Berlin’s radical rent freeze gets government go-ahead

Jill Petzinger
Jill Petzinger, Germany Correspondent, Yahoo Finance UK
A placard reading "City for all" is pictured with the TV tower in the background during a protest against rising rents and a housing shortage in Berlin, Germany April 6, 2019. REUTERS/Fabrizio Bensch

Once feted for its cheap accommodation, the German capital Berlin has been battling skyrocketing rental prices.

After months of debate, the city’s coalition government came to an agreement on Friday evening to tackle rapidly rising rents in Berlin. The Berlin Senate is expected to sign off tomorrow on a deal to freeze rents for the next five years, beginning from 2020.

Apartments in the city cost an average of over €11 per square metre, which is pricing locals out of the city’s central districts. Soaring prices coupled with a lack of new housing being built has brought the situation to a head. This year has seen numerous demonstrations, with people demanding the city government take steps to cap rent prices as well as rein in big property owners like Deutsche Wohnen, which owns over 100,000 flats in the city, by expropriating its apartments.

Shares in private property companies were down on Monday morning on the news. Deutsche Wohnen, which is the city’s largest private landlord, saw its shares drop by as much as 4.5%.

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Under the new legislation, landlords will be permitted to increase rents annually by an inflation-linked 1.3%, or by small pre-agreed amounts if they renovate the apartment. It will apply to around 1.5 million apartments built before 2014. To counter landlords rushing to raise rents before next year, the new law will be retroactively backdated to 18 June 2019.

Berlin rents are a long way off being as expensive as the likes New York or London, it is not even the most expensive city in Germany to rent a place — that would be Munich and Hamburg. However, rents in the city have risen faster than anywhere else in Germany in the past decade.

Germany is still a nation of renters. A survey from the Federal Office of Statistics found that in 2018 some 58% of Germans were renting their homes, which makes it the lowest rate of home ownership in the European Union. In Berlin, some 85% of residents rent their places.