Berlin’s revolutionary rent ceiling – success or failure? | TBEN | 23.02.2021

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The German capital is one year away from its five-year “rent freeze” on Tuesday, and the data collected so far has fueled their arguments for both opponents and supporters.

A survey published last week by the real estate portal ImmoScout24 revealed that while the average rent in Berlin has indeed fallen over the past year, by around 7.8%, the number of new apartments on the market eligible for a rent reduction had also fallen – by about 30%. .

This has had a huge effect on competition for new apartments, ImmoScout24 said, with an average of 214 people responding to every rental ad in January 2021, up from 128 in the same month last year.

Many cities around the world have rent control measures in place, but Berlin’s rent cap law, in effect since February 2020, is unique. This meant that the rents of 90% of Berlin apartments were frozen for five years at the level where they were in June 2019. New rental contracts could not be higher than this level, and from November 2020, existing rents which were still above this level had to be reduced.

Barbara Steenbergen, Head of the EU Liaison Office at the International Union of Tenants (IUT), is delighted with the success achieved so far. “It’s a blessing,” she told TBEN. Like many NGOs, the IUT offers tenants an online tool to calculate how much their rent could be reduced by, and among those who checked, the average rent reduction turned out to be € 210 ($ 255). per month: “That’s a lot of money, I think. People really say it’s a relief,” she says. “It’s like a raise.” The IUT estimates that 365,000 city ​​residents now have the right to reduce their rent.

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In contrast, the response from Jürgen Michael Schick, president of the German Real Estate Association (IVD), is scathing. “The rent cap is a disaster for the Berlin real estate market,” he told TBEN in an email. “It hinders the construction of new apartments, even if tens of thousands of apartments are missing in Berlin every year. It hinders the modernization of existing apartments. It limits the supply of apartments. The ceiling of Berlin rent is the best example of what it shouldn’t do. be finished. “

For his part, Wibke Werner, of the Berlin Tenants Association, says it’s far too early to say whether it was a success anyway. “This is the first year of four more, hopefully,” she told TBEN. “And for the moment, we are still under the sword of Damocles of the decision of the Constitutional Court.”

Critics of rent cap say it’s a disaster for Berlin’s real estate market, hampering modernization

Forcing landlords to reduce rents

The associations of disgruntled landlords have taken their objections to the rent cap to the German Constitutional Court on the grounds that, according to the Basic Law, only the federal government can intervene in rental policy. So far, the homeowners ‘and tenants’ associations seem convinced that they will win.

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Pending this decision, expected in the next three or four months, it has become common practice for Berlin landlords to put “shadow rents” on new contracts – in other words, tenants must recognize that their rents can suddenly increase if the Constitutional Court cancels the rent cap and landlords could ask them for a refund of rent. This has made finding a new place to live in Berlin even more complex, as potential tenants may not be sure whether a particular apartment is within their price range.

According to Steenbergen, this reason and many others – the coronavirus pandemic and the fact that the rent freeze has made their current homes affordable – have led to a decrease in the number of people moving to Berlin. “People stay where they are,” she says.

Many cities around the world have some sort of rent control, but what’s unique about the Berlin rent freeze is that it allows tenants to force landlords to lower their rents, even if they have already signed contracts.

For this reason, many other cities don’t seem daunted by startup issues. All cities over 50,000 in Catalonia have also implemented a rent freeze, and Steenbergen said the city of Vancouver, Canada, has been in contact with her to ask questions about the rent freeze. in Berlin. Glasgow, Scotland, would also consider this idea. “Berlin is a pioneer,” Steebergen said.

Infografik shows how many people live in rented accommodation across Europe

The ultimate problem: the housing shortage

Both sides of the argument agree on one thing: the underlying problem is a housing shortage. “The greatest protection against excessively high rents is and remains the expansion of the housing supply,” said IVD chairman Schick.

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But the rent cap, as the Berlin government argues, includes elements designed to encourage new housing – any building built after 2014 is exempt – but its main purpose is to create a respite space to give companies time to state-owned development to build new homes. . “It’s really a downtime for markets that are very stressed,” said Steenbergen.

Various government initiatives – both federal and local – are currently in place to attempt to build new housing, but Germany, and Berlin in particular, is catching up. According to the Pestel Institute, an independent research organization, Germany has 670,000 short-term apartments, almost all of which are aimed at middle and low-income earners. The Berlin government also admitted on Tuesday that it will miss its target for public property developers to build 30,000 new apartments during this legislative period (which will end in September) – only 16,580 apartments will be completed, the development minister said. urban Sebastian Scheel. mentionned.

It is clear that the Berlin housing market could be the subject of private sector investment – but few seem willing to build cheap apartments, even if, according to the IUT, there are up to 4 % of profits to be made. Instead, private companies choose to invest heavily in building luxury apartments, where the profits are significantly greater.

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