What Germany is doing to keep rents down: Special report

Market economy or human right to live'. A few days before the Hesse state election, around 5000 people protested against high rents and a lack of housing. 

https://www.thelocal.de/20181022/changes-to-the-rent-price-brake-are-being-proposed-in-the-hope-of-slowing-down-germanys-rising-rents

The ‘rent price brake’ should guarantee affordable rents in Germany’s popular cities. However, it isn’t working properly and needs to be improved. How can tenants defend themselves in the future?

Tenants are opening letters from their landlords with growing anxiety. Rent increase? Modernization? Additional payment for running costs? Hundreds of thousands of tenants know this fear: the fear of soon being unable to afford to live in their home.

They also know that moving won’t make it any better - because rents are rising even faster on new contracts. Now even an average earner can struggle to find an affordable apartment, especially in big cities across Germany.

The ‘rent price brake’ is in place to try and fight against hefty rent increases. However, only three years after its introduction, the federal government is already working to improve it.  

What actually is the ‘rent price brake’?

The so-called Mietpreisbremse or ‘rent price brake’ was introduced in 2015 and is supposed to stop landlords in areas with strained housing markets from increasing rents by more than 10 percent than the local benchmark average. In June 2015, Berlin became the first German state to implement the new regulation.

There are, however times when a landlord is exempt from the regulations, such as in the case of a new tenant moving in after extensive modernization or if previous tenants already paid in excess of the local rent average. Newly constructed buildings are also exempt.

Why is the ‘rent price brake’ being tightened?

Well, because it simply isn’t working properly. Rents are continuing to rise throughout Germany; in 2017 the national average grew by 4.3 percent. In some cases the rise was even more than 9 percent, according to Bundesbank.

This is mainly because there is a shortage of hundreds of thousands of apartments. However, according to economic research, the ‘rent price brake’ has failed to slow down rising rents because many landlords simply ignore it and there are no high penalties if they do that.

What exactly does the federal government want to improve?

It needs to be easier for tenants to work out whether they are paying too much. In the future, if a landlord asks for an exemption from the ‘rent price brake’ in order to ask for more than the local rent plus 10 percent, they must inform the tenant in writing.

For example, a landlord is obliged to prove that the previous tenant paid this rent, or to explain what in the apartment has been modernized and at what cost.  If a landlord does not do this, the tenant is not required to pay the higher rent.

Does this apply everywhere in Germany?

No, the ‘rent price brake’ continues to apply only where the housing market is particularly competitive. In other areas, like in the countryside, rents have not been high for a long time so it’s not needed. Nevertheless, groups such as the Left party (Die Linke) is demanding that price brakes should apply everywhere.

Until now German states have introduced the scheme in 313 of Germany’s 11,000 towns and cities. These include large cities such as Berlin, Munich and Frankfurt and smaller cities such as Braunschweig and Jena, but also rich rural communities such as Emmendingen and Sylt, where property is in high demand.

'Step on the rental brake'. Protest against rising house prices in Hamburg, 2013. Photo: DPA

How does the brake apply to long-term tenants?

The rules only apply if someone new moves into an apartment. For existing rents, there are other rules: the landlord may raise the rent, but over a three year period this cannot be more than a 15 to 20 percent increase. Critics say this is still too much. For example, The Left party say there should be a maximum increase of 2 percent per year.

Many long-term tenants are pushed out by modernization - what is the federal government doing to fight this?

“Modernizing for profit is wrong,” says Justice Minister, Katarina Barley. In the future, tenants will be able to claim for damages if landlords drive them out with construction work and then lease the apartment out to them at a higher price. Such landlords risk a fine of up to €100,000. In general, rent may only increase by 3 euros per square meter every six years. In regions with a strained housing market, only 8 percent of modernization costs may be passed on to the tenants.

When will these changes apply?

If everything runs smoothly in parliament, the changes should come into force from January 1st next year. On Friday, the draft had its first reading in parliament and the federal council also proposed some improvements.

Does everyone think these changes are a good idea?

The ‘rent price brake’ was controversial from the beginning, and it remains so, even within the coalition. The CDU fears that it could be too complicated, especially for small landlords.

However, The SPD politician Barley openly says: “I do not want to conceal the fact that I can imagine more far-reaching measures”.

This is also the opinion of the Greens and the Left, who want to get rid of exemptions to the price brake and introduce sanctions for landlords who ignore it.

Above all however, these parties place an emphasis on the need for 'rent price brake' laws to be extended - currently, the regulations are due to expire as early as 2020.