Last month Berlin instituted a five year rent freeze on many rental properties.
Berlin is just one City. It is a trendsetter and actions taken in the German capital have worldwide reprecussions.
Deutsche Welle 11.3.2019
Berlin’s brand-new rent freeze (and cap) is hardly unique among cities with pressured housing markets. But while other cities have stricter laws, Berlin’s new rent control has some more unique protections.
Around 1.5 million homes in Berlin will have their rents 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 October 23.
The new measures were described as a “breathing space for tenants” by Housing Minister Katrin Lompscher on Tuesday.
The idea that a city with an acute housing shortage should introduce rent control is not exactly revolutionary, said Barbara Steenbergen, head of the EU liaison office at the International Union of Tenants (IUT).
“It’s nothing extremely special,” she told DW. “Actually I was more or less waiting for something to happen in Berlin.”
Berlin’s rent prices have been exploding, and as the city’s population grows by some 40,000 people a year, displacement of low-income communities and social inequality have been the inevitable result.
Last year, a Global Residential Cities Index published by property consultants Knight Frank found that Berlin’s rents were rising faster than anywhere else in the world: from 2017 to 2018 alone, rents rose by 21%, it said.
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 unique globally, according to international tenants’ organization, which says they represent the strongest part of Berlin’s law.
It was good news for Oleg Mirzac, one of the final holdouts in an apartment building in the north of Berlin, where new owners want to renovate and raise rents by as much as 140%.
He has lived there since 2003, when Berlin’s rents were less than half of what they are now, and when hardly anyone spent more than a quarter of their income on rent. He’s seen almost all his neighbors leave in the last few years as new owners have pressured them out to make way for expensive renovations.
Like many others in Berlin, Mirzac started a community tenants’ initiative, the Pankow Tenants Forum, to fight the price-out attempt in his building. He welcomes the new Berlin measures. “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.”
A freeze, and a cap
The new law was passed by the Berlin state cabinet in late October after 12 hours of last-minute negotiations 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.
The new freeze is not total. To encourage new construction, buildings built after 2014 will be exempt, as will government-owned social housing, where rents are controlled anyway, but an estimated three-quarters of apartments in Berlin will be covered. From 2022, landlords will be allowed to raise rents in line with inflation of 1.3% per year.
But despite warnings of a return to socialism from the political opposition, the regulations do little more than bring Berlin into line with legal situations already in place in other major cities that suffer chronic housing shortages and ballooning rents, including San Francisco, Oakland, New York, Vienna, Madrid, Barcelona and Amsterdam.
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. Canada has had some form of rent regulation since 2006, while Paris, France, is already planning regulation, presumably waiting to see how Berlin’s legislation works out.
“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.”
Steenbergen says Berlin’s controls compare well with others, though they don’t go much further: In New York, San Francisco, the Netherlands and Spain, rents are also capped to inflation rates. In Spain, there is also a five-year minimum on rent contracts to protect against rent hikes.
Berlin now also has measures to control what she calls “ren-eviction”: that is, forcing poor tenants out by renovating the building to justify a massive rent hike – exactly what its happening to Oleg Mirzac in Pankow.
Under the new law, rents in Berlin’s renovated buildings can only go up by €1 per square meter. However, rules in the Netherlands are even stricter: 70% of a building’s tenants have to give their consent before any renovation can happen.
Pressure from new owners to force out their tenants can often be indirect. Mirzac says it started with cease-and-desist notices over bikes in the courtyard or shoes in the hallways, and moved up to court cases. He also says that construction workers broke his heating when other apartments were being modernized. “They walled up a fireplace I had that was necessary for ventilation,” he said.
The new Berlin law also follows the Netherlands and Spain in that it gives “extortionate rents” a legal definition, setting it at 120% of the value set out in the rent table.
If the rent is above that, Berlin tenants can sue to have their rent lowered, regardless of what it says in their contracts. They can even have their rent returned, which Steenbergen says 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.”
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.