Opponents of the Berlin rent cap consider the planned rent cap to be socialist devilry that only an investor-hostile government could come up with. But rent regulation is by no means a special case in Berlin. Rents are rising so sharply everywhere in the world's major cities that many people can no longer afford their homes. More and more city governments are realizing that rents cannot be left to the free market and are resorting to state rent caps. Thinking outside the box.
But even in Germany, there were state rent controls until the 1980s: From the "black circle" to the rent cap
Through the debate about the rent cap, the Swiss city of Geneva is haunted as a bogeyman. The daily newspaper "Die Welt" reported on the "most comprehensive rent cap in a free Western market economy", which has led to the decay of buildings: "On many houses in the Rhône city, the masonry is crumbling, the colors of several shutters have faded to a light gray."There are also complaints that tenants with old leases are no longer moving.
Geneva leads the way – rent caps also in the whole of Switzerland
Since 1996, Geneva has had a cantonal law that – similar to the Berlin rent cap – allows modernization only if it serves to save energy and the rent thereafter remains within a framework that meets "the prevailing needs of the population". Of course, landlords in Switzerland are also obliged to maintain the rented property – and thus also to repair any damage to the plaster.
The regulation, which is basically comparable to the rent cap, has been in effect throughout Switzerland since 1990: The amount of rent in current rental agreements is calculated according to the interest rate that has to be paid for mortgages. The landlord's net return may not exceed this reference rate by more than 0.5 percent. The rate is set quarterly for the whole of Switzerland. Falling interest rates therefore also lead to falling rents.
The fact that a tenant stays in his apartment, even if it no longer suits his needs, is due to the fact that when renting a new apartment, the rent can in principle be freely agreed upon. While it is true that the previous tenant's rent may not be exceeded by more than ten percent. However, enforcing this is not easy for tenants – similar to the German Mietpreisbremse – especially since there are exceptions here as well. However, there is no danger of tenants being tied down to unsuitable apartments with the Berlin rent cap. Fixed rent caps will apply to re-rentals. This could make it more attractive to change apartments and allow a larger number of tenants to move.
In Geneva, existing rents practically did not increase for more than 20 years. The fact that there is still a housing shortage there cannot be blamed on the cantonal law. In other cantons of western Switzerland and in Basel, the Geneva model has also found supporters.
New York: Rent increases of only 1.5 percent a year
Today, more and more governments are convinced that rents must be regulated, even in ur-capitalist countries like the USA. There, every fourth tenant pays more than half of his income for rent. In June 2019, the New York State Senate passed a consistent rent control measure. In around one million apartments in the city of New York, rents may now only be increased by 1.5 percent a year. This limit had been in place for some time, but was virtually ineffective due to numerous exemptions. Thus, this limit did not apply if the rental price of an apartment had already exceeded a certain price hurdle. If an apartment was empty in the meantime, the owner could demand 20 percent more rent than from the previous tenant. The door was thus opened to abuse. The result: from 2010 to 2017, rents in New York rose twice as fast as residents' incomes. The biggest loopholes are now closed.
USA: Rent restrictions also in
Miami, Boston, Orlando, Oregon and California
Similar rent restrictions also apply to individual cities in the states of New Jersey, Maryland and California. Florida and Massachusetts recently allowed cities with tight rental markets to regulate rents, including Miami, Orlando and Boston. In February 2019, Oregon became the first state to limit rent increases for its entire territory to seven percent a year plus inflation adjustments. Now California – the U.S. state with the highest rents and most homeless – is following suit, capping rent increases at five percent a year plus inflation adjustments for ten years on all of its roughly eight million rental apartments.
Portugal: Rent limits in exchange for tax relief
Since the 1. July 2019 there is also something like a rent cap in Portugal. For five years, the "Affordable Rent Program" applies there. In Lisbon, where rents have risen by 71 percent since 2013, rent ceilings now apply to the apartments in question, although they are still quite high: 600 euros a month for an apartment, 900 euros for a one-bedroom apartment, 1150 euros for two rooms, 1375 euros for three rooms, 1550 euros for four rooms and 1700 euros for five rooms. The protest of the landlords was then also rather weak – not only because of the height of the limits. In return, they benefit from tax breaks: Income tax on rental income is waived for them, and cities are supposed to give them discounts on property and real estate taxes. In addition, there are more favorable insurance conditions. What landlords lose as a result of the Portuguese rent cap is therefore ultimately largely offset by taxpayers.
6-year rent freeze" referendum in Bavaria
Inspired by the Berlin rent cap, the collection of signatures for the petition for a referendum "6 years rent freeze" started in Bavaria in October. The campaign was launched by the Munich Tenants' Association and is supported by 15 other local tenants' associations from Bavaria, the DGB trade unions, the SPD, Linke and Green parties, and several social welfare associations.
Required a rent freeze for six years in 162 cities and municipalities with a tight housing market. Existing rents may then no longer be raised. Also graduated and index rents are to be frozen. Landlords who previously charged moderate prices may continue to increase rents up to an amount equal to 80 percent of the local comparable rent. According to the bill, the maximum rent that may be demanded for re-rentals is the local comparative rent. The same applies to rent increases after modernization. new buildings should be exempt from the rent freeze law.
To apply for the referendum, an initial 25.000 signatures required. "We are very confident that we will gather significantly more signatures already in the first phase. Because Bavaria's tenants know that they have to stand together to improve the situation," says Beatrix Zurek, chairwoman of the Munich Tenants' Association.
If the Ministry of the Interior allows the referendum, ten percent of the Bavarian electorate must register at the town halls within 14 days. Once this hurdle of about one million signatures is cleared, the state parliament can adopt the bill or vote on it by referendum.
From the "black circle" to the rent cap
In the Federal Republic of Germany, there was – due to the housing shortage after the Second World War – from the beginning a nationwide rent control for old apartments. With the introduction of "white circles" it was gradually removed from 1960 onwards. In West Berlin, it still existed until 1988, without the free democratic basic order suffering or anyone seeing socialism approaching. The poor condition of many old buildings was not so much due to regulated rents, but mainly a result of speculation and targeted neglect. The old price regulation still has an effect today: The fact that Berlin's rent level is still lower than in most West German cities is also due to the former rent control. The upcoming Berlin rent cap is based on a similar legal foundation. Because the responsibility for housing has been with the states since 2006 with the federalism reform of the Basic Law and the housing and rent policy of the federal government is highly inadequate, the Senate is now taking the reins itself.
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ATTENTION:
The Federal Constitutional Court ruled on 15.4.2021 Berlin rent cap declared unconstitutional – with legal consequences for tenants.
What tenants need to know now
24 questions and answers on the reversal of the rent cap under rental law
1. There is no immediate termination option because tenants have complied with applicable law. However, there is an immediate repayment obligation for differential amounts (see 3.).
2. Mutual agreements without shadow rent, for example in new leases, are valid.
3. Where otherwise effective civil law agreements on rent levels existed, these are to be fulfilled within a reasonable period of time. This means that the retained rents are to be repaid due to the rent cap. The repayment is due with knowledge of the decision of the Federal Constitutional Court. A payment request from the landlord is desirable, but in many cases may not be necessary. Who can not afford the outstanding amounts immediately, should contact the landlord and if necessary. apply for assistance from the Senate ( https://mietendeckel.berlin.de).
4. In the case of shadow rental agreements after re-letting, the tenants' association urgently advises to seek advice.