Ireland faces an acute housing crisis. As rent continues rising and affordable housing remains scarce, politicians are turning to rent control as a quick fix. The Tenants’ Rights Bill proposes a three-year rent freeze that sounds appealing to struggling renters. However, decades of economic research and real-world evidence indicate that rent control policies often do more harm than good.
Our transactional data at Farrell Southern reveals the scale of the problem: in Q2 2024, one in two properties we sold came from landlords exiting the rental market. This landlord exodus is accelerating at the worst possible time, when Dublin desperately needs more rental housing, not less.
The Idea of Rent Control: Why It’s So Appealing
The idea of rent control is intuitive. When rent rises faster than wages, why not simply freeze rents or cap rent increase limits? Proponents of rent control argue it protects tenants from exploitation and provides security of tenure. In rent pressure zones across Dublin, renters face annual rent increases that make housing costs unaffordable.
It’s easy to understand why politicians support rent control. Voters see rising rents and demand action. A rent freeze appears to solve the housing affordability problem immediately. However, as economists after economist have demonstrated, rent control could actually exacerbate the housing crisis rather than alleviate it.
Effects of Rent Control: What Economic Research Actually Shows
The evidence that rent control causes more problems than it solves is overwhelming. Studies found that rent control reduces the supply of rental housing, decreases housing quality, and creates market distortions that harm renters and landlords alike.
Rent Control Reduces Housing Supply
Research shows rent control reduces rental housing supplies by 15 per cent or more. When landlords face frozen or capped rental income while costs rise, many exit the market. They convert rental properties to other uses or engage in selling to owner-occupants. This shrinks the supply of rental housing precisely when the housing shortage demands we increase the supply.
In San Francisco, studies found that rent control reduced mobility by 20 per cent and lowered displacement from San Francisco for existing tenants, but at the cost of lost rental units that would have housed new renters. The policy protected some while excluding others entirely from access to housing.
Rent Control Creates a Two-Tier Housing Market
Without rent control, the housing market allocates units through price signals. With rent-controlled apartments, the market becomes dysfunctional. Tenants in rent-controlled units pay below fair market rent and rarely move, reducing housing stock turnover. Meanwhile, rental units entering the market or not covered by rent control laws command higher rents in the uncontrolled sector to compensate landlords for regulatory risk.
This creates perverse incentives. Long-term tenants benefit from rent control while new renters face even higher rents. Young professionals, students, and mobile workers those who most need rental flexibility, ty are priced out entirely.
Rent Control Decreases Housing Quality
When rent is frozen or tightly capped, landlords cannot justify investments in maintenance or upgrades. The quality of rental housing deteriorates. Rent-controlled properties receive minimal upkeep because improvements generate no return. This harms tenants who remain in increasingly substandard housing.
Rent Pressure Zones in Ireland: A Failed Experiment
Ireland already tried a form of rent control through rent pressure zones (RPZs). Put in place in 2016, RPZs limit rent increases to 2 per cent annually in designated areas. The policy aimed to stabilise the rental market and improve housing affordability.
What happened? Landlords accelerated their exit from the rental sector. Rental supply contracted further. New housing construction didn’t increase because rent caps made new rental properties financially unviable. Market rent outside RPZs rose even faster as landlords priced in future risks.
Economists warned this would happen. Yet policymakers persist in believing rent control works despite clear evidence that it doesn’t.
The Housing Crisis Won’t Solve Itself: What Ireland Actually Needs
Rent control appears attractive politically, but won’t solve the housing crisis. Ireland’s problem is fundamentally one of supply. We don’t have enough housing units to meet demand. The solution to the housing shortage requires building more homes, social housing, affordable housing, and market-rate rental housing.
