The new annual cap will only operate when general inflation is higher than 2 per cent.
The Government has approved a 2 per cent cap on rent increases in rent pressure zones.
A rent pressurized zone (RPZ) is a designated area where rents cannot be increased by more than general inflation and applies to new and existing tenancies unless an exemption is being applied.
RPZs are located in parts of the country where rents are highest and rising, such as Dublin, and where households have the greatest difficulty finding affordable accommodation.
The new annual cap will only operate when general inflation is higher than 2 per cent with the Government saying the measure will "result in far lower rent increases for tenants".
Minister for Housing Darrah O'Brien said:
"In addition to significantly reducing the level of rent increases in RPZs, the Bill will also address long-term security of tenure by introducing tenancies of indefinite duration. This was a key commitment in Housing for All, our new housing Plan for Ireland.
"This Government is fully committed to improving the situation for renters in Ireland and we are making strides in this regard," he added.
Labour housing spokesperson Rebecca Moynihan has commented that while the rent cap introduced today is welcome, an immediate rent freeze is urgently required to protect already stretched renters.
“The measures announced by government today are welcome but they do not go far enough to protect rents and tackle the unaffordable rents that are crippling renters.
"Labour is calling for a rent freeze to give renters a much needed break and give the market an opportunity to stabilise and recalibrate." she said.
Key provisions of the measure are to form part of the Residential Tenancies Bill to be published this month, with the cap to apply immediately from enactment.
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