Berlin caps the rents - does it work?

The Berlin tenants celebrate the decision that rents are to be capped for 5 years. The landlords are already preparing the first lawsuits. Is this now an emergency brake and does it help tenants keep their apartments, or does it rather scare off potential housing developers so that no more investments are made and the housing shortage worsens?

On the radio, you mostly hear only the accusing tenants who disparage and insult their landlords as sharks. Nobody says that construction costs and necessary investments have multiplied in recent years. If these tenants had to build, renovate, and pay for the apartments from their own money, where would the rent be then?

In the rent index, I test an example for Berlin and end up at 7 to 8.50€. In Leipzig, we are already higher than that. In Dresden, we once considered building apartments. But rents of around 8 euros would not even cover the costs in 20 years.

Just a few years ago, we demolished gigantic new blocks because of vacancy. Now the cheap apartments are missing. Is this all just an unfortunate coincidence of population growth and interest rate policy? Do you consider the Berlin decision to be right?

On the radio, you mostly hear only the complaining tenants who slander and insult their landlords as sharks. Nobody says that construction costs and necessary investments have multiplied in recent years.

Yes and no, that only applies to those who bought the apartment in recent years and then rented it out.

Then, of course, there are those who bought an apartment about 15 years ago for 1300 euros/m2 and were now swept away by the flood and could raise the rent from 5 euros back then to now 10 euros. Although the apartment was always calculated at only 5 euros cold rent. Of course, you take whatever you can... no one would do otherwise in a job either; heating engineers, for example, are currently in demand, and why shouldn’t one, as such a person, treat oneself to a very strong swig from the bottle at the latest when changing jobs? Or is there also a wage freeze so that construction prices remain affordable? After all, housing is a basic need?

A few years ago we were demolishing gigantic new buildings due to vacancy. Now the cheap apartments are missing. Is this all just an unfortunate coincidence of birth growth and interest rate policy?

Birth growth is the smallest effect in the misery. The numbers are minimal. The main factors are

a) the trend toward more single-person households and larger apartments

b) the influx of more than 3 million migrants from Eastern Europe and worldwide, most of whom can/want/are allowed to live economically only very conditionally on their own feet here (whatever). For most of them, the social welfare office pays the local customary rent, no matter how high it may now be due to increased demand from a) and b). In addition, this group is mainly concentrated in cities.

a) as well as non-migrated long-time residents can hardly compensate for the rent increases caused by b) anymore, because wages do not automatically rise with rents as they do at the welfare office.

In b) it does not matter, since the welfare office always pays higher rents. a), on the other hand, increasingly drops out as demanders.

At least interest rate policy leads to a relative construction boom, which can somewhat dampen the increased demand.

As far as the state of Berlin is concerned, the effect seems to be particularly large due to its popularity among b). Many districts have allegedly been so financially restricted by the burdens of rent subsidies that they are hardly able to act. A rent freeze is therefore essential for them, because otherwise savings would have to be made on other RRG favorite projects like hardly functioning e-buses or free daycares.

I believe that B is certainly a factor, but in the special case of Berlin, gentrification plays a bigger role. I have to honestly admit that I haven't been to Berlin for several years, but a large part of the hipsters from my graduating class (OK, hipsters didn't exist back then - but close enough) moved to Berlin as media/IT/startup people. They definitely have no problem with a €10 cold rent.

That the "greedy" landlords try to reach this level with this new clientele even in existing properties is understandable in my eyes.

That much as a supplement to s post. My current (still) landlord is from Berlin and has not raised the rent in the apartment for 6 years. I think one has to sharply distinguish between private landlords and the big corporations.

So you mean the rents in the cities are rising so exorbitantly because of the influx of 3 million migrants, all of whom also have their rent paid by the authorities? I would have my doubts about that. Especially whether those are the apartments that are in demand and missing on the market.

I don’t know how it is in Berlin, but here in DD there are still plenty of apartments for refugees. But these are not the ones families want. What is missing are the nicely located new buildings within a 5-minute walk to school, work, and shopping centers. However, building those costs more than 8 euros rent.

The problem in Berlin is certainly also the lack of housing. Supply and demand...

Investors are probably all the more deterred now, who would be foolish enough to buy an apartment in Berlin now and rent it out? That would likely exacerbate the problem of the missing apartments even more.

That won't help. I think the effect will be that every 5 years the rents will more or less automatically be raised by the maximum possible amount. For new buildings, the maximum possible rent will also be charged.

And honestly, I'm not such a philanthropist that I simply give tenants a few hundred euros a year. If an apartment could fetch 800 euros in rent, I certainly wouldn't charge only 650 euros. It's basically sad, but in the end, it's my money. Plus the huge problems of being able to reclaim your property if the rent isn't paid or if the tenant causes other problems. THAT is where, in my opinion, action needs to be taken.