Almost exactly a year ago, the Federal Constitutional Court ended a major experiment.

On April 15, 2021, the Karlsruhe judges ruled that the Berlin Senate's rent cap was unlawful.

Tenancy law is federal law, the Berlin Senate is not authorized to enact such a law.

The maximum amounts set by the red-red-green state government - including all surcharges, a maximum of 11.54 euros per square meter cold rent was allowed - were therefore no longer applicable.

Julia Loehr

Business correspondent in Berlin.

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Even after the introduction of the rent cap in February 2020, it became apparent that the number of rental apartments advertised on the relevant real estate portals fell significantly, and landlords apparently preferred to offer vacant apartments for sale or leave them empty.

A new analysis by the Munich Ifo Institute comes to the conclusion that the consequences of this development are still having an impact today.

After the introduction of the rent cap, the supply of rental apartments in Berlin fell by up to 60 percent "and will remain at this low level even after it has been abolished," say the economists after evaluating data from the online portal Immowelt.

No recovery in sight

The statement refers to apartments that were first ready for occupancy before 2014.

The Berlin rent cap applied to these.

In other large German cities, the number of rental advertisements for such apartments has hardly changed in recent years.

In Berlin, on the other hand, a downward trend began in 2017, which intensified with the announcement of the rent cap and has continued to this day.

It is conceivable "that landlords expect new attempts to introduce a rent cap in the future and therefore continue to sell vacant rental apartments as condominiums or use them themselves," write the study authors.

As far as advertised rents are concerned, there is a two-part picture: in the formerly regulated segment, prices fell during the rent freeze period.

They are now rising again, but according to the Ifo Institute they are not yet as high as would have been expected without the cap.

In the unregulated segment, i.e. in the apartments completed from 2014, the law had a price-driving effect, and even after abolition, prices rose above average compared to other cities.

Protection against unfair rental prices

Even if the Berlin cap is history - the topic of rent regulation is picking up speed again.

In February, the Federal Council voted to fight extortionate rents more vigorously and to increase the fines for landlords to up to 100,000 euros.

Tenants should therefore be able to invoke extortionate rents if the agreed rent exceeds the usual local rental costs by 20 percent and the supply of apartments on site is low.

However, the federal traffic light coalition – led by Justice Minister Marco Buschmann (FDP) – rejects the draft law.

The coalition agreement only provides that in tense markets the upper limit for rent increases should drop from 15 to 11 percent within a three-year period.

In addition, the rental price brake is to be extended until 2029.

The Federal Building Ministry is currently preparing a draft law on the controversial right of first refusal.

According to a ruling by the Federal Administrative Court, the cities can hardly do this anymore, but many would like to do so in order to push back private investors.

In Berlin, the plans go even further: After the majority of voters in September spoke out in favor of the expropriation of large housing companies, the SPD-led Senate set up a commission of experts at the end of March.

For a year, this is to examine whether and how nationalization is possible.

The Commission is headed by the former Federal Minister of Justice, Herta Däubler-Gmelin (SPD).