EARLIER THIS MONTH Environment Minister Alan Kelly announced plans to introduce some form of ‘rent certainty’.
The plan was outlined as a means of making rents in the private sector more affordable.
At the Labour Party conference the Minister had given his support to a plan that would see rents in the private sector frozen for two years and landlords prevented from increasing rents above the consumer price index, unless they have carried out work that justified the increase.
Disregarding a freeze on rents, how much change would linking rents to the consumer price index really have?
To find out, we took a look back at rents over the the past decade, taking the publication of the first Daft.ie rent report in 2006 as a starting point. The cost of a three-bedroom home in Dublin 2 will be taken as an example.
Click here to see a larger version of the graph.
As can be seen by the graph, while linking things to inflation might not have made things cheaper, it would certainly have prevented a lot of the sharper rises and falls that the market has experienced.
The depression that happened in 2008 and 2009 would still have happened if rents were linked to inflation, but nowhere near as drastically as it did in real terms.
Prices would have remained relatively high, with real rents only now beginning to come back to where they would have been if they had been tied to inflation in 2006.
In the long run, fixing rent to inflation at the height of the boom in 2006 would most likely have cost tenants more. Benefits to the renter however would be much more pronounced if costs were tied to inflation while the market was at a lower ebb.
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