New Legislation To Cap Annual Rent Increases At 2%

Newly-amended legislation is set to cap rent increases at 2% per annum in Rent Pressure Zones (RPZs) across Ireland.

The Residential Tenancies (Amendment) (No. 2) Bill 2021 will see a new cap operate when general inflation is higher than 2%.

The Bill also provides for tenancies of unlimited duration, a key reform committed to under Housing for All, the Government's recently published plan to create a sustainable housing system in Ireland. The Bill will be progressed to enactment as a matter of priority. The rent increase cap will apply immediately upon enactment.

The previous cap of 4% on annual rent increases was replaced on 16 July 2021, with rent increases in RPZs currently prohibited from exceeding general inflation as recorded in the Harmonised Index of Consumer Prices (HICP). The aim was to bring about far lower rent increases for the estimated 74% of all tenancies which are in RPZs. HICP averaged 0.73% over the three years to July 2021. Given the unexpectedly fast rise in inflation, a rent increase cap of 2% per annum will apply under this Bill when the HICP inflation rate is higher.


Welcoming the publication of the new Bill, Housing Minister Darragh O’Brien TD said: "When introducing the legislation to link any rent increases to HICP inflation in July, I was very clear on the need to carefully monitor inflation. At that time, HICP inflation averaged 0.73% per annum over the previous three years but had risen to 1.6% per annum in the year ending June 2021.

"Given the unexpectedly fast rise in HICP inflation, I quickly moved to engage with the office of the Attorney General and secured Government approval to introduce a 2% cap on rent increases in RPZs. This Bill respects the constitutionally protected property rights of landlords and aims to safeguard continued investment in the sector by existing and new landlords to deliver the requisite supply of high-quality rental accommodation.

"In addition to significantly reducing the level of rent increases in RPZs, the Bill also addresses long-term security of tenure by introducing tenancies of unlimited duration. This is a key commitment in Housing for All, our new housing Plan for Ireland.

"The early publication of this Bill and the clear focus on its early enactment demonstrates the Government's strong commitment to improving the situation for renters in Ireland. We are making strides in this regard. Affordability is one of the key challenges in the rental market and tackling this is one of the central plinths of Housing for All. This Bill will help and I look forward to debating the Bill this week in the Oireachtas. We now have tenants in situ in our first cost rental homes, availing of rents which are up to 50% below the open market rate.

"Applications for other schemes have recently closed and from seeing the volume of applications, we know that we need to significantly scale up cost rental accommodation in Ireland. Housing for All sets us on a path to delivering 18,000 cost rental homes between now and 2030 – an ambitious but achievable target," he concluded.