Rent Control – Success Come Out, You Are Encircled
Three months after the introduction in Berlin we are giving an initial interim conclusion.
Noble flats in old buildings in Berlin Prenzlauer Berg, 80 square metres, silent area – sounds perfect? Mostly only until you have been told the price. Lately, net rents of 1,600 Euro and more was the fee that has been paid by tenants for their dream apartments in popular areas in Berlin. But this is not nearly how it used to be. Even in the past one and a half year quoted rents in Berlin have been increased by 0,3 percent in average every month. This is reflected in various metropolitan areas and cities of Germany, e. g. Munich, Stuttgart or Frankfurt. With the goal to react to these developments a law to curb rent increases has been passed in March 2015, which is generally known as rent control . According to this, rent fees determined in new contracts may only surmount the local reference rent by a maximum of 10 percent.
Rent Control In Numbers
The first state adopting the rent control on 1st
of June 2015 was Berlin. But how does it look like three and a half months
later? At first glance success lights are on green! For the first time since
2009 quoted rents (median) decreased with 3,1 percent to 8,53 Euro per square
metre in June. Also in July the positive trend continued: Immobilienscout24
recorded another small decrease to 8,46 Euro per square metre. Quite similar it
has been in Hamburg, where the rent control has been brought to use on 1st
of July. Here offered rents decreased with 3,44 percent in July.
Despite all that, experts are still not satisfied, because normally quoted rents
should have been decreasing even more during a gapless adoption. In
addition to that, the success that has been noted in Berlin and Hamburg was not
to be seen in all areas using the rent control. E. g. sample evaluations of
several cities in North Rhine-Westphalia have not yielded any indication of
possible effects in July.
No One Is Born A Master
So why is
it, that the rent control has not taken full effect yet? As an old saying goes:
No plaintiff, no judge. According to the BMV (tenant association in Berlin)
only few tenants examine whether they pay too much. On one side they don’t want
to damage their relationship to the landlord after winning the war on the most
popular apartments. On the other side the tenant doesn’t even have the ability
to judge the legitimacy of demanded rent fees, due to missing information about
local reference rents, maybe realised modernisations or the previous rent. At
this place, some demand a correction of the law in form of an information-duty
for the landlord. Another reason given by the BMV is that a
landlord is not necessarily liable to prosecution when violating the rent
control. After a tenants’ complaint the landlord only has to pay back the
demanded fee but not any penalty charges. Overall there are small gaps, which complicate
the realisation of the rent control.
In The Check Room As Well: The Principal Of Order
Along with the rent control the so-called principal of order has been passed in March 2015 and was brought to use on 1st
of June all throughout of Germany. Now it’s in place: Whoever orders a real
estate agent has to pay! What sounds quite good to the tenant at first, because
the brokerage is dropped which had to be paid in the past, now turns out to be
treacherous in reality. A company for data analyses, the IMMO INFO in Hamburg,
has recorded a decrease of the number of apartment adverts in June by 14
percent, which stands for about 2,000 rental objects. A possible
reason for this, stated by the Aigner Immobilien AG, is that real estate agents
no longer advertise real estate offers directly and now wait until they are
hired. If this trend continues in the future, an increasing
non-transparency of the German housing market and a related shortage of housing
offers are the result. Beyond that, an ad-hoc survey via the real estate
platform immowelt.de has shown that real estate agents are progressively adjusting
to the principal of order by obtaining the brokerage from the landlord.
According to estimations, already 66 percent of the landlords are taking care
of the brokerage. In 34 percent of the cases though, the landlords prefer
advertising their own rental objects, e. g. with a company-own renting platform . Remaining to be seen is, whether landlords allocate the incurring
brokerage to the rent in the future.
Indeed, initial effects on the rents can be seen three months after the realisation of the rent amendment, especially in the big cities Hamburg and Berlin, nevertheless, it remains to be seen how the rent control will affect the housing market in the future. Especially in the areas, where no changes in rent prices were to be noted so far, long-term studies will decide about success or failure. It is also not clear how the legislator will perform adjustments on existing regulations. But one thing is for sure: we will definitely keep you posted!