Rent regulation in Berlin

In the second half of October, the Berlin Senate approved a bill submitted by Senator Katrin Lompscher to set a maximum rent in local apartments. The bill should be approved by the Berlin parliament by the beginning of 2020 before it can enter into force. At the moment, the bill is still in the legislative process and its final form may still change, but let’s take a look at what the regulation should consist of.

Rent capping

The so-called Mietendeckel, as the bill is abbreviated, would apply to approximately 1.5 million rental apartments in Berlin. Exceptions, which would not be covered by the regulation, include new buildings from 2014 onwards or social housing. The essence of the rent regulation is the establishment of a rent table, which sets a maximum rent per square metre depending on the age and amenities of the apartment.

For example, for flats that were ready for occupation before 1918 and which have neither central heating nor a bathroom, the rent is set at a maximum of EUR 3,92 per square metre. On the other hand, for apartments that were ready for occupation between 2003 and 2013, the rent is capped at EUR 9,80 per square metre. If the apartment has modern amenities (it must meet at least three of the five features listed in the law, one of which is a built-in kitchen), the rent ceiling is increased by EUR 1. The rent ceiling can also be increased by EUR 1 in the case of modernisation for climate protection or barrier-free construction. The bill also applies to family houses, whereby for living space located in a building with no more than two apartments, the rent ceiling is increased by a surcharge of 10%.

How will the change affect existing leases and how will it affect new contracts?

For newly negotiated leases or extensions of existing leases, the rent may be negotiated at the maximum amount determined by the status as of 18 June 2019 and may not exceed the upper limit specified in the rent table. In the case of existing leases, the rent may not exceed the upper limit of the rent table by more than 20 %. These rules should start to be applied no earlier than nine months after the entry into force of the law. Breaches of the rules will be punishable by a fine of up to EUR 500 000.

Enthusiasm and concerns about rent regulation

The proposed rent regulation is causing enthusiasm on the one hand, but also fears that it will restrict the construction of new houses and their modernisation. Landlords will not be motivated to rent out apartments at rents significantly below market rents and will prefer to leave them empty. Paradoxically, there could then be fewer vacant flats than at present. There are also voices that the proposed rent regulation is in breach of the Constitution. The reason given is the interference with the constitutionally guaranteed right to property and the lack of legislative competence of the Berlin parliament. It will therefore certainly be interesting to see what the fate of rent regulation in Berlin will be. Whether this experiment will become an inspiration for other major cities or whether, on the contrary, it will be found to be unconstitutional and thus doomed to failure.

Rent regulation in our country

Not so long ago, the process of rent deregulation was only just completed in this country. The history of rent regulation in our countries dates back to the First World War, when rents were regulated mainly for the families of soldiers. During the First Republic, rent deregulation was almost complete, and rent regulation was reintroduced during the Protectorate. After 1948, the regulation of rents corresponded to the then policy of liquidating private property. New regulations regulating existing tenancies were issued after 1991, with no regulation of new construction and, since 1995, no regulation of new tenancies. Rents were then gradually increased to bring them in line with market rents. By the end of 2012, market rents had been achieved in a large part of the housing stock.

However, at present, especially in the larger cities, rents are increasingly higher, which contributes, among other things, to housing affordability problems for a significant part of the population. This is a worldwide problem in large cities, and there have been recent changes to rent laws in New York, for example. It is therefore clear that the various attempts to regulate rents and regulate tenancy relations will continue, and it is possible that rent regulation will once again become an issue in this country. The latest developments in the bill and more detailed information can be found on the Berlin.de website.