The German Constitutional Court on Thursday overturned a municipal rent control law in Berlin that froze prices and required landlords to reduce the value of contracts.
The rule, in effect since February 2020, was ruled unconstitutional because German law states that rents must be regulated by the federal government.
The law, now overturned, determined a series of measures to try to contain the rise in house prices in the German capital, where 85% of the inhabitants live in rented accommodation. The package included a two-year lease freeze, followed by a limit on the percentage increase, which impacted 1.5 million contracts.
The rules also limited the value of rentals, based on criteria such as location, age and condition of the property. Landlords who billed more than what was allowed were forced to lower the amounts, as of November 2020. This measure has benefited 300,000 tenants.
About 6,000 people demonstrated in Berlin against the decision on Thursday.
Rescinding the rules raises concerns for tenants as landlords will be able to charge, retroactively, the amount of increases that have not been made. Deutsche Wohnen, one of Germany’s big rental companies, said it would charge for it, while another company, Vonovia, would waive it.
The two companies, which have thousands of units for rent in Berlin, celebrated the overturn of the law and saw their shares rise on Thursday. “The decision makes sense and the rent limit is not sufficient to solve the problems of the Berlin real estate market,” said Rolf Buch, director of Vonovia.
After the conviction, freeze supporters called on the federal government to create a federal tenancy law or allow local governments to do so. However, Peter Altmaier, Minister of the Economy, rejected the idea. He argues that the best way to ensure access to housing is to build more houses.
After the measure took effect, there was a sharp drop in the supply of rental properties in Berlin and an increase in the prices of houses that were not frozen. Thus, those who needed to move encountered difficulties.
According to data from the consultancy firm Gutmann, the volume of units available for rent fell by 77% in the comparison between October 2020 and the same month of 2019. The consultancy firm carried out the survey on the basis of advertisements on major websites and newspapers.
Over the same period, the average value of rents on new contracts rose from 11.10 euros to 12 euros per m² (increase of 8.1%), the freeze not having affected buildings constructed after 2014.
For years Berlin had lower rents than other European capitals, but prices skyrocketed as more people wanted to live there. The numbers have doubled since 2008, with an average of 40,000 people moving to the capital each year. However, the supply of housing has not kept up with demand. An estimated 200,000 homes are missing in the city.
Renting a 60 sqm apartment in Berlin would cost around 850 euros per month (R $ 5,700) at the end of 2020, which typically consumes a third of the city’s average family income.
Defender of the freeze, the mayor of Berlin, Michael Muller, believes that apartments should not be seen as an investment, like stocks or gold, but as social good, because people live there.
Muller, of the SPD (Social Democratic) party, has been in power since 2014. He has also invested in the purchase of private buildings, so that the city can rent them to Berliners at fairer prices.
Opposition members including Chancellor Angela Merkel’s party CDU have accused the mayor of harming the city as restrictions keep investors away. Some representatives of the left, in turn, criticized him for not having taken more severe measures, such as the expropriation of apartments from rental companies.