In a blow to hopes that Berlin’s rent cap, or Mietendeckel, would be declared non-valid, Germany’s constitutional court dismissed a motion last week to suspend a new law that puts a cap on rents for apartments in Berlin, which can now take effect next month.
The ruling means the rent cap comes into force on 23rd November, forcing landlords to cut rents for more than 300,000 tenants. The decision by the court means that the legal uncertainty surrounding the Berlin housing market will continue for a while yet.
The constitutional court was asked to rule on the case after a Berlin district court found in March that the rent freeze law was unconstitutional. The court’s decision last week was in response to an emergency motion by a Berlin landlord of 24 apartment who had applied for an express judgement in advance of the court’s binding decision on the rent cap, expected in the first half of 2021 – COVID-19 permitting. The court decided that in the case of the plaintiff there was not sufficient evidence of “severe disadvantage of special weight”, that would merit suspending the law.
Berlin’s ruling Senate decided in January to freeze rents in the city of 3.6m inhabitants for five years, after waves of complaints from residents that the previously affordable city was pricing them out. There are some exceptions to the rent cap, with apartments built since 2014 and public housing being exempt, affecting about 1.5m rental apartments in the city.
The measures have been widely criticised in the real estate industry as being unconstitutional, with the conventional industry view being that the freeze will worsen Germany’s housing crisis by scaring off real estate investors others willing to build in urban centres.
Parliamentarians from the liberal FDP and conservative CDU parties are seeking to abolish the Berlin judgement altogether, and are petitioning against the legal right of the state of Berlin to decree such laws, or whether these are exclusively a matter for the federal government. The Berlin courts have issued several rulings on the constitutionality of the rent cap, which are themselves being called into question at the national level.
Since the introduction of the rent freeze over eight months ago, which could have forced landlords to reduce prices by as much as 40%, the evidence is mounting that it is increasingly hard to find an apartment to rent, with a system of “shadow rents” or secondary side contracts being demanded by landlords in the event that the legislation is ultimately overturned by the constitutional court, as many expect. A grey market has also sprung up, whereby prospective tenants are charged ludicrous prices such as €10,000 for a chair or €15,000 for an inbuilt cupboard as a condition for renting. Many have little choice but to pay up.
According to data from ImmoScout24, Germany’s leading online real estate platform, the number of homes available for rent in Berlin in September was down by 42% on a year earlier, while those affected by the new freeze – apartments built before 2014 – were down by 59%. Thomas Schroeter, managing director at ImmoScout24, confirmed that “there are often several hundred inquiries for each apartment, and ads are frequently taken down within a day.
”This is clearly not just pandemic-related, as all Germany’s big cities are seeing more rental activity than last year, except Berlin. What’s clearly happening is that spooked landlords are choosing to sell apartments as owner-occupied condominiums rather than renting them out at the enforced lower rental rates. ImmoScout’s figures show that in September the number of Berlin homes for sale was up 13% on last year, while the increase for those built before 2014 was 23%.
