CSO consumer price index ‘should be used to set rent hikes’

Landlords fear they will be subjected to an unintended rent freeze because of how a tool measuring inflation is used to determine increases.

A Residential Tenancy Board (RTB) calculator uses the Harmonised Indices of Consumer Prices (HICP) to determine the rate at which landlords may increase rent. This index is used to measure inflation in the eurozone, but does not include data for price changes around mortgage interest, building materials and home insurance.

Rent pressure zone (RPZ) rules cap increases in line with inflation or at 2pc, depending on which figure is lower. The HICP recorded a negative value in January, meaning some rents could not be increased in February. A negative value was also recorded last November and landlords are concerned this could become a trend leading to a possible future rent freeze.

The Institute of Professional Auctioneers and Valuers (IPAV) said it would like to see the RTB calculator changed so the CSO consumer price index, which measures general inflation in the Irish economy, is used to determine any possible rent increases.

The consumer price index does measure costs not included in the European HICP.

​IPAV chief executive Pat Davitt said these costs are relevant for landlords carrying out maintenance or repaying loans on properties.

“The CSO determines the official measure of inflation in Ireland. It is a very important benchmark for the rental industry and we believe this is what the Housing Minister should insist is the basis for determining whether or not a rent increase should apply,” he added.

“The HICP is not the appropriate method to calculate rent increases because of its exclusions of some very important items impacting landlord costs.”

He said the continued use of the HICP would pose a risk to the sector, with those who are locked in to rent pressure zone rates that are below current market levels more likely to leave a sector already blighted by a shortage of properties.

“Short-term this will incentivise private landlords to continue to exit the rental market. Longer term it is going to result in a lack of maintenance of such properties, as has been the international experience,” Mr Davitt added.

The RTB said any potential changes to the method of calculating rent changes will require a legislative amendment and is a matter for the Housing Minister and the Oireachtas.

The Department of Housing said a rental market review is due to be published before the end of June.

“The review contains no plans to migrate from HICP to the consumer price index as a measurement for rent increases in an RPZ,” a department spokesman said.

“The linkage with HICP aims to safeguard continued investment in the sector by existing and new landlords to deliver the requisite supply of high-quality rental accommodation while protecting against a significant increase in rental inflation in the coming years as the labour market rebounds,” he added.

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