We’ve previously discussed the various rent control schemes in place across Australian jurisdictions. In this next series, we will take a look at how some international jurisdictions have implemented rent control. When we broaden our horizons it helps us to understand that there are many paths towards protecting the dignity and security of renters in this country.

In the first post of this series we’ll take a look at how Ireland has designed their rent control scheme. The short of it is that Ireland identifies areas of the country that have rapidly tightening rental markets and limits how much landlords can increase the rent in order to slow things down a bit.

Rental Pressure Zones
In 2016, the Irish government was concerned by a situation that has since become common in Australian jurisdictions: rents set by private investors were increasing at a rate much more rapidly than incomes. The Irish economy had only just returned to pre-GFC levels but rental prices had been increasing roughly 10% per annum for the last few years (Daft.ie, 2021). This problem was especially prevalent in metropolitan areas, and the runaway train of housing profiteering needed to be brought under control. If not, cities would quickly become the exclusive domain of the wealthy. The government set about designing a scheme which would apply an emergency brake when rentals were increasing too quickly. The system they came up with designates certain “overheated” rental markets as Rental Pressure Zones (RPZs) and places limitations on rent increases within these areas.

What is a rental pressure zone?
To designate an RPZ, the government looks at the average rent within a certain area. For ease of drawing boundaries, they are generally electorates. They then compare this average with the average of rents within the broader region (Dublin, Greater Dublin Area, or Rest of Country). If the average rent in the area is greater than the broader reference region, then the area has met the first of the two requirements to be designated an RPZ.

The second requirement relates to rental inflation (i.e. how much rent is increasing year on year). If rental inflation was 7% or more in four of the last six quarters, then the second requirement has been met.

What does it mean for renters?
If a rental property is within an RPZ, the law places limits on rent increases as well as the setting of rent at the beginning of a new tenancy. The government initially limited rent increases to the amount of general inflation. However, general inflation began to increase massively in 2021, so the government amended the regulation to limit rent increases to 2% where general inflation is higher, or at the level of general inflation if it is below 2%.

For example: a renter has a lease on an apartment in an RPZ and they pay $1000 monthly. The landlord wants to increase the rent and general inflation is 3.4%. The rate of general inflation is higher than 2% and therefore the increase is limited to 2%. The maximum increase allowed under the regulation is therefore $20 per month.

The RPZ legislation also includes vacancy control - rules that limit the rent chargeable at the start of a new tenancy. If a new tenancy is starting within an RPZ, the rent is limited to whatever would be allowed if the property had remained occupied by the previous tenant. This type of regulation prevents landlords ‘churning’ through tenants in order to increase the rent chargeable at the start of a new lease. The benefit of vacancy control is that it also prevents certain areas or communities from rapidly becoming inaccessible for the average person (i.e. rapid gentrification).

Do these regulations apply to all properties within an RPZ?
All properties within an RPZ are subject to limits on the amount that rent can be increased. The exceptions to RPZ requirements are therefore limited to the amount of rent chargeable at the start of a new tenancy. The exceptions are designed to encourage properties that have been unrented for a period of time to come back onto the market as well as encourage improvements to existing properties.

If a dwelling has not been rented for two years prior to the commencement date, the rent set at the beginning of the tenancy can be freely set.
If the dwelling is located within a protected structure (similar to being heritage listed) and has not been rented for 1 year prior to the commencement date, rent can be freely set.
If there has been substantial change in the nature of the dwelling then rent at the beginning of the tenancy can be freely set. Substantial change is one of those things which is defined by legislation but in general terms: if it has got bigger due to an extension, if it has more rooms, or if it is more accessible for people with a disability.

What can we take away from this?
So we can see that Ireland approaches the problem of rental affordability by:

1. Identifying areas in which rents are rapidly increasing.
2. In those areas, placing limits on how much rents can increase.
3. Allowing certain exceptions to some of these limits based on improving the quality and capacity of existing housing stock.

A core advantage of this scheme is that it is dynamic: instead of designating areas specifically, the regulation provides for the designation of areas depending on rental market activity.

This provides one example of how things could work in Australia. In upcoming posts, we’ll look at examples from other overseas jurisdictions.