Sinn Fein put a Rent Freeze Bill before the Dáil for a Second Stage hearing last night (known as the Fair Rent Bill) which would provide for a three-year rent freeze across the private residential rental sector (PRS).
The bill was first introduced to the parliament on 5th December by Eoin O’Broin TD, Sinn Fein’s housing spokesperson. Normally, legislation proposed by Sinn Fein would not make it past the first reading, however, Fianna Fail have suggested that they would back the bill which, combined with other opposition members, would ensure its passage to Committee Stage.
The Bill also contains provisions on tax credits for new and existing tenants, equivalent to 8% of annual rental costs, which will run in parallel with the rent freeze. TDs (MPs) are expected to vote on the bill this Thursday to allow it advance to Committee Stage for further scrutiny.
This legislation would go for further than European peers by introducing a nationwide freeze on rents for three years, which in the first instance will impact the NAV for the listed players through the yield impact, and naturally the evaporation of the approximately 4% forward rental growth assumption.
Goodbody Stockbrokers say the likely impact on residential investors’ market sentiment is negative, reducing incentives to introduce much needed supply to the rental market and thus exacerbating the supply shortage. Following the vote on Thursday, the next stage of progression would be to Committee Stage, where the bill would be examined section by section, and amendments would be introduced.
According to Goodbody Stockbrokers, "The Bill further highlights the political pressure on Government in addressing the significant residential (mostly apartments) shortage. With a Minority Government in place, such moves reflect the political risk to the PRS sector given Government may support an amended version if it means it can continue to enjoy the support of the main opposition party, Fianna Fail."
They added, "We note that the Minister for Housing considers the move to unilaterally freeze rents as unconstitutional, so such a Bill is unlikely to advance at Committee stage without major amendments. The introduction of the 4% cap on rental growth in rent pressure zones was not deemed unconstitutional when it was introduced in 2016."