current prohibition on any rent increase in a rent pressure zone, RPZ, from exceeding general inflation, as recorded by the harmonised index of consumer prices, HICP, to insert a new condition that the rent last set cannot inflate by more than 2% per annum on a pro rata basis. That is the ceiling, so the rate will be set by the HICP or 2%, whichever is less. It would also introduce a temporary fee waiver in the immediate aftermath of the rolling out of the requirement for annual registration of tenancies with the Residential Tenancies Board, RTB, for certain tenancies registered.
I am particularly keen to enact and bring into operation the new rent increase cap in RPZs without delay. The most recent HICP inflation data for Ireland indicate an inflation rate of 5.1% for October 2021. The November data are due to be published in mid-December and the fast-rising inflationary trend requires fast counteraction by the Government with the Oireachtas. Once enacted, as I have said, the Bill will stop rent inflation beyond 2% per annum. The short-term inflation we are seeing is not just a phenomenon in Ireland. We only have to look to our colleagues in Europe and in the OECD to see a significant spike in inflation.
It is not lost on me that I am back in the Seanad for the sixth time as Minister asking the House to introduce further changes in tenancy legislation. Most recently, the Residential Tenancies (No. 2) Act 2021 introduced measures in July 2021 to better protect tenants with affordability challenges by extending the operation of rent pressure zones until the end of 2024 and prohibiting any increase to general inflation. The link with the HICP is correct and safeguards continued investment in the sector by existing and new landlords to deliver the much-needed supply of high-quality rental accommodation while, most important, protecting against a significant increase in rental inflation in the coming years.
When I introduced these measures in July, I was very clear about the need to monitor inflation. At that time, HICP inflation averaged 0.73% per annum over the previous three years. I needed to revise the RPZ rent control relatively quickly in July, as Senators remember the matter concerning 8% rollover increases, and the measure was accepted in both the Dáil and Seanad. I said at the time we were watching inflation and if we needed to introduce further protection, we would do so.
The quarterly economic commentary from the Economic and Social Research Institute, ESRI, for autumn 2021 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 ESRI has cautioned that any sustained easing of inflation could be compromised by a continuation of global price pressures for energy products in particular, as well as a faster than expected recovery in the domestic economy. That is why these measures are so important.
Section 3 of the proposed Bill aims to address the rent affordability challenges building on foot of the inflation I mentioned by introducing a cap on rent increases in RPZs of 2% to operate in conjunction with the current restriction based on HICP inflation. As a responsible Minister and one who wants to see the supply of rental accommodation increase where appropriate, I intend to only implement legally and economically sound policy proposals to the Statute Book.
We have to be aware and very careful that any measures we bring into this market, from which we have seen an exodus of 23,000 or so tenancies, most of whom are "mom and pop" landlords, are proportionate and will not have an unintended or, indeed, obvious consequence of losing more supply. That is why the Government has also focused on bringing forward cost rental. As I mentioned during last night's debate, we now have a national scheme for cost rental and our first tenancies are in place. We need to ramp that up to improve rental affordability.
I will go very quickly through the sections. Sections 1 and 8 contain standard provisions dealing with definitions, the Title and the 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 setting rent subject to the maximum permissible rent increase. This section, if passed, will amend the current prohibition on any rent increase on an RPZ from exceeding general inflation to insert a new condition that the rent last set cannot increase by more than 2% per annum pro rata. This will mean that rents may only increase by HICP inflation, or 2%, whichever is lower. This new cap on rent increases in the RPZs is considered necessary; I have explained it is because of growing inflation. The operation of the new 2% cap will be subject to review every 12 months - it is appropriate this is done by any Minister - with a written report to be provided and laid before the Oireachtas after a further three months. This amendment also provides for the deletion of the Minister's power to prescribe an index other than HICP. It is 2% or HICP, whichever is lower.
Section 4 provides technical referencing amendments to sections 3 and 22 and Schedule 2 of the principal Act.
Section 5 proposes to amend Part 4 of the principal Act, which deals with security of tenure, to provide for enhanced tenancy protections on the basis that after six months a Part 4 tenancy is established for an unlimited duration, which is very important, and is not subject to expiry after a six-year term or at the discretion of the landlord. This was a commitment under Housing for All - a New Housing Plan for Ireland, and is being addressed in accordance with work we are doing with the Attorney General and taking into account the rights of the tenant and property owner. The provision will apply 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 simplify 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, the tenancy will automatically become one of unlimited duration. That is very important for existing Part 4 tenancies.
Existing tenants may also seek the consent of their landlord to have their current tenancy treated as a tenancy of indefinite duration. However, the landlord cannot be compelled to grant her or his consent. Where consent is not granted, the existing protections of the Act will apply. The aim is just transition to tenancies of unlimited duration, while also respecting property rights, thereby reducing the potential for any legal challenge to this legislation.
Section 6 amends section 64B of the principal Act to provide that the duration of tenancy under any tenancy of unlimited duration, and under any preceding Part 4 tenancy or further Part 4 tenancy, would be treated as one tenancy in calculating any termination notice period given.
Section 7 amends section 134 of the principal Act to provide that, subject to conditions, where a landlord applies to register a further Part 4 tenancy before the commencement date for the requirement for annual registration and the 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 after that will be liable to annual registration fees. The intention is to commence section 7 of this Bill at the same time as the commencement, in quarter 1 2022, of the requirement under sections 22 and 23 of the Residential Tenancies (Amendment) Act 2019 for annual registration. That potential waiver of registration fees would apply from quarter 1.
We have all shown how we can work together to quickly suppress the spread of Covid-19. In that spirit, and in providing further significant protections and certainty for renters, I again ask for Senators' co-operation on this Bill, which will make a real and significant difference in a very short space of time. I, therefore, commend the Bill to the House.