Exploring rent pressure zones: Ireland’s recent rent control regime

Abstract

Following a number of years of rapid rental inflation in the private market, in late 2016, Ireland introduced a regime of rent controls whereby areas are designated as ‘Rent Pressure Zones’ if they meet criteria for excessive inflation and elevated levels of rent. In these areas, rental inflation is capped, initially at 4% per annum, with targeted exemptions. In this article, we consider these regulations along a number of dimensions. First, the criteria, calibration and qualification of the rules are outlined and discussed. Second, we use local-electoral area data to document the areas classified and show the price moderation in these areas was between 2 and 5 percentage points using difference-in-difference techniques and error correction specifications to deal with differential housing market developments. We also highlight the use of exemptions to the policies for new supply, maintenance and energy efficiency. We show low exemption usage and more targeting for energy efficiency upgrades needed given the Irish private rental building stock.

KEYWORDS: :

• Word
• rent controls
• rent inflation
• rental supply

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1 See ESRI/RTB Rent Index.

2 Local areas designation could either be local electoral areas (166) or local authority areas (32).

3 A full listing can be found on rtb.ie.

4 The standardised average rents are produced by the ESRI for the RTB on a quarterly basis and use a series of hedonic models to transform the microdata on registered tenancies and their rent levels into a time series at the local-electoral area which is unaffected by the composition of the sample, and the observed characteristics of the tenancies and properties. More detail on the standardisation process that creates these rental data can be found in Lawless et al. (2008).

5 Two LEAs were not classified until September 2017 (Drogheda Urban and Greystones) and two LEAs were classified from the beginning of Q2 2019 (Limerick City East and Navan).

6 These data are total new housing completions to the Irish housing market in a specific local electoral area in any quarter. The data are taken from the Central Statistics Office of Ireland.

7 Calculated using CSO data on hours worked and hourly earnings.