Authorities in Berlin have decided to freeze most rents for five years, part of an increasingly fierce political backlash in Germany against the rising cost of property.
The decision is the first attempt by a city government to impose a cap on rents in Germany and has sparked unease among investors in German property. Shares in Deutsche Wohnen, a large landlord in Berlin, have fallen 14 per cent in two weeks since the plans were floated.
Berlin’s freeze — which is likely to face legal challenges from property owners who see their rights unduly infringed — highlights growing popular anger with the lack of affordable housing in a city once renowned for its low cost of living.
“Housing is a basic need . . . With this new law we want to put a halt to the severe increase in rents in recent years and to calm the overheated rental market in Berlin,” said Katrin Lompscher, Berlin’s senator in charge of housing, said on Tuesday. The law will apply to an estimated 1.5m apartments.
Rental prices in the German capital have more than doubled over the past decade, though Berlin remains cheaper than other national property hotspots such as Frankfurt and Munich.
Critics of the property industry argue that the recent rise in rents is the direct result of the large-scale privatisation of public housing stock in recent years. Others point the finger of blame at Berlin’s restrictive policy on construction and excessive bureaucracy.
The capital is governed by a so-called “red-red-green” coalition that brings together the Social Democrats (SPD), the Greens and the far-left Die Linke. Berlin’s mayor, Michael Müller, is a member of the SPD.
Tuesday’s decision by the senate, or city government, of Berlin comes at least in part in response to fierce voter pressure. Perhaps the most high-profile campaign of late comes in the form of a grassroots movement calling for the expropriation of Deutsche Wohnen’s portfolio in Berlin, where the company owns about 110,000 flats.
According to the Berlin Tenants’ Association, rents for vacant apartments rose 12 per cent in 2017 alone, reaching a record high of €10.15 per square metre
The law imposing Berlin’s rental freeze is supposed to enter force in 2020 but will apply retroactively to all rental agreements as of Tuesday.
The Berlin Tenants’ Association said it had received a “flood” of reports about rental increases in recent days, suggesting that property owners have tried to push through last-minute increases ahead of the new law taking effect.