Berlin’s new rent freeze: How it compares globally
Rents for 1.5 million homes in Berlin will be frozen for five years and capped at €9.80 ($10.90) per square meter, after the Berlin state government agreed a new rent control law on Tuesday.
From 2022, landlords will be allowed to raise rents in line with inflation of 1.3% per year. But the law also says that landlords cannot charge rents higher than what the previous tenant paid, and, should their rent be above the limit set out in a “rent table,” tenants can even sue to have their rent lowered. These two measures are thought to be unique globally, and, according to observers, represent the strongest part of Berlin’s law.
The freeze is not total. To encourage new housing, buildings built after 2014 will be exempt, as will government-owned social housing, where rents are controlled anyway, but an estimated three-quarters of the apartments in Berlin will be covered.
The regulations will bring Berlin into line with legal situations already in place in other major cities suffering chronic housing shortages and ballooning rents, including New York, Vienna, Madrid, Barcelona and Amsterdam.
The new law was passed by the Berlin state cabinet on Tuesday after 12 hours of last-minute negotiations last week ironed out the final differences among the three government parties: the center-left Social Democrats (SPD), the socialist Left party and the Greens. It is expected to come into effect in January 2020.
‘Waiting for something to happen’
Barbara Steenbergen, head of the EU liaison office at the International Union of Tenants (IUT), thinks the idea that a city with an acute housing shortage should introduce rent control is not exactly revolutionary. “It’s nothing extremely special,” Steenbergen told DW. “Actually I was more or less waiting for something to happen in Berlin.”
In the last few years, Spain and the Netherlands have introduced nationwide rent control measures, as have four states in the US: California, New York, New Jersey and Maryland. Paris, France, is already planning regulation, presumably waiting to see how Berlin’s legislation works out, while Canada has had rent regulation since 2006.
“There is a common understanding that it is necessary to regulate housing markets, because housing markets do not work by themselves,” Steenbergen added. “If you don’t regulate, there is always a shortage of cheap rental housing, while there is always enough expensive housing and property to buy, because that is where investors can make profits.”
In New York, the Netherlands and Spain, rents are also capped to inflation rates, and in Spain, which introduced new legislation in April, there is also a five-year minimum on rent contracts to protect against rent hikes.
But Steenbergen says Berlin’s controls compare well with others: There are measures to control what she calls “ren-eviction”: that is, forcing poor tenants out by renovating the building to justify a massive rent hike. Under the new law, rents in Berlin’s renovated buildings can only go up by €1 per square meter. In the Netherlands, though, there are even stricter rules: 70% of a building’s tenants have to give their consent before any renovation can happen. In New York, rent increases linked to modernization are limited to 2%.
“Extortionate rents” also get a legal definition in the Berlin law: that is, 120% of the value set out in the rent table. The Netherlands has a similar regulation, but Spain doesn’t.
But, if the rent is above that, Berlin tenants can sue to have their rent lowered, regardless of what it says in their contracts, and even have their rent returned. That, says Steenbergen, is unique. “This is really interesting,” she said. “This is something we should follow very closely. I think it’s going to be very hard to realize that.”
‘Breathing space’ for tenants
The new measures were described as a “breathing space for tenants” by Housing Minister Katrin Lompscher on Tuesday.
But the freeze has faced predictable criticism from some quarters: Associations of property developers, architects and construction companies wrote a joint open letter to the Berlin government predicting that the rent cap would see investment in property in the capital drop by 90% and would even endanger the construction industry.
But the rent law has been celebrated as a victory by the many tenants’ initiatives that have sprung up in Berlin recent years after low income communities have been threatened with eviction by drastic rent hikes. Among these is Oleg Mirzac of the Pankow Tenants’ Forum, who has held out in his home in northern Berlin while almost all his neighbors have caved to buy-outs and pressure from new owners eager to modernize and find richer tenants — or buyers.
“The rents have been rising nonstop for 10 years, and the incomes aren’t rising at all,” he told DW. “I think I speak for a lot of Berlin’s tenants when I say I welcome this, and hope it creates a barrier for property speculators.”
The pressure from new owners takes an underhand form, according to Mirzac: cease-and-desist notices over bikes and shoes left in the courtyard, or banners hung in windows. He also says that construction workers broke his heating when other apartments were being modernized.
Berlin’s rent prices have indeed been exploding. Last year, a Global Residential Cities Index published by property consultants Knight Frank found that Berlin’s were rising faster than anywhere else in the world: from 2017 to 2018, rents rose a startling 21%.
This year, the real estate portal Immowelt put the average rent in Berlin at €11.60 per square meter, and has reported a 104% increase in Berlin rents from 2009 to 2019, (though that left it still well below other German cities: The average rent per square meter in Munich is €18.60). Berlin is also seeing a yearly net population gain of some 40,000 people per year.
But that stat does not account for affordability. A study released this month by the nonprofit project Mietenwatch (“rent watch”) found that a single apartment hunter living on the city’s average net monthly income of €1,375, would find that only 4.4% of the apartments on the rental market would be affordable for them — in the city’s central districts, that figure drops to 1.0%. Mietenwatch defined an affordable rent as no more than 30% of income.