Protest posters against speculation in a building on Karl Marx avenue in Berlin in 2018.Joachim Herrmann / Reuters
The city-state of Berlin has exceeded its powers in trying to put limits on the runaway increase in rents in the capital.
The German Constitutional Court has declared unconstitutional the so-called rent cap law that the Berlin government, a coalition made up of Social Democrats, Greens and the left, approved in 2019 and which came into effect just over a year ago.
A regional parliament does not have the power to regulate rent prices by law, concludes the court, whose decision was eagerly awaited by both landlords and tenants.
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The rental market in the German capital was practically paralyzed for months waiting for the Constitutional Court to pronounce.
Many owners chose to sell or not to put the flats affected by the regulations on the market, so the offer had been contracted.
The law, which does not affect new constructions (those prior to 2014), established a ceiling or cap on rents based on the year of construction of the building and the reforms or improvements that had been made to it.
This limit would be in force five years from the entry into force of the law.
The opposition voted against the rule, which immediately caused insecurity when it was known that the Constitutional Court was going to make a decision on it.
The Karlsruhe court has decided that the regulation is void from the moment it came into force, that is, the ruling has retroactive effect.
This means that tenants will have to pay their landlords the difference between the rent that they agreed to in the contract and the one that Berlin established as a maximum.
Throughout these months it has been common to see this type of notices in real estate portal ads: a flat is advertised at a certain price, but the owner warns that, under the rent cap law, he can only charge one lower amount.
The difference between one and the other amount, the advertisements warned, would be required of the tenant in the event that Justice annulled the regulations, as has finally happened.
Vonovia, one of the largest homeowners in Berlin, with more than 40,000 flats, announced this Thursday that it will not claim from tenants the difference between the agreed rents and those actually paid, despite the fact that the ruling allows it.
"We have decided not to require any additional rent from our tenants so as not to cause even more insecurity in these times," wrote Rolf Buch, the CEO of the company, on his Twitter account.
"We need a broad partnership to get more affordable housing," he added.
The shares of this company, and of the other large owner of rental apartments in Berlin, Deutsche Wohnung, rose after the Constitutional ruling was known.
The latter said in a statement that it will facilitate the payment of back rents.
"No tenant will lose their home because of this decision," he added.
. @ BVerfG zur Verfassungswidrigkeit des #Mietendeckel | s ist folgerichtig.
Wir haben uns dennoch entschieden, von unseren Mietern keine Miete nachzufordern, um sie in diesen Zeiten nicht zusätzlich zu verunsichern.
Wir brauchen ein breites Bündnis für mehr und bezahlbare Wohnungen.
https://t.co/n3GGh3nR1W
- Rolf Buch (@Rolf_Buch) April 15, 2021
The Länder or federal states can only legislate on access to housing if the federal government has not done so, recalls the court in its ruling.
Given that there is already federal legislation that has regulated rental prices, "there is no room for the legislative power of the States," he assures.
The Berlin regulation, therefore, is "void".
The federal regulation referred to by the Constitutional Court was approved in 2015 and is known as the rent brake law.
It is only applied in stressed areas, that is, with high demand and high prices.
The rule requires that new contracts can only raise the rent 10% above the average rent in the area.
Berlin's rent cap (known as the
Mietendeckel
, literally rent cap) officially went into effect on February 23, 2020, affecting 1.5 million homes, whose owners faced fines of up to half a million euros if they did not meet the conditions.
In the new contracts signed as of that date, the prices in force in June 2019 were taken as a reference, which would be frozen for five years.
It was planned to increase rents by 1.3% per year from 2022 to incorporate inflation.
The IFO economic institute published a study last February that assures that rents were reduced thanks to the regulations, but that the supply contracted.
The owners were putting fewer apartments on the market in a city where 85% of its inhabitants live in rent.
One of the main problems in the German capital is that the construction of new houses is not keeping pace with the arrival of new Berliners, which is estimated at about 40,000 each year.
Germany is the country of the European Union where a higher percentage of the population (48.9%) lives in flats or houses that they do not own, according to the European statistical office.
In addition to the capital, several cities have a high population density and high demand, which push prices up.
Between 2010 and 2018, rents in the seven largest German cities rose on average by more than 40%, according to a study by the consulting firm Empirica.
"We had opened new paths with the rental limit and we expected a different decision," he acknowledged
Sebastian Scheel, Berlin Government Senator (Councilor) for Urban Development and Housing.
“Social peace is in danger due to the increase in rents.
The goal of politics is not to sit idly by.
The last few months have shown that the rent cap is a suitable instrument for this.
Now it is the task of the federal government to approve an effective rental price law ”, he added.
Conservatives have always criticized the Berlin regulations.
Horst Seehofer (CSU), federal minister for construction, welcomed Karlsruhe's decision: "It created uncertainty in the housing markets, slowed down investment and did not create a single new apartment," he said.
