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The German government’s abrupt reversal on expanding rent controls to newer residential stock has been met with relief—but little gratitude—from the property sector. The new Justice Minister Stefanie Hubig’s decision to abandon plans to include buildings completed between 2014 and 2019 in the scope of the Mietpreisbremse, or rent brake, marks a tactical retreat in the face of fierce industry and coalition resistance. Yet the episode has deepened investor scepticism and underscored the volatile political climate surrounding housing policy in Germany’s capital.
Originally intended as a centre-piece of the coalition’s 100-day housing agenda, the revised rent brake law will now go to cabinet without the controversial extension. The 2014 cut-off point for exempting new-builds from rent controls will remain unchanged—for now. The draft legislation still extends the brake until 2029, with the SPD hoping to reintroduce the 2019 cut-off date during the parliamentary process. Hubig conceded she had been forced to back down: “My wish is that the coalition factions discuss this again,” she said in a statement.
The proposal to retroactively cap rents in buildings completed between 2014 and 2019 had sparked alarm across the real estate sector. For many, it signalled a collapse of the legal and regulatory predictability on which investment strategies depend. Tim Schomberg, CEO of Kingstone Real Estate, called it “a change to the rules after the game has started.” Lars von Lackum, CEO of LEG Immobilien, warned that “the inclusion of new buildings constructed before 2019 exacerbates the situation and will significantly increase the concerns of those willing to build new homes about further regulation.”
Those warnings appear to have landed. The CDU/CSU’s refusal to support the expanded cut-off date effectively forced the SPD to shelve the clause in order to avoid legislative gridlock. Even so, the temporary climbdown has not erased the damage. “We priced those assets based on their exemption from the brake. This changes everything,” said Thomas Wirtz, managing director of Industria Wohnen, which recently acquired a portfolio of post-2014 units from Patrizia.
Legal risks persist, despite policy retreat
Legal experts were quick to highlight the constitutional risks of retroactive rent regulation. The Federal Constitutional Court upheld the rent brake in 2019 only as a transitional measure, and with explicit caveats. Axel Gedaschko, head of the GdW housing association, described the proposed expansion as crossing a legal line. Even with the current draft rolled back, future attempts to alter the exemption period are likely to invite constitutional scrutiny—especially if introduced by amendment during the Bundestag process.
To pre-empt these concerns, the Bundesrat has proposed requiring states to justify any local application of the brake in designated tight housing markets. But the broader message to institutional capital is clear: the rules remain open to reinterpretation at short notice.
The fallout was felt acutely at last week’s InvestmentExpo in Berlin, where industry leaders and policymakers clashed over the government’s priorities. Michael Kießling (CSU), housing policy spokesperson in the Bundestag, admitted that while the rent brake extension was “unavoidable,” legal uncertainties around other critical tools—such as Gebäudetyp E and Section 246e of the Building Code—continue to stall reform. These measures, originally designed to cut planning costs and speed up project approvals, are languishing in legal limbo.
Annett Jura, head of housing policy at the Ministry of Construction, tried to reassure investors that Building Type E was ready for implementation, citing groundwork laid by the previous coalition. But even she conceded that broader amendments to the building code would be delayed and would require coordination with the Ministry of Justice.
ZIA CEO Aygül Özkan, moderating the panel, did not sugar-coat the situation: “The extension of the rent brake is going to happen. Hopes that it can be stopped are unrealistic.” While emergency tools like Section 246e might offer some relief, she warned, the overall regulatory burden continues to grow.
Investor confidence hit just as momentum was returning
In the broader macro context, keynote speakers at the event painted a bleak picture. Economist Professor Lars P. Feld warned that repeated policy interventions were eroding Germany’s appeal to international investors. Dr Christoph Heusgen, former Chairman of the Munich Security Conference, added that geopolitical risks and internal fragmentation were further weakening confidence in German growth prospects.
The real estate sector had been cautiously watching for signs that the newly installed CDU-SPD coalition would tackle the housing crisis with decisive supply-side reforms. Instead, its early legislative moves have confirmed industry fears: tenant protections, however politically expedient, are once again being prioritised over long-term structural solutions.
The removal of the 2019 cut-off from the rent brake bill may calm one storm. But the fact that it was proposed at all—and may still re-emerge—has left lasting damage. Trust, once lost, is hard to restore. For investors eyeing the German residential market, the message from Berlin remains troubling: the ground underfoot is anything but firm.