A report commissioned by The Housing Agency has found that while reference rent systems can help stabilise rents and improve affordability, their success depends on a number of factors including robust data infrastructure and adequate enforcement mechanisms.
Reference Rents: International Perspectives and lessons for Ireland was authored by Dr Joe Frey, Visiting Professor at Ulster University. The report looks in-depth at the operation of reference rents, primarily in Germany and Northern Ireland, to assess their relevance and applicability to the Irish context.
It finds that Germany uses a “Mietspiegel” (Rent Mirror), a detailed database of local rents based on property characteristics, which serves as a benchmark for setting legal rent limits. The Mietpreisbremse (Rent Brake) restricts new rents to no more than 10% above the local reference rent in designated areas. While the system is data-driven and transparent, it faces challenges such as enforcement difficulties, legal loopholes, and high administrative costs. Moreover, landlords often find ways to circumvent the rules, and some withdraw from the rental market.
In Northern Ireland, although there is no formal reference rent system, the Local Housing Allowance (LHA) acts as a de facto reference for tenants receiving housing benefits. However, LHA rates often fall below market rents, limiting its effectiveness. Recent legislation allows for rent freezes and reductions, but implementation has been minimal due to political and practical constraints.
The paper concludes that while reference rent systems can help stabilise rents and improve affordability, their success depends on robust data infrastructure, legal clarity, stakeholder cooperation, and adequate enforcement mechanisms. It finds that Ireland would need to invest significantly in data collection and administrative capacity to implement such a system effectively.
Read the full report here.