If you have either rented or are looking to rent out a property in Ireland, you may have come across the term ‘Rent Pressure Zone’. Originally Introduced in 2016, Rent Pressure Zones impact both the amount of rent that landlords can set and how much it can be increased over time. These restrictions were then further augmented with the enactment of the Residential Tenancies ACT 2021, which came into effect on the 9th of July 2021.
But with an unexpected increase in inflation, the Act was amended and augmented with further measures that came into full effect on the 11th of December 2021. You can view the full act here.
To help you understand how they work and what they mean for you, we’ve put together this handy guide to lay out all the key facts. Here is everything you need to know about Rent Pressure Zones and the Residential Tenancies ACT 2021.
Under the new rules, a rent pressure zone is a designated area where rents cannot surpass inflation levels. The barometer used to record inflation levels is the Harmonised Index of the Consumer Price (HICP). Under this rule, rent cannot rise more than 2% per year in RPZ’s. The new rules apply to new and existing tenancies unless there is a specified exemption.
For example, if a landlord reviews how much rent is owed every 12months and inflation is 1.5% then rent can only be increased to 1.5%. If inflation is higher than 2% or 3% the landlord can only increase rent to a maximum limit of 2%.
Why have these rules come into place?
RPZs were introduced as a response to increasingly expensive rents that were making it hard for people to find affordable accommodation.
The cost of renting in Ireland has doubled in the past 10 years, so RPZs are in place to moderate these rising costs and create a more stable and sustainable rental market. RPZs currently apply to certain areas in more than half of Irish counties and can be designated at any time, so it’s important to familiarise yourself with the rules before renting out a property in Ireland.
How Is An Area Designated A Rent Pressure Zone?
The following criteria are used to determine whether an area is a Rent Pressure Zone:
- The average rent in the previous quarter must be above the average national rent in the quarter and
- The annual rate of rent inflation in the area must have been 7% or more in four of the last six quarters
The ‘average rent’ may be for the whole country, the whole country excluding Dublin or the whole country excluding both Dublin and the Greater Dublin Area. This depends on the location of the property.
Fortunately, you don’t need to worry too much about this as you can easily check your property online using the RPZ calculator. Simply input the This will tell you if it is in an RPZ and give you the maximum rent you are allowed to charge.
The RPZ Calculator
A vital tool is the RTB Rent pressure Zone Calculator.
The Rent Pressure Zone Calculator will allow you to determine what you can set rents at in RPZ’s.
Some key points:
- Input your eircode
- If the property is in an RPZ, it will calculate the maximum rent increase allowable
- Rent setting will occur at the start of the tenancy
A rent review occurs every 12 months inside an RPZ. The only exception to this rule is where there has been a substantial change to the premises.
A landlord cannot increase rent greater than the amount specified in the RTB calculator
It’s also important to note that just because the calculator indicates a landlord can increase the rent, there is no legal obligation to do so.
For more information, check out the Residential Tenancies Act and what it means for landlords.
Residential Tenancies ACT 2021- what are the key changes?
The Residential Tenancies ACT 2021 came into effect on the 9th of July 2021, but then was amended due to increased inflation on 11th December 2021.
Some of the key points of the Act include:
- The Act will extend emergency powers that where enacted under the Planning and Residential Tenancies Act 2020
- There will now be a minimum notice period that will be landlords will be required to give to tenants
- The Act will put a ceiling on the maximum allowable rent increases (2%)
- The Act will limit deposit payments required for tenants (one month’s rent and one month’s deposit)
- The new law extends the areas which are deemed RPZ’s until 31st December 2024.
- Breach of these new rules are punishable by penalties
We’ve already covered the key 2% limitation of rent increases in RPZs.
Now let’s take a deep dive into some of the other key changes the Act brings into place
Deposits and advance rent payments
The Act creates more tenant focussed protections. A key area of the Act is the limitation of landlords requesting upfront payments to secure a tenancy. In order to secure a tenancy, tenants can only be asked for one month’s rent and a deposit equals to one month’s rent.
Any breach by landlords of the rules specified in the act will result in penalties and charges being incurred by the landlord.
Tenancies of unlimited duration
Another key reform that the Act provides for is tenancies of unlimited duration. From 11th of June 2022, all tenancies will be considered unlimited duration, once the tenants have resided at the premises for more than six months and no notice of termination has been served on them.
Can a landlord still terminate a tenancy?
But only under certain conditions.
The landlord can terminate the tenancy if they are selling the property or the landlord is changing the use of the property.
