What is the current situation for landlords regarding rent restrictions in Germany?

September 13, 2019

The housing situation in Germany’s major cities has changed significantly due to population growth and the resulting housing shortage. Despite the introduction of the “rent brake” in 2015, the desired effects have not been achieved. The Berlin Senate is planning new legislative changes, which are expected to be presented in October:

  • Five-year rent freeze: Rent prices for new leases will be capped at the level of the previous rent.
  • Rent cap adjustment: Adjusting the rent levels to the 2013 rent index, potentially leading to rent reductions.

Discussions about the effectiveness of these measures are intense. The table on our homepage shows that immigration is outpacing the completion of new housing.

Current Rent Controls

While we wait for the decision in October, here’s a summary of the “rent brake” in Berlin and other cities:

  • Lease agreements: Indefinite, can be terminated for personal use, demolition, or unprofitability.
  • Notice periods: 3 months (< 5 years of rental), 6 months (5–8 years of rental), 9 months (> 8 years of rental).
  • Rent increases: For new contracts, rents can be raised by a maximum of 10% above the average price in the “rent index.” Existing rents can be increased by a maximum of 15% within 3 years.
  • Modernization costs: Since January 2019, 8% of investment costs for modernization can be passed on to tenants annually, capped at €3/m² per month (€2/m² for lower rents).

Does the Rent Brake Work?

The “rent brake” has not achieved the desired effect. Landlords often circumvent the regulations. The tenant association is calling for stricter laws.

Exceptions and Loopholes

  • Previous rents: If the previous tenant paid more than 10% above the “rent index” rate, the brake does not apply.
  • Modernizations: The rent brake can be exceeded by an increase of 11% of the modernization costs.

Was the Rent Brake Necessary?

Although rents in Berlin are lower than in Paris or London, Berlin recorded the highest rent increase worldwide in 2018 at 20.5%. The measures for the rent brake are limited to five years. However, the tenant association is calling for its indefinite extension and the elimination of all exceptions. Skepticism about the implementation of the proposed changes remains, leaving the future of the Berlin real estate market uncertain.