Lessons from Berlin Rent Control Revolution

Ideas and Issues
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berlin rent control, rent freeze, rent speculation

April 12, 2021

New Orleans               Likely this hasn’t been right at the forefront of your mind, even though we have talked about this before, but the great Berlin, Germany, rent control revolution has proceeded and picked up steam, so that we can start to determine lessons and outcomes to guide our own experience. You may not remember that in responding to widespread protests and tenant demands, the progressive-led Berlin city government introduced a five-year rent cap for apartments built before 2014. The cap went into effect in February 2020 and rents for the one-and-a-half-million apartments that fell under the 2014-rule were frozen at their 2019 levels. In November of 2020, as part of the package, any rents that were more than 20% over a list of caps, had to be reduced to under certain prices per square footage requirements by landlords. Any future leases would also have to be beneath the caps to be legal.   For long time tenant rights advocates and organizers, all of this seems almost too good to be true.

According to the Economist, the German Institute for Economic Research has established that “rents in the newly regulated market of flats built before 2014 have declined 11% compared with the still-unregulated market for newer buildings.” The political leaders of governing parties in Berlin are taking these results and promoting them now as national policies, which should also be interesting.

Maybe it’s not all sunny skies. Reportedly rents in nearby cities and suburbs of Berlin are rising faster than the national averages as landlords try to compensate for losses in the city.           Predictably, in this situation tenants are staying put and doing the happy dance, while landlords, not so much. Some argue that advertisements for available apartments have decreased and that some landlords have taken units off the market and some moms-and-pops are perhaps squatting their own flats. Having organized with ACORN in Italy where tenants won huge advantages when landlords weren’t paying taxes due, I’ll bet some of this has also gone to black-market wink-and-nod contracts, where a stated lease says one thing and the reality is a bit of something else, as landlords try in some cases to wait out the reform.

Of course, the measure has been challenged in the German constitutional courts and a decision is pending, but this is interesting as well in these pandemic times when evictions in many countries have been at least technically frozen, and rents may have gone uncollected.  If the tenants were to lose in court, presumably the landlords could try to collect any monies that they could argue they lost out on because of the city regulations. Facing reality, one of the city’s biggest landlords is “discussing dropping demands for repayments.” Another giant landlord with over 100,000 Berlin apartments claims it would try to collect, but swears to anyone willing to believe this that it would “find solutions” for tenants unable to settle the arrears. In the US and elsewhere, collecting will be equally hard and likely as fruitless.

Under any circumstances, Berlin is still worth watching as the sharp point in expanding tenant rights. There is still an effort trying to move a proposition to the ballot that would force the giant owners of more than 3000 apartments to sell them to the government. That gun to their head might also be reason for their liberality about back rent, but either way this is a world class fight that could be earth shaking for tenants everywhere.