According to a major new assessment on Ireland by the Organisation for Economic Cooperation and Development (OECD), rents should be freely modified between leases in a substantial adjustment to current limits, reports RTE.
The discovery comes as the government examines current rent caps because of worries that they are deterring institutional investors from investing in the construction of new homes.
Regardless of whether a property has new occupants or not, the Rent Pressure Zones maximum is currently raised to 2% annually.
However, the OECD cautioned against encouraging landlords to dismiss tenants in its study, reports RTE.
It further stated that the current cap implies that rentals are less than a property’s maintenance costs, which would have caused landlords to sell.
According to the report, stringent rent regulations may have an impact on housing supply by deterring lenders and developers from making real estate investments, reports RTE.
Amid rumours that the government is considering using the measures, the OECD research cautions against reintroducing tax incentives to encourage home construction.
According to the report, tax incentives caused “misallocation of housing” and “significant fiscal loss” during the last boom, reports RTE.
Two government programs that assist first-time homebuyers, Help to Buy and the First Home, are criticised in the study.
“Translate to higher house prices or rents over the medium term” is what it suggested both could do, reports RTE.
It further stated that both programs should be closely watched so that any inflationary pressures on home prices may be promptly addressed.
It said that the “main obstacle” to developers constructing additional homes was the frequent use of court reviews, which was slowing down the planning process, reports RTE.
Dublin’s building expenses are 15% to 30% more than those of comparable European cities, according to the OECD.
It proposes raising the municipal property tax rate on second residences, increasing housing taxes, and restricting the tax-free exemption on the sale of a principal dwelling, reports RTE.
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