Leasing brake systems to remain a long-term arrangement, extended until the end of 2029.
German Government Proposes Extending Rent Cap until 2029
Berlin - The German federal cabinet has initiated a draft to prolong the rent control measure, known as the "rent brake," until December 31, 2029. This move aims to protect tenants from significant rent increases, especially in cities with housing market tensions.
Justice Minister Stefanie Hubig of the SPD party emphasized the urgency of the matter, highlighting the need for affordable housing. The extension of the rent brake, which has been in effect since 2015, is part of the coalition agreement between Union and SPD.
Target Area: Tight Housing Markets
The rent brake applies only in areas designated by each state government as having a tight housing market. Upon new rental agreements, landlords may not charge more than 10% above the local average rent, as determined by rental indices. Exemptions include newly built apartments first rented out after October 2014, and apartments rented out again after major renovations.
Impact on Average Earners
The rent brake has reportedly moderated rental increases in tight markets, particularly in cases of strong annual increases exceeding 3.9%. Despite this, rental housing remains tense, especially in urban areas. High re-let rents pose a financial challenge for people with low income, as well as increasingly for average earners and families with children, causing displacement from established neighborhoods.
Calls for Adjustments and Improvements
The German Tenants' Association welcomed the extension of the rent brake, but regretted that remaining exceptions, such as the 2014 cutoff date, were not being eliminated. The President of the association, Lukas Siebenkotten, argues that apartments built over a decade ago are no longer considered new.
The House & Grund property owners' association criticized the extension, citing issues with encountering new apartments in tight housing markets. The association's president, Kai Warnecke, suggested support via housing benefits would be fairer.
Plans for Further Measures
Minister Hubig emphasized that the rent brake extension is a first step towards better tenant protection. Future measures include stricter controls on ancillary costs, more transparency in index rents, and stricter regulations on furnished apartments and automatic rent increases. The coalition agreement also promises tax relief for those who rent at affordable prices.
Hubig also mentioned plans to review and potentially adjust the rules for modernization rent increases and introduce fines for landlords who violate rent control laws. The aim is to protect tenants from sharp rent increases and provide greater clarity and fairness in the rental market.
- The extension of the rent brake in tight housing markets could have a significant impact on business, as landlords may face financial challenges due to the restriction on raising rents above a certain threshold.
- The proposed further measures by Minister Hubig, such as stricter controls on ancillary costs and more transparency in index rents, indicate a shift in politics towards improving general-news issues like affordable housing, which is of great concern for average earners and families with children who struggle with high re-let rents.
