Berlin Backs Rent Freeze

Local lawmakers agreed to one of Europe’s most radical rental laws, but it sets the stage for a battle with Germany’s national government.

The Berlin senate has voted in favour of what could be the most radical rent laws anywhere in Europe. The decision, which awaits final ratification by the same assembly members in October, is the most drastic step yet in a city that has already gone further than most in its attempts to keep rents affordable.

But while those efforts enjoy fairly broad support among the public, Berlin itself may still face serious institutional pushback, because such a law tests the boundaries between the powers of city and national governments. Once fully ratified in October, the law would be retroactive to June 18. Rent increases on Berlin homes would be banned for five years, with the exception of already subsidized public housing and newly constructed apartments. In practice, this means rental rates will remain in place.

To enforce the rule, tenants who sign new contracts could have them checked by the city to verify that rents have not been raised illegally. Meanwhile, existing tenants who pay a rate that the city deems too high could apply to have their rent lowered.

Across the city, a rental authority currently assesses average rents for each micro-neighbourhood, broken down further by apartment size and condition. No new lease is allowed to exceed 10% of this average price. This is already fairly strict, but its effect is to steadily pace rent increases, rather than halt them altogether. This has thus far prevented rents from galloping up year-by-year, which could cause real social chaos in a city where 85% of homes are rented.

By freezing rent increases altogether, things will surely get tougher for landlords. Any renovation plans will now have to be approved by the city to ensure that they are genuinely needed. This would prevent a common Berlin landlords’ practice of “improving” a property with unrequested alterations, such as adding balconies to a building’s inner courtyard. The landlord can then take advantage of a loophole that allows rent rises in case of renovation, often pushing the cost of living in the building so high that poorer tenants are forced to leave. Once the new law is in place, renovations will be permitted on the condition that they do not raise the monthly rent by more than €0.50 per square meter. Permits would be granted easily, meanwhile, for such basic essentials as heating system renovation.

Landlords will get some respite elsewhere, though. They will be able to raise their rents if they experience a provable economic emergency. Even this concession nonetheless comes with a sting: If landlords falsify an emergency purely in order to raise their rents, they will face a fine of up to half a million euros. This might sound punitive—indeed, it is arguably supposed to—but it’s worth remembering that small-scale landlords are very rare in Berlin. Owners who possess just a few apartments account for less than 5% of all rentals. Most landlords are large companies.

In a city where even relatively wealthy, well-connected people rent, this has led to a growing popular movement for greater collective control of the housing market. Berlin is already being swept by a campaign to renationalise former public housing and ban mega landlords, one that may well be the subject of a city-wide referendum in 2020.