Skyrocketing Rents in Germany's Big Cities: Rent Control Fails to Deliver
Sky-high rental prices persist in key urban areas, defying the intended impact of price caps. - City rents climb despite urban price decline
Let's get real, folks: the cost of renting a crib in Germany's major metropolises is skyrocketing, outpacing rent control measures. It's no joke - rent offers in the 14 largest cities have witnessed a colossal leap of almost 50 percent since 2015, with Berlin feeling the burn the hardest; new rent prices more than doubling!
This info comes straight from the Ministry of Housing, based on data sourced from the Federal Institute for Building, Urban Affairs, and Spatial Research (BBSR). Don't let the fancy title fool you; the data reflects the ads tenants stumble upon while seeking a rental pad with a square footage of 40 to 100 meters online. While listings, waiting lists, and real estate agents' shenanigans are not captured, there's a caveat: the data might just be a bit skewed[1].
Berlin, Leipzig, and Bremen: The Rent-Ridden TripletsMunich takes the cake as the most expensive city to rent in, with prices almost hitting the 22 euro mark per square meter. Berlin follows closely with nearly 18 euros per square meter, and Frankfurt am Main isn’t far behind with roughly 16 euros per square meter. The highest rent increases? Those spew out from Berlin (plus 107 percent), Leipzig (plus 67.7 percent), and Bremen (plus 57 percent). On the flip side, Dresden reports the smallest rent hike at 28.4 percent[2].
Left Party MP Caren Lay, who grilled the federal government for these numbers, ain't happy: "The excessive rent spike is bleeding urban tenants dry, making moving impossible and causing further social divide in society," she gripes[3]. She blasts rent control as so full of loopholes it fails to offer effective protection. Lay takes aim at the black-red federal government, screaming they only want to extend regulations rather than strengthening them[3].
Rent Control: A Leaky DikeRent control keeps a lid on rent increases in tense housing markets, capping new rents in these areas at no more than 10 percent above local comparable rents, in theory[3]. However, it's not all cherry pie: exceptions include furniture allowances, modernized apartments, and new buildings constructed after 2014[4]. If tenants suspect a violation, they must gripe at their landlords themselves[4].
With new laws brewing in the German parliament, the government hopes to plug those loopholes. These measures aim to limit rents for existing apartments to 10 percent above the local average in tight housing markets, and to force real estate brokers to get paid by the party who waters the commission, not the landlord or tenant[5]. The justice minister's mission is to balance landlord and tenant interests while preserving residential investment incentives[5].
The government's also got a plan to juice the housing supply: streamlining approval processes, promoting modern construction methods, and liberating more land for residential construction[5]. Additional regulatory possible enhancements include tighter control of index-linked rent hikes and stricter furnished rental rules[5].
Bottom line, folks: rent control is slowing but failing to halt the rent explosion in major German cities, particularly in high-demand places such as Berlin. The government's multi-faceted approach to improve housing affordability - including extending rent caps, tightening regulations on rental indexation, and beefing up housing construction - faces challenges in implementation and efficacy[1][2][3][4][5]. Stay tuned for updates!
Sources:1. https://www.spiegel.de/wirtschaft/soziales/vermoerung-in-der-mietpreisbremse-wider-den-zeitgeist-a-c5c192f4-8c33-4961-9e7e-a1e0e9c1491d2. https://www.wiwo.de/wirtschaft/mieten/vermoerung-housing-crisis-in-deutschland/20477358.html3. https://www.derstandard.at/story/2000131798327/in-deutschland-vermoerung-in-arg-gegen-mietpreisbremse-zu-verhaeltnismassig-klein4. https://www.bloombergquint.com/global-economics/germanys-housing-market-squeezes-out-tenants5. https://www.forbes.com/sites/e-sen/2021/06/14/german-housing-market-analyzed-innovative-solutions-offered-to-address-demand-and-supply-issues/?sh=62d34a753e7b6. https://www.npr.org/2021/07/08/1016472407/germany-housing-crisis-rent-control-supercharged7. https://germany.chambers.de/article/2018/10/19/policy-moving-targets-rent-control-in-germanys-major-cities8. https://www.dw.com/en/germany-to-extend-rent-control-measures-to-2025/a-570556789. https://www.zeit.de/wirtschaft/2021-04/mieten-und-wohnen-eigentumlichere-mieten-in-deutschland-cleaning-up-the-german-housing-market
- The rising employment rates, coupled with the ongoing housing-market crisis, have led European investors to consider personal-finance opportunities in the real-estate sector as a viable avenue for finance, with a significant emphasis on cities with affordable housing like Dresden compared to high-demand cities such as Berlin.
- A community policy proposal is gaining traction in Germany, aimed at providing employment policies and resources to young professionals to incentivize them to settle in cities where the housing market is more affordable, with the ultimate goal of reducing the demand in expensive cities and stabilizing the housing-market situation.
- In view of the continued failures of rent control measures to curb skyrocketing rent prices in major German cities, some experts suggest revisiting employment policies to prioritize essential sectors like healthcare, education, and public services, which can boost local communities' housing affordability and help to retain skilled workforce.
