Yesterday, a subtle but groundbreaking change swept through Berlin’s housing sector. From now on, Berlin landlords will only be able to increase rents to 10 per cent above local average rents, under what is being called a “rent ceiling”. This is the result of a new law passed in March, which will see these types of controls rolled out across Germany’s densely populated areas. Berlin is the first city to bring it into effect, and, as such, will act as a useful test case.
So how much change will the new regulations bring? In short: not much. For a start, like the rent controls proposed in Labour’s manifesto, this is a control on increases, not a flat-out cap on rents. This will stagger the pace of price rises, rather than preventing them altogether: if every landlord in an area increases their prices to 10 per cent above the local average, that average will obviously rise too.
And unlike Labour’s proposals, which would have offerend stability to current tenants through three year tenancies and a cap on in-tenancy rent rises, Germany’s caps seem designed to close the widening gulf between rents in longer term tenancies, and those in recently let properties. Landlords will no longer be able to extravagantly hike up rents when they re-let a home, which should go some way towards cooling prices overall.
At the same time, seeing as rents in Berlin increased by 9 per cent between 2013 and 2014, a ceiling of 10 per cent above the average seems a reasonable deal for landlords. On top of this, the caps won’t apply to new-build or totally renovated properties, so shouldn’t result in a dampening effect on housebuilding.
Overall, it seems a sensible step forward. Rent controls are controversial, and are notoriously hated by most economists. But in Berlin, as in other European cities, there’s a feeling that something must be done to stop the city gutting itself of all lower-income tenants.
As Reiner Wild, managing director of the Berlin Tenants’ Association, told The Guardian: “We don’t want a situation like in London or Paris. The reality in Paris or London is that people with low income have to live in the further-out districts of the city.” Hear hear.