Published on: 05/07/2021

4% Rental Increases a Thing of the Past as Inflation Linked Increases Become Law

As of July 9th 2021, the old system of 4% annual rent increases is being replaced with a new inflation linked system. Under the new regime, landlords will only be able to increase rents in line with inflation and not the 4% that was permitted heretofore. You can check the current rate of inflation here. As you can see, for the past number of years, we have actually had negative inflation which means that prices are actually going down year on year. This phenomenon has dumbfounded economists as with record low interest rates and massive ongoing quantitative easing, classical economic theory suggests we should be seeing strong inflation not deflation. However, the snap back in demand post-Covid, persistently low interest rates, ongoing money printing and tightened supply chains have finally coalesced to start to drive inflation higher, with the annual rate picking up to close to 2% in May. It would be very interesting to see, were rates to push through 4%, would this new policy have the opposite impact to the desired one i.e enabling landlords to increase by more than 4%; that of course is highly unlikely and any such rise in inflation would likely be put back in check with raised interest rates; I digress!

Inflation rates have ticked up to close to 2% post-Covid as demand snapped back and supply chains were put under pressure, driving prices higher

The precise details of how the new system will work have not as yet been published as yet but they will be included in the Residential Tenancies (No. 2) Bill 2021 which is currently going through the Oireachtas. Full details are available here: https://www.oireachtas.ie/en/bills/bill/2021/87/

The RPZ Calculator has yet to be updated to reflect the new regime but it is expected to be updated before the bill becomes law.

More details to follow once the bill is passed into law.

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