Berlin has introduced legislation to combat rapid rising rents after the German National Parliament approved a law prohibiting landlords from charging new tenants more than 10% above the local average of similar properties. These laws were already in place for existing tenants but have now been extended to new contracts. The new measure will allow state governments to define areas with high upwards pressure on rents and set limits on year-to-year increases. The law came into effect on June 1st 2015.
In January 2014, Minister for Housing Jan O’Sullivan, floated rent control as a way of tackling the rising cost of rent in Ireland. She wanted rent to be capped in line with the cost of living and potentially ban landlords from increasing rents significantly in excess of the Consumer Price Index (CPI). These plans seemed to have been abandoned by the government until the start of this year when the Minister for Environment, Alan Kelly, announced plans to introduce legislation to guarantee ‘rent certainty’ for tenants.
The Attorney General, Marie Whelan, earlier this month gave the proposals the go ahead and it is expected to go to cabinet in the next few weeks. The legislation is expected to contain a provision that tenants will have their rent fixed for 3 years, in accordance with the CPI, until the housing supply catches up with demand. The legislation also proposes that landlords would have to justify a rent increase, for instance by refurbishing property, as well as controlled tax incentives for landlords, incentives for long term ‘continental-style’ leases and increases in power for the Private Residential Tenancy Board to resolve disputes quickly.
Commentators and other experts are sceptical about the introduction, even though Minister Kelly insists that they are legislating for “rent certainty” rather than “rent control”. Rent controls were originally introduced in Ireland in the Increase of Rent and Mortgage interest (War Restrictions) Act 1915. This system was abolished in the 1980’s following a legal challenge which ruled them unconstitutional.
The Minister recognises that the real solution to the spiralling accommodation costs is to build more houses but says that this is the short term solution to ensure we can deal with this issue while the supply is being bumped up. With Irish society being opposed to such rent controlling measures in the past, it remains to be seen whether the legislation will be passed.
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