Increase the Supply of Housing
The only sustainable solution is to increase housing supply dramatically. This means:
- Streamlining planning processes for high-density housing construction
- Investing in social housing and housing vouchers for vulnerable populations
- Removing regulatory barriers that force landlords out of the rental market
- Creating tax incentives for new construction and long-term rental provision
- Allowing market rent to signal where housing is needed most
Address the Root Causes, Not Symptoms
Rising rents are a symptom of the housing shortage, not the cause. Freezing rents treats the symptom while worsening the disease. Every economist who has studied rent control reaches the same conclusion: it creates housing market dysfunction that harms affordability in the long run.
Swedish economist Assar Lindbeck famously stated: “Rent control appears to be the most efficient technique presently known to destroy a city except for bombing.” This wasn’t hyperbole. Cities from Stockholm to New York have seen rent control devastate their housing stock and rental sector.
Why Rent Freeze Policies Do More Harm Than Good
Ireland’s proposed rent freeze will guarantee several negative outcomes:
Accelerated Landlord Exodus: More landlords will sell rental properties immediately rather than face three years of frozen income against rising costs. This reduces the supply of rental housing when we need more, not less.
Collapsed Build-to-Rent Development: Developers won’t build new rental housing if they cannot charge market rent. Housing construction in the rental sector will halt.
International Investment Flight: Institutional investors require regulatory certainty. Rent stabilisation that becomes rent control causes capital flight to more stable markets. Without these funds, many housing projects become financially impossible.
Declining Housing Quality: Landlords won’t invest in rent-controlled properties. The housing stock will deteriorate, harming the very tenants the policy aims to protect.
Exploded Rents for New Tenants: Properties entering the market for the first time will command premium rents as landlords price in regulatory risk and reduced supply meets steady demand.
Reduced Housing Mobility: Tenants in rent-controlled apartments won’t move even when their housing needs change, because they can’t find comparable rent elsewhere. This locks up housing units that could serve others better.
What Economists Say About Rent Control
The economic and social research consensus is clear. A 2012 survey found 95 per cent of economists agreed that rent control reduces the quantity and quality of housing. Whether rent control is “hard” (strict freezes) or “soft” (limited caps), the effects are similar: reduced supply, decreased quality, and market distortions.
Nobel Prize winner Gunnar Myrdal, architect of Sweden’s welfare state, called rent control “the worst example of poor planning by governments lacking courage and vision.” These aren’t conservative economists defending landlord profits; they’re social democrats who support housing affordability but recognise that rent control causes the opposite of its intended effect.
Studies from the Economic and Social Research Institute (ESRI) in Ireland confirm these findings. Rent control increases scarcity, reduces new construction, and harms housing affordability over time. The short-run benefits for existing tenants come at the cost of excluding new renters from the housing market entirely.
The Real Solution: Build More Housing
Ireland can solve the housing crisis, but not through rent control policies. The solution requires political courage to pursue supply-side reforms:
- Dramatically increase social housing construction to provide affordable options for lower-income households
- Reform planning laws to enable faster housing construction, particularly high-density housing near employment centres
- Stabilise the regulatory environment so landlords and investors can plan long-term
- Provide housing vouchers to support vulnerable renters without distorting the overall housing market
- Invest in infrastructure that enables new housing development in areas with jobs and amenities
These solutions are harder politically than a rent freeze. They take time to show results. But they actually work to get housing built and reduce the cost of living for renters.
The Bottom Line: Rent Control Creates More Problems Than It Solves
Ireland’s housing crisis demands real solutions, not political theatre. A rent freeze might poll well, but it will drive more landlords from the rental market, halt new housing construction, and ultimately make housing affordability worse.
Every serious economist who has examined rent control reaches the same conclusion: it does more harm than good. Rent control won’t solve the housing crisis; it will deepen it.
Politicians must find the courage to pursue evidence-based policies that increase housing supply rather than populist measures that sound good but fail in practice. The housing shortage won’t solve itself, and rent control policies will only make it worse.
Ireland deserves better than failed policies recycled from the 1970s. We need the political will to build the housing our population needs. That’s how we solve the housing crisis. That’s how we create genuine housing affordability. And that’s how we ensure both renters and landlords can participate in a functional housing market.
Anything less is just political posturing that will harm the people it claims to help.
