Real Estate

Germany’s highest court strikes down Berlin rent freeze

Germany’s constitutional court has struck down the city of Berlin’s controversial rent cap, after a year of legal battles between supporters of landlords and real estate companies, and grassroots campaigners fighting rising rents in the capital.

In its decision on Thursday, the country’s highest court declared the Berlin rental controls null and void, saying the federal government had already passed laws to regulate the rental market and no further action was needed by regional authorities.

“There is no room for the legislative power of the states, due to the blocking effect of federal law,” the court said in its decision.

Germany’s 2015 nationwide rent freeze was meant to control prices in sought-after residential areas. But last year, Berlin’s senate enforced its own rental caps in response to popular campaigns arguing the national law did not go far enough to tackle gentrification and soaring prices in Berlin. Before the pandemic, the city had become a haven for Brexit refugees, artists and aspiring tech entrepreneurs, its population growing by 40,000 a year. 

Real estate companies, the construction industry and conservative politicians responded with outrage, arguing the move could devastate Berlin’s investment climate, already plagued by excessive bureaucracy and planning delays.

The constitutional court effectively upheld a complaint against the rent cap brought by 280 Bundestag MPs from the centre-right CDU/CSU bloc and the pro-business Free Democratic party who came together to argue that the Berlin government had exceeded its powers in enacting the law, straying into an area that was the sole responsibility of the federal authorities.

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Shares rose in German property companies invested in Berlin, including Vonovia and Deutsche Wohnen (DW), Berlin’s biggest landlord and one of the main targets of those fighting rising rents in the capital.

When the Berlin regulation was enforced, many landlords had notified tenants they could be required to repay rent trimmed by the cap, should the court rule in their favour. But landlord Vonovia announced after the ruling that it would not request back rent.

Speaking to the German newspaper, Der Spiegel, Vonovia boss Rolf Boch said the verdict would not solve rising tensions within the city, or its housing crisis.

“It would be an illusion to believe that the decision will simply be accepted by politicians and initiatives and that everything will be turned back to the time before the rental cap was introduced, ” he said.

The cap had popular support in Berlin, particularly because of anger towards private developers such as DW, which gained a reputation for renovating buildings and then raising rents. The company argues its pricing was always within regulations.

Berlin tenant groups regularly accuse large real estate companies of not performing maintenance or fixing heating, leading to multiple complaints during this winter’s subfreezing temperatures.

Opponents of Berlin’s rental cap, however, argued the regulations would never have solved tenants’ problems, and could instead worsen the supply of rental units by discouraging investment and construction.

“Instead of populist symbolic politics, effective, realpolitik measures are needed to take pressure off the housing markets,” said Wolfgang Steiger, secretary-general of the CDU’s Economic Council. “What we need above all are faster building or type approval procedures . . . The influx into the metropolitan areas can be absorbed only by the construction of new apartments.”

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But the fight looks far from over in Berlin.

A movement of activists and residents is already pursuing a more radical step — a campaign called “Expropriate Deutsche Wohnen & Co”, which demands that Berlin “socialise” about 200,000 flats, most belonging to DW.

Supporters of the rental cap on Thursday saw a silver lining in the court’s move to block state legislation, arguing they could still fight against gentrification and soaring rents by taking their fight nationally.

“If the federal states cannot regulate it, we will address the federal government with all our strength and a nationwide one #Mietenstopp [rent cap],” the Berlin Tenants’ Association wrote on Twitter. “Fight for millions of tenant households in Germany that need security!”


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