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| Snakes and ladders for tenants as Berlin rent cap starts to bite | Snakes and ladders for tenants as Berlin rent cap starts to bite |
| (about 4 hours later) | |
| When Rahel Scheffel looked for a flat in Berlin with her boyfriend Zach earlier this year, the 26-year-old economics student suddenly recognised the perils of giving up accommodation she had lived in for five years. | When Rahel Scheffel looked for a flat in Berlin with her boyfriend Zach earlier this year, the 26-year-old economics student suddenly recognised the perils of giving up accommodation she had lived in for five years. |
| “I was living in a one-bed apartment, paying around €252 for 45 sq m.” (€5.60 per sq m). “We found a two-room apartment that some friends had lived in a few doors down, that was just a bit bigger, at 60 sq m, and although it was nothing luxurious, suddenly the rent soared to €11 per sq m [not including bills] – to €660. Effectively a 100% rental increase.” | |
| Had the couple waited a few months longer, they could have challenged the rent level, because their friends had paid just €9 per sq m for the flat. | Had the couple waited a few months longer, they could have challenged the rent level, because their friends had paid just €9 per sq m for the flat. |
| Related: Sky-high London rents prompt calls for new controls on landlords | Related: Sky-high London rents prompt calls for new controls on landlords |
| A rent control law passed by parliament in June aims to prevent landlords in the German capital from raising rents for new tenants to more than 10% above the local average. | A rent control law passed by parliament in June aims to prevent landlords in the German capital from raising rents for new tenants to more than 10% above the local average. |
| The legislation was introduced to put a cap on rents in areas with housing shortages and where landlords are inevitably enjoying raking it in. Rents in Berlin have risen on average by almost 53% in the past five years, and in some districts, like the sought-after one that Scheffel lives in, by 79%. | The legislation was introduced to put a cap on rents in areas with housing shortages and where landlords are inevitably enjoying raking it in. Rents in Berlin have risen on average by almost 53% in the past five years, and in some districts, like the sought-after one that Scheffel lives in, by 79%. |
| “The rent control is really important for Berlin because the difference between the rent paid between existing contracts and new contracts is so vast,” said Reiner Wild, the managing director of Berlin’s Tenants’ Association. He also points out that the city’s population is growing fast, increasing demand on the housing market. | “The rent control is really important for Berlin because the difference between the rent paid between existing contracts and new contracts is so vast,” said Reiner Wild, the managing director of Berlin’s Tenants’ Association. He also points out that the city’s population is growing fast, increasing demand on the housing market. |
| Rents remain low in Berlin compared with other capitals such as London or Rome, but supporters of the law say it is nevertheless vital to ensure the city remains affordable for lower-income residents. Gentrification in parts of inner-city Berlin has pushed many long-term residents to the edge of the city and also spoiled some of the characteristics that make Berlin so popular. | Rents remain low in Berlin compared with other capitals such as London or Rome, but supporters of the law say it is nevertheless vital to ensure the city remains affordable for lower-income residents. Gentrification in parts of inner-city Berlin has pushed many long-term residents to the edge of the city and also spoiled some of the characteristics that make Berlin so popular. |
| Related: Pitfalls of rent restraints: why Stockholm's model has failed many | Related: Pitfalls of rent restraints: why Stockholm's model has failed many |
| But critics point out flaws in the law, such as the fact that the burden is on a tenant to prove that their landlord has increased the rent by more than is allowed. If they challenge the increase before signing a contract, they are unlikely to be accepted as new tenants, so long is the list of potential renters in a city with a housing shortage. If they challenge it once they have moved in, as some have been advised to do, their only option is to threaten legal action, with all the stress and expense that that is likely to entail. | But critics point out flaws in the law, such as the fact that the burden is on a tenant to prove that their landlord has increased the rent by more than is allowed. If they challenge the increase before signing a contract, they are unlikely to be accepted as new tenants, so long is the list of potential renters in a city with a housing shortage. If they challenge it once they have moved in, as some have been advised to do, their only option is to threaten legal action, with all the stress and expense that that is likely to entail. |
| Even though she moved into her flat before the law was introduced, Scheffel still challenged her landlord. “His response was that I could move out, as there were ‘at least 20 other people I could find to move in by the end of the week’,” she said. | Even though she moved into her flat before the law was introduced, Scheffel still challenged her landlord. “His response was that I could move out, as there were ‘at least 20 other people I could find to move in by the end of the week’,” she said. |
| And even if a landlord is caught out, there are no penalties that can be levied. But Germany’s largest real estate website, ImmobilienScout24, says its figures show that the legislation has started to bite, reporting a 3% decrease in rents within a month of its introduction. | And even if a landlord is caught out, there are no penalties that can be levied. But Germany’s largest real estate website, ImmobilienScout24, says its figures show that the legislation has started to bite, reporting a 3% decrease in rents within a month of its introduction. |
| Marcus Cieleback, of real estate agent Patrizia Immobilien AG, is sceptical, calling the law a “result of political populism” and claiming it will only weaken the position of renters. | Marcus Cieleback, of real estate agent Patrizia Immobilien AG, is sceptical, calling the law a “result of political populism” and claiming it will only weaken the position of renters. |
| “You need to consider that 25 years ago Berlin was a non-existent market economy. It lost a generation of rental increases and salary increases due to the Berlin Wall and its aftermath. In 2014, politicians saw that the rents had increased suddenly by 20-30% from 2013, and insisted they had to be capped, but in fact the rent increases were only catching up to normal levels. | “You need to consider that 25 years ago Berlin was a non-existent market economy. It lost a generation of rental increases and salary increases due to the Berlin Wall and its aftermath. In 2014, politicians saw that the rents had increased suddenly by 20-30% from 2013, and insisted they had to be capped, but in fact the rent increases were only catching up to normal levels. |
| Related: New York's rent controls: 'essential for the future of the city' | Related: New York's rent controls: 'essential for the future of the city' |
| “Ultimately, the rent cap will result in a lack of proper investment by landlords in the property. It will boost the building of luxury apartments [where higher yields can be made] and discourage the building of normal standard housing [relatively expensive due to energy regulation], which will not help the housing shortage,” he said. | “Ultimately, the rent cap will result in a lack of proper investment by landlords in the property. It will boost the building of luxury apartments [where higher yields can be made] and discourage the building of normal standard housing [relatively expensive due to energy regulation], which will not help the housing shortage,” he said. |
| Others say the rent controls have also caused rent rises in hitherto less desirable districts as landlords have taken the advantage of being allowed to justify a 10% increase where they might previously have increased it by less. | Others say the rent controls have also caused rent rises in hitherto less desirable districts as landlords have taken the advantage of being allowed to justify a 10% increase where they might previously have increased it by less. |
| Despite the conflicting views on the success of the rent cap in Berlin, it has since been copied by Hamburg, and no fewer than 166 towns and cities in the states of Bavaria and North Rhine-Westphalia. Other states are to follow by the end of the year. | Despite the conflicting views on the success of the rent cap in Berlin, it has since been copied by Hamburg, and no fewer than 166 towns and cities in the states of Bavaria and North Rhine-Westphalia. Other states are to follow by the end of the year. |