Very low rent in Rent Pressure Zone

[LisaK123]

There is a form, RPZ rent exemption form, and you have to tick the reason you are looking for an exemption and putting the rent at market rate. One of the reasons is there hasn’t been a tenancy for 2 years.

 

[Greenbook]

Keep in mind also that you need to work out whether you are happy to relet with the new rules

1. If you relet now, you can do so at market value, but that rent is capped at HICP/2% max for as long as the lease lasts. You can evict to move in a family member or to sell.

2. Any leases created post March 2026 will have market value rent. Assuming you are a small landlord, if the lease lasts for 6 years, then it is HICP/2% increases until year 6. I personally suspect that a large increase at year 6 simply won't be allowed by the government - think about it, the tenant is used to very small increases and is suddenly hit with a 30% increase. You can only evict during the 6 years to move in an immediate family member. Evictions to sell can only occur at year 6 - so you'll only have one shot at this every 6 years and they will make the procedure as complex as possible. If you are a large landlord, you can't get vacant possession at all and the tenant can stay forever (as can their children when they reach adulthood).

 

[CharlieMac]

I don't think a 30% increase in rent after 6 years is likely possible in any rental market. If everyone is stuck on max 2% increases per year that's a cumulative 12-13% after 6 yrs.

I don't understand how you are so sure market rates will be so much higher. The rent pressure zones will put a natural break on the rate at which rents in general do rise.

And why are you so sure that a future Government will step in and renege on agreement that landlords can increase to market rate after 6 years?

 

[Premos]

The rent pressure zones will put a natural break on the rate at which rents in general do rise.

And why are you so sure that a future Government will step in and renege on agreement that landlords can increase to market rate after 6 years?

The rent pressure zones are in place for the past 9 years, why would they suddenly manage to put a break to rent increase now (particularly if issues of supply are not solved). I don't know how fast the rent increases will materialise after March 2026. However, that in itself might be an issue. How many landlords will take the opportunity to increase the rent by 50 to 70 per cent if they are lucky enough to receive notice from their tenants?
If one looks at the number of changes that happens in the past 6 years, one can indeed wonder what will happen in the next 6 years.

 

[Greenbook]

I don't think a 30% increase in rent after 6 years is likely possible in any rental market. If everyone is stuck on max 2% increases per year that's a cumulative 12-13% after 6 yrs.

I'm just giving an example - 2% is the max, HICP is likely to be lower. The IPOA at the recent Housing Committee hearing said it is currently .7%. So for example, I rent at €1,500 per month, my increases using HICP will be around 1% pa so my rent increases for 6 years by in or around €15 per month. Now if the year 6 increase is 10% lets say, that is a €150 jump - I'll baulk at that. If the increase is 20%, then it is an extra €300.

The problem with HICP/2% is because of all the problems in the rental and housing markets it artificially keeps increases low. When the rent reverts to market at year 6, unless housing is solved or there is a major recession, a large increase is guaranteed. The political system won't allow that - 20% annual increases where the cause of the RPZ legislation

 

[Greenbook]

However, that in itself might be an issue. How many landlords will take the opportunity to increase the rent by 50 to 70 per cent if they are lucky enough to receive notice from their tenants?

Plus with the new rules, if you are setting the rent to market value, you have to put up the rent as high as possible (I think it is called front loading); if your tenant stays you will not get another market rent increase for 6 years and I suspect that you may not get one at year 6 either! So you have to take your increase now.

This is going to be chaos when it comes in. All new rents will be high. Under the current system, if you were lucky or had contacts you had a chance of a getting cheaper rent capped place.

 

[Premos]

Plus with the new rules, if you are setting the rent to market value, you have to put up the rent as high as possible (I think it is called front loading);

LL who have been stuck with relatively low rents for years will try to cover themselves for the next few years... They got stuck once, they will try to avoid it happening twice...

 

[CharlieMac]

The rent pressure zones are in place for the past 9 years

@Greenbook I appreciate all the information you are adding about these new rules. But you are very negative on it all. We have had RPZ breaks on rent increases for years now and the new rules are not changing that in any way.

At least there is a chance to revert rent to market rates. Ok you don't think that will end up being allowed and maybe you'll be right, time will tell.

Maybe the rules will encourage landlords to sell and invest elsewhere where far better yields are likely available on their investment, compared with rental properties, even if none of these rental rules existed.

 

[Greenbook]

At least there is a chance to revert rent to market rates. Ok you don't think that will end up being allowed and maybe you'll be right, time will tell.

Yes, I am very negative about these new rules.

The only advantage is that we can rent at market rate when the tenant leaves of their own accord. But the ability to increase to market value when the tenant left has been one which landlords have had since renting began and exists in every other jurisdiction. It was taken away 'temporarily' in 2016 with the RPZs and is now being given back. That is the only advantage to these new rules and, I stress, it is something we always had is now just being given back to us. The disadvantages vastly outweigh this sole advantage:

1. Permanent tenancies for 'large landlords' which extends to tenants' children when they reach 18
2. A once off shot to evict to sell if you are a small landlord which they will make as difficult as possible to lock you into another 6 years
3. If you have a series of tenants in property, when does the 6 year cycle end? I am talking about a situation where you rent to A and B, B leaves in replaced by C, A then leaves who and is replaced by D who then leaves and is replaced by E all within the 6 years.
4. No guarantee of an increase to market at year 6 - especially if SF are in government
5. A very complex system which non-professional landlords will get wrong and end up being fined and sanctioned. It is much easier to fine the small guy who can't defend himself rather than the large landlord with the solicitor and the barrister to back him up.
6. A ramped up RTB (see recent Housing Committee hearing)
7. Increased standards and inspections. I personally think they went a bit easy on these because the landlord could sell up if presented with a large bill. With more permanent tenancies, that risk is gone. You may have to increase the energy rating as well.
8. Harder to deal with difficult tenants (in a permanent tenancy for example)
9. The requirement to sell with the tenant in situ which will reduce the sale price and will mean it will take longer to sell (much reduced pool of potential purchasers )
10. More tinkering is likely to deal with the problems which will arise from all this.

Frankly, this has now become a very high risk investment.