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’. 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.
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.
In a nutshell, a Rent Pressure Zone (or RPZ) is a location where rents cannot be increased by more than 4% per year. 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 Formula
As mentioned above, you won’t need to work out the maximum rent yourself, but it’s good to have a rough understanding of how the amount is reached. The formula is as follows:
R x (1 + 0.04 x T/M)
R = The current rent amount
T = The number of months between when the rent was last set and when the new rent will be introduced
M = The time in between the rent review (this must be 24 or 12, depending on whether the tenancy began before or after the RPZ was designated – more information on this below)
What Do Rent Pressure Zones Mean For Landlords?
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 4% 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 4% 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 12 Things You Must Do As A Landlord In Ireland.
The Future Of Rent Pressure Zones
It was recently reported that when Rent Pressure Zones expire at the end of 2021, a new system will be put in place. One of the issues raised with the current system is that most people’s wages do not rise by 4% per year, meaning that rents remain too expensive in many parts of Ireland.
It’s not clear at the moment what new guidelines will be introduced, but it looks as though there may be a different benchmark from which maximum rent prices will be calculated. As a landlord, it’s important to keep up to date with these kinds of changes to make sure you are always compliant with the current rules and regulations.
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.