Termination of tenancies by students
The new Act has brought in regulations specific to student accommodation. The Act stipulates that the notice period required for a termination in student accommodation is 28 days. The student may give notice that is longer than 28 days, if they so wish.
What Do Rent Pressure Zones Mean For Landlords?
Increased protections for tenants, including students.
The act restricts landlords requiring tenants from having to pay more than two months’ rent to secure a tenancy agreement. The two months include one months rent in advance and one month’s deposit.
Renting out a property in an RPZ has an impact on the way landlords both set and review rent, requiring some additional paperwork and documentation to ensure guidelines are being followed. Though it won’t make a significant difference to your workload, there will be some additional steps you need to bear in mind.
Setting The Rent
If the property you are renting out is in an RPZ, at the beginning of a tenancy you must provide the following information to the tenant in writing:
- The date that rent was last set
- The amount of rent that was last set
- A statement as to how the rent was set using the Rent Pressure Zone formula (there is an option to print this off from the RPZ calculator)
Three examples of similar properties in the local, or a comparable, area (see more on this below). The properties must have been advertised within the last four weeks.
As well as considering the maximum amount given by the RPZ calculator, you are not allowed to set rents above local market rents for similar properties. This is why you need to provide examples to show you are charging a suitable price for the area.
For properties in RPZs, rent reviews can only be undertaken every 12 months. The rent cannot be increased by more than 2% at each review, and should not exceed the local market rents of similar properties.
However, if the tenancy was already in place when the area was designated an RPZ, the rent can only be reviewed 24 months after the tenancy began or after the date the rent was last set. After that, the rent can be reviewed every 12 months in accordance with RPZ guidelines.
If you would like to carry out a rent review, you must use the Residential Tenancies Board (RTB) Notice of Rent Review form. You need to give it to the tenant with at least 90 days notice (an email or text will not suffice). It’s very important that you don’t deviate from the wording in the form, change its format or delete any information as this could potentially invalidate it.
Once the new rent has commenced, you must notify the RTB using their Tenancy Update form. This should be submitted within one month of the date that the new rent applies.
There are several exceptions to RPZ guidelines that are not subject to a maximum 2% rent increase. These include:
- Properties that have not been rented for 2 years prior to a tenancy starting (though all rent reviews after that must adhere to the RPZ formula)
- Properties that have undergone ‘a substantial change in the nature of the accommodation’, for example:
- An increase in floor area of at least 25%
- An improvement of at least 7 building energy ratings
Or at least 3 of the following:
- The internal layout being permanently altered
- The property being adapted for access and use by a person with a disability
- A permanent increase in the number of rooms
- An improvement of at least 3 building energy ratings if the building’s original rating was D1 or lower
- An improvement of at least 2 building energy ratings if the building’s original rating was C3 or higher
If any of these apply to your property you must apply to the RTB to receive an exemption. You must do so in writing (with supporting documentation) within one month of setting the new rent for the property.
Note that the work must have been undertaken after the RPZ legislation came into effect to be valid. You must also bear in mind that if any of the work is being carried out in order to bring a property up to the minimum required standards, this will not qualify you for an exemption. For more information about minimum required standards, head over to our guide on what you must do as a landlord in Ireland.
The Future Of Rent Pressure Zones
There are a lot of big changes that the Residential Tenancies Act 2021 will bring force. The key change being the rent cap increase of 2% in RPZs. Rent increases in RPZ’s cannot exceed inflation and the old limit of a 4% increase has now ceased.
It could be argued that these new rules provide, in uncertain times, certainty for landlords and tenants and will allow them to financially plan into the future.
On the other side of the coin, there are concerns in certain sectors that the increasing legislation and regulation is actually driving small to medium sized landlords away from the residential rental market. The knock-on effect is that this may result in there being even less supply of rental accommodation. Minister for Housing Daragh O Brien acknowledged this when he stated,
“The exiting of landlords from the private rental sector is a consequence of multiple factors. A changing regulatory environment, which has been necessary to ensure a fair and effective residential rental sector that balances tenants’ rights and landlords’ responsibilities, has resulted in a challenging compliance framework for some.” For more on this discussion, check out this Oireachtas debate.
Working with a property management company is a great way to keep on top of legislation that will directly impact your time as a landlord. As they work with lettings day-in, day-out, it is their job to know when new guidelines apply so they can offer the very best advice to their clients. If you are a landlord in Ireland and are interested in property management services, we would love to hear from you. To find out more, you can take a look at our property management pricing page or head over to our contact page to get in touch directly.