The Mietpreisbremse becomes law – How German cities are reacting
Germany’s upper house, the Bundesrat, approved the introduction of the Mietpreisbremse, or rental cap, and an additional law – the Bestellerprinzip, or “he who orders, pays” - designed to alter the manner in which commission on real estate transactions is paid. Both new laws are now merely awaiting the signature of the nation’s president Joachim Gauck before coming into effect in (most likely) June this year.
The Mietpreisbremse is designed to cap the amount by which residential rents are permitted to rise in urban areas which are threatened by rent price overheating. The law allows a maximum of a 10% increase in rent on a new lease contract over an agreed rent table or index for the relevant neighbourhood. Germany’s federal states are empowered by the law to designate areas within their jurisdictions which fall into this category, initially for a five year period up to 31st December 2020. Newly-built apartments, whose first tenancy agreement was signed after 21st October 2014, are excluded from the new regulation, as are apartments that have been extensively modernised.
Justice Minister Heiko Maas of the SPD coalition partners in Berlin commented to the German Press Agency immediately after the Bundesrat’s ratification, “Housing cannot be allowed to become a luxury. We expect that the Mietpreisbremse will affect about 5 million apartments throughout Germany and benefit more than 400,000 tenants annually…The new measure is really important for normal earners, helping to ensure that rents don’t explode upwards any further. It will benefit people with not such high incomes, people with children who need a bigger apartment, without having to be driven out of their neighbourhood.”
Germany’s federal states are now working to identify which of their towns and cities, and within urban areas which specific neighborhoods, will be designated as falling under the protective measures. The pace of implementation differs from city to city, but the word coming in from around Germany suggests at the very least the following:
Munich: A spokeswoman from the Bavarian justice ministry said the state has been carrying out extensive statistical analysis of its counties and municipalities, “so that the sharp instrument of the Mietpreisbremse should only be used where it’s really necessary. Munich has the highest rents in Germany, running at about €15.77 per sqm per month for new leases. A recent new indexation of the city’s rents showed the highest rent increases in 12 years.
Berlin: The German capital plans to introduce the Mietpreisbremse across the entire city, “as soon as is legally possible”, according to the city’s development ministry. The Berlin Tenants Association reckons that the new law could dampen rent increases in two thirds of new lease agreements.
Hamburg: Mayor Olaf Scholz of the left-leaning SPD also plans to introduce the Mietpreisbremse across the entire city-state, although he is being faced by the threat of withdrawal from an important city house-building initiative of partners who normally build at least 6,000 housing units a year if he goes ahead with blanket coverage.
Cologne: The city is one of the leading proponents of the measure in North Rhine-Westphalia, with a very tight housing market and solid upward pressure on rents. Cologne is about mid-placed among bigger German cities, with average ‘cold’ rent of €10.27 per sqm per month. The city is still in the process of preparing its statistical study on its housing hot- and troublespots.
Frankfurt: Hessen’s government is a big supporter of the Mietpreisbremse, and is still preparing its statistical report on housing in its big cities of Frankfurt, Wiesbaden, Darmstadt, Hanau, Kassel, Giessen and others. Frankfurt, with average rents of €13.35 per sqm, is pressing the state government hard for speedy implementation.
Stuttgart: The capital of Baden Württemberg is one of the three most expensive of Germany’s largest cities with rents of €12.20 per sqm. Currently debating whether the city should qualify as a whole, or whether it needs to be broken down into affected regions.
Düsseldorf: Like Cologne, NRW’s capital city Düsseldorf has been pressing the state government for strong representation in the Germany’s most populous state’s deliberations. With rents at a similar level to Cologne (€10.26 per sqm) the housing pressure is strong, and NRW’s Minister for Construction Michael Groschek (SPD) said recently he wants early adoption of the law by this summer
Bremen: The city-state of Bremen’s Senate plans a rapid introduction of the law, but has given no concrete date, while the building and construction ministry is preparing a detailed geographic breakdown of the city’s neighbourhoods. Bremen has above average unemployment for western Germany, and relatively low rents at €7.21 per sqm, less than half the rent level in Munich.
Dortmund: Rents in Dortmund are fairly cheap at €6.52 per sqm and there is no immediate pressure on housing in most of the city’s neighbourhoods. Because of this the city is not planning to impose the Mietpreisbremse, although the Dortmund Tenants Association want the city to rethink its views, particularly in respect of housing in the more desirable southern districts of the city.
Essen: At an average rent of €6.25, Essen is the most affordable of Germany’s big cities, with comparatively plenty of housing available and a reasonable balance of quality neighbourhoods, hence no immediate plans to introduce the Mietpreisbremse into the city, according to a city spokesperson.