Berlin Freezes Rents for Five Years

Strapped New York City tenants might want to start learning some German. The Berlin Senate voted June 18 to freeze rents in the city for the next five years.

The ban on rent increases will cover about 1.5 million apartments in Berlin, where about 85 percent of the city’s residents are tenants. It was originally scheduled to begin in January, but the Senate decided to make it immediate to prevent landlords from raising rents before it went into effect.

“With the new law we want to put a stop to the serious rent increase in recent years and calm the overheated rental market,” Katrin Lompscher, senator for urban development and housing, told the British newspaper The Independent.

The freeze does not cover new construction or publicly subsidized “social housing.”

Germany has a higher proportion of tenants than most European nations, with almost half its residents renters. Rents in Berlin went up by 7 percent in the last year, according to the housinganywhere. com comparison Website, with most of the increase coming in the last three months. The median rent per square meter increased by more than 50 percent from 2011 to 2018, according to IBB Wohnungsmarktbericht, Investitionsbank Berlin’s housing market report.

While Berlin rents are lower than those in New York, London, or Paris — they average about €1,100 a month ($1,230) — corporate investors such as Grand City Properties and Deutsche Wohnen have been buying up buildings, renovating them, and raising the rents.

Deutsche Wohnen, the third-largest listed property company in Europe, owns about 112,000 apartments in Berlin, more than two-thirds of its total residential portfolio. It says its strategy is “acquiring properties and achieving growth in dynamic metropolitan regions.” The company’s stock dropped by 14 percent after the rent freeze was proposed in early June, according to the London Financial Times.

“We don’t want to end up like London,” Finance Minister Olaf Scholz, a member of the center-left Social Democratic Party, told the Frankfurter Allgemeine Zeitung newspaper. The Social Democrats govern Berlin in a coalition with the Greens and the Die Linke (The Left) party, of which Lompscher is a member.

Last November, the national governing coalition of Chancellor Angela Merkel’s center-right Christian Democratic Union and the Social Democrats agreed to reduce the amount landlords can raise rents for renovations from 11 percent of the cost to 8 percent. “Modernizing out,” renovating apartments to the point where the current tenant can’t afford the new rent, is a “serious” problem in large urban areas, Minister of Justice Katarina Barley, a Social Democrat, told the Sweden-based English-language news site The Local.

Acting Social Democrat co-leader Thorsten Schaefer- Guembel said in mid-June that his party plans to discuss enacting nationwide rent controls with Merkel’s bloc. Merkel has said that building more housing would be the best way to solve the problem.

Others are advocating more militant approaches. In April, housing activists in Berlin began collecting signatures for a referendum on whether the city should expropriate apartments from landlords who own more than 3,000 units there, under the slogan “Expropriate Deutsche Wohnen — Fight Speculation.” That would affect almost 250,000 apartments. The German construction industry trade association told Bloomberg News that would cost $41 billion in compensation.

The activists need to collect 190,000 signatures by February to get the referendum on the city ballot.