Hundreds of thousands of tenants face further rent increases linked to surging inflation after the policies of Housing Minister Darragh O’Brien backfired.

r O’Brien is under pressure to act just months after the introduction of the measures he has taken to limit quick rents.

Tenants were promised that the changes introduced this summer would result in lower rent increases under its Rent Pressure Zone legislation.

A change has been made where annual rent increases are now based on inflation instead of fixed caps.

But since then, the inflation rate used to determine rents in Rental Pressure Zones (RPZ) has climbed to 3pc.

Mr O’Brien said in July when he announced the change that the inflation rate used to determine rates had averaged only 0.73 pc over the past three years.

About three-quarters of all rentals are in areas designated as RPZ.

Before the new system was put in place, rents could only increase by 4% per year.

On the switch, Mr O’Brien said the 4pc has become a target rather than a limit.

Now, rents in RPZs can only increase based on the Harmonized Consumer Price Index (HICP) – a standardized measure of inflation used across the EU.

But the latest HICP figures show it rose to 3% in August, a 13-year high.

This despite Mr. O’Brien’s promise that the change would mean “a significant reduction in the level of rent increases in the RPZs”.

Rents have doubled over the past decade. They are almost 40% above their pre-crisis levels in Dublin and 20% in the rest of the country.

When asked if the HICP hike would lead to a 3% increase, a spokesperson for Mr O’Brien said: “If the last rent fixing in a PZR was in August 2020, a rent increase of 3% would be authorized. “

Sinn Féin housing spokesperson Eoin Ó Broin said the new rent measures were failing, as he announced when they were introduced. The inflation rate was heading towards 4pc, he said.

He called for a three-year rent freeze and rent credit for tenants. He claimed that if rents had been linked to inflation years ago, it would have kept rental costs from spiraling out of control.

Ivana Bacik, of the Labor Party, said her party wanted a three-year rent freeze.

“For years we wanted rents tied to inflation,” she said. “In the meantime, rents have reached record highs due to multi-year increases of 4%, but just as the government finally acts, the HICP inflation rate is starting to skyrocket.”

The Dáil is scheduled to debate a Labor Party bill today on tenant protection and stronger eviction protections.

KBC Bank economist Austin Hughes said the change in determining how much landlords will be allowed to raise rents won’t mean lower rents anytime soon.

“It is likely that inflation will increase further in the coming months,” he said. “Depending on what happens to the energy bills, this could threaten 4pc.”

He said that while most economists expect inflation to slow down next year, it could stay relatively high for some time.

“This means that moving from the previous rental cap of 4 pc might not result in significantly lower rent increases, at least in the short term. “

Mr Hughes said switching to an inflation measure means allowed rent increases will be faster when the cost of living rises rapidly

This will mean a double whammy for the purchasing power of tenants.

Davy Stockbrokers economist Colin Grant said the government’s decision to switch to the harmonized index was based on the assumption that it would be considerably less than 4pc.

“However, given the rise in inflation, this target has been compromised,” he said.

Daft.ie’s most recent report showed average rents rose an additional 5.6%, which was attributed to a record shortage of properties.

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