Measuring rental inflation: Evidence from Ireland

Abstract

Accurate measurement of rental inflation is essential for understanding housing market dynamics, informing policy, and ensuring reliable inflation statistics. This paper constructs a repeat rent index (RRI) using newly available administrative data from the Residential Tenancies Board (RTB), with near population-level coverage of both new and ongoing tenancies from Q2 2022-Q1 2025. Applying both hedonic and RRI methodologies to the same dataset isolates methodological effects from data scope and coverage effects and enables a formal decomposition of hedonic inflation estimates. Nationally, annual rental inflation measured by the RRI is consistently 2.1–2.8 percentage points lower than hedonic estimates. Decomposition shows that within-property rent growth accounts for 53% of hedonic inflation in this period, while entry and exit effects contribute roughly one-third, reflecting higher standardised rents for entrants and lower rents for exits. These findings highlight the role of market churn in shaping hedonic estimates and illustrate the importance of index choice for policy evaluation. Hedonic indices are best suited for capturing market-level dynamics, while RRIs provide a more accurate measure of affordability trends and compliance with rent controls. Our results demonstrate the value of comprehensive administrative data for improving rental market measurement and informing housing policy in regulated markets.

Non-Technical Summary

Accurate measurement of rental inflation is essential for understanding rental market dynamics, for assessing affordability, and informing broader housing market and economic policies. This study uses newly available administrative data from the Residential Tenancies Board (RTB), which provides coverage of both new and ongoing tenancies in the private rental sector following a 2022 legislative reform requiring annual registration of all tenancies. The availability of these data allows for the construction of a Repeat Rent Index (RRI) for the first time in Ireland and enables a direct comparison with the hedonic rent index method currently used.

The key distinction between these two methodologies lies in what they measure. The RRI tracks the same properties over time, capturing rent changes within individual properties. This makes it particularly suited to measuring affordability trends for households (and properties) in the sector and for assessing the effectiveness of rent caps in limiting within-property rent rises. In contrast, the hedonic index does not track individual properties; instead, it uses all observed rents in each period and adjusts for differences in property characteristics. This means hedonic measures capture changes in the average rent paid and also reflect changes in the composition of the rental market over time, including the entry of new properties and the exit of other properties. 

Our analysis for the period Q2 2022-Q1 2025 shows that annual rental inflation
measured by the RRI was consistently 2.1–2.8 percentage points lower than hedonic estimates. A formal decomposition reveals that 53 per cent of hedonic inflation in this period reflects within-property rent growth, while roughly one-third is driven by market churn, the entry and exit of properties with systematically different rent levels. Properties entering the sector over this period had rents around 11 per cent higher than those exiting, highlighting the role of property turnover in shaping hedonic estimates. 

Local authority level analysis reinforces these findings. In rent-controlled urban areas, RRI estimates of rental inflation were low, while hedonic estimates often exceeded rent cap thresholds. Importantly, two local areas can display similar hedonic inflation rates, yet the underlying drivers differ markedly. This distinction matters because it signals different affordability pressures: churn-driven inflation reflects structural market changes, while within-tenancy growth directly impacts sitting tenants more prominently. 

These differences have important implications for interpretation. Hedonic indices are crucial for understanding broader market pressures, driven by factors such as population growth, supply constraints, elevated construction costs, and high interest rates, all of which influence the mix of properties and overall rent levels. However, they can overstate the inflation experienced by households in the sector and lead to misinterpretation of the effectiveness of rent regulation in limiting rent increases. Conversely, the RRI provides a timely and clearer picture of affordability developments for households, but does not capture the impact of market churn on overall rent levels in the sector. 

Using both indices together provides a more comprehensive and timely understanding of rental market developments. This research demonstrates the value of leveraging administrative data to improve the accuracy and transparency of rental market indicators.