The Government is proposing a major change in how rent increases in rent pressure zones (RPZs) are regulated.

Darragh O’Brien (Minister for Housing, Local Government and Heritage, pictured) said he had received Government approval to remove the current 4% cap on annual increases, and replace it with one based on inflation.

The changes are to be inserted into the Residential Tenancies (No 2) Bill 2021, which was published on 17 June. They will take effect when the bill is passed – expected by 9 July.

Around three-quarters of all tenancies are in areas designated as RPZs, according to the Government.

Inflation measure to be used

Rents in these areas will now be allowed to rise only in line the Harmonised Index of Consumer Prices (HICP) – a standardised measure of inflation used across the EU. HICP increases have averaged 0.73% over the past three years.

For those outside of RPZs, the provision for rent reviews every two years will be extended for an additional three years, from 1 January 2022 to 31 December 2024.

“I have always acknowledged that, for some, the 4% cap on rent increases in RPZs became a target rather than a limit,” said the minister.

“We are now taking action to ensure that tenants will only pay rent increases, if required to, which are in line with general inflation, which is currently below 2%,” he said.