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The so-called rent cap has been in effect in Berlin for exactly one year.
In a legal process unprecedented in the Federal Republic of Germany, rents in the capital were initially frozen to the level of June 19, 2019.
In a second step last November, many landlords also had to lower their rent.
The law applies to around 1.4 million apartments, and the rent has been reduced in 365,000 of them, estimates the Berlin tenants' association.
While tenant representatives are happy about the relief, the real estate industry is storming against the rent cap.
Violations are punished with fines of up to 500,000 euros
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In an interim assessment, the Berlin Senate drew a positive conclusion.
Most landlords adhered to the law, said the Senator for Urban Development and Housing, Sebastian Scheel (Die Linke).
A total of around 4,300 violations were reported in the Senate and in the districts.
It is a prohibition law, as the Senate emphasizes again and again.
Anyone who violates it risks a fine of up to 500,000 euros.
“I can only warn against that,” says Scheel, “some landlords play with the tenants' ignorance and fear.
We will act consistently against this. "
In the federal capital, rents have risen particularly sharply in recent years.
Since 2010, real estate portals have roughly doubled rental prices for current apartment offers.
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Current tenancies have also become more and more expensive, especially after modernizations.
Average incomes, however, lag behind this price trend.
According to a study by the Immowelt portal, which, like WELT, belongs to Axel Springer SE, incomes are eight percent below the national average, while rents are 53 percent higher.
The Senate wants to give the tenants a "respite" with the law, as it is called.
From 2022, landlords can increase again, by a maximum of 1.3 percent annually.
Overall, the law applies until 2025, and will not be extended, Scheel emphasized on Monday.
It seems to have worked.
According to an analysis by the Immobilienscout24 internet portal, the offers for vacant apartments that fall under the rent cap have fallen from EUR 10.46 per square meter in January 2020 to EUR 9.64 in January 2021.
This corresponds to a decrease of 7.8 percent.
The CDU and FDP had filed a complaint with the Federal Constitutional Court
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The red-red-green government does not see the rent cap as a special route, but rather a blueprint for other large cities with high rents in Germany.
The Federal Constitutional Court is currently dealing with judicial review complaints and constitutional complaints against the law.
Among other things, the Bundestag factions of the CDU and FDP had complained against it.
They do not consider the Berlin state government to be responsible, because tenancy law is regulated at the federal level.
"We need legal clarity as soon as possible," said Scheel.
"The uncertainty must come to an end."
If Berlin prevails in Karlsruhe, which it is assuming, this could arouse interest in other cities in bringing their own lid laws on the way at state level.
"The rent brake has failed completely," said Scheel in relation to the nationwide regulation for new rental agreements.
This includes many exceptions and has been overturned by many courts.
Above all, however, tenants have to enforce the rent brake themselves through civil law, which is why many shy away from it.
"We need a serious debate about regulation in the housing market," said Scheel.
The Federal Constitutional Court is aiming for a decision in the second quarter of 2021, a spokesman confirmed to WELT.
"A decision on a decision date during this period is not connected with this," it said.
So the uncertainty could still linger.
For the time being, tenants do not have a handle against shadow rents
That is how long both landlords and tenants in Berlin are legally on shaky ground.
Many landlords see themselves right when they ask for so-called shadow rents when signing new contracts, i.e. in addition to the officially permitted rent, a written, significantly higher rent.
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This should apply retrospectively if Karlsruhe overturns the law.
Tenant representatives consider these shadow rents to be inadmissible, but tenants do not have a handle for the time being.
And as far as the rents that were cut in November are concerned, the Senate does not seem to be so sure of itself and is aggressively advising to put the difference aside so that it can be repaid if the worst comes to the worst.
The Berlin tenants' association sees other circumvention tricks.
Some would rent out furnished and charge a surcharge for the furniture - although the upper price limits apply to the entire rent including the furniture surcharge.
But some would simply not react at all, as the Berlin tenants' association observed.
"We estimate that so far a reduction has been carried out in more than 50 to 60 percent of the cases," says tenant association chairman Reiner Wild.
From the point of view of the Real Estate Association Germany (IVD), however, the past twelve months have been a "lost year" for the Berlin housing market.
The Senate is braking new construction and has ensured with the law that the rental housing supply declines.
In fact, Immobilienscout24 recorded significantly fewer rental apartment advertisements in Berlin.
"The rent cap is probably partly a victim of its own success," says Tenant Association boss Wild.
“Because, among other things, because of the significantly strengthened housing security in existing tenancies - no normal rent increase until the end of 2021, hardly any modernization-related rent increases - the willingness to move is decreasing, which means that fewer offers are available for those looking for accommodation,” is his interpretation.
The Association of Berlin-Brandenburg Housing Companies (BBU), in which state-owned housing associations, cooperatives and Deutsche Wohnen SE are also organized, names other negative side effects of the law.
The willingness to invest is declining and companies are putting less money into their real estate.
Where rents fall, the interest of the portfolio holders to modernize decreases, so association boss Maren Kern.
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"Regardless of whether in New York, San Francisco, Barcelona, London or Stockholm, it became evident everywhere that after such interventions hardly any investments were made in the quality of the holdings," said the Cologne Institute for Economic Research (IW) in an analysis.
"Not only energetic modernizations or old-age-friendly renovations are unlikely, but also normal repairs."
However, the Berlin Senate replies that according to the law, at least energetic modernizations are still possible - with the permission of the district and with a cost allocation of a maximum of one euro per square meter.
The new building does not seem to be affected for the time being
The reluctance to invest is not yet clearly reflected in the figures for the Berlin construction industry.
Incoming orders fell slightly in the past year, but sales increased again compared to the previous year.
The new building does not seem to be affected for the time being either.
The new building permits were in the first three quarters - more recent data are not available - at the level of the previous year.
When asked directly, project developers who invest in Berlin are rather unimpressed.
If there are new plots, they will also be built on, they say.
Cooperatives, on the other hand, are not good at talking about the lid because they already charge low rents.
If those are capped even further, the income will drop so much that new construction plans have to be postponed.
"Ultimately, the city will be left to decay"
In Berlin, the second stage of the controversial rent cap is in force.
This means that landlords have to reduce existing rents where they exceed the upper limits by more than 20 percent.
Kai Warnecke, President of the Haus & Grund owners' association, warns of a dangerous development.
Source: WELT / Carsten Hädler
Reluctance to invest and legal uncertainty are not the only negative side effects of the rent cap.
“Another problem is that not only households in need are supported, but that well-off households with good credit ratings in particular benefit from greater rent reductions in well-renovated apartments in sought-after locations,” writes market expert Anja Schuhmann, Regional Manager Berlin and Leipzig at real estate service provider JLL.
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And: "Households with poor credit ratings are still at a disadvantage when looking for an apartment, since landlords will continue to rent to prospective buyers with good credit ratings to avoid the risk of default."
In the event that Karlsruhe overturns the rent cap, there is no real plan B. “If the judgment turns against us against all expectations, we have to rethink”, said Senator Scheel.
“We are discussing the introduction of an indexed rent index.” And if tenants cannot pay rents demanded retrospectively, “the providers” would have to step in.
So probably the state.
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