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This Monday comes into force the most radical stage of a law that has never existed in the German property market: for many apartments in Berlin, the cost of housing has to be reduced if it has been too high so far. This is what the rent cap provides, probably the most important socio-political project of the state red-red-green coalition. Rents have only been frozen since February 23, but now begins phase two, which provides for large-scale rent cuts.
The Berlin Senate Department for Urban Development and Housing has so far assumed that around 340,000 apartments will be affected by this second stage of the rent cap. But a new study from research firm F + B shows that the law should apply to significantly more apartments. According to the current residential index of the analysis house, which is available to SPIEGEL, the rules on rent deduction should apply to 512,000 apartments. “That corresponds to about 37 percent of the total stock of relevant Berlin apartments in buildings with three or more apartments,” the analysis says.
2013 rental index level
So soon more tenants will probably receive a letter informing them of the rent reduction. A fixed rent is considered too high if it exceeds the upper limit defined by law by more than 20 percent. This upper limit depends on the year of construction of the house, as well as the equipment and the time of the last modernization.
To do this, the red-red-green Senate has presented a price table in which the apartments are staggered according to year of construction and equipment and are given a maximum rent. These prices roughly correspond to the level of the 2013 rental rate. For example, for Wilhelminian-style buildings from the years prior to 1918, which are often located in sought-after locations, 6.45 euros of net rent per square meter is allowed . For flats that were built between 1973 and 1990, only 6.04 euros. If the current rent is more than 20 percent higher, owners can only request the tabular value.
According to F + B analysts, landlords will earn almost 21 million euros less rent per month with this regulation. That would be an average of 40 euros per apartment. Calculated over a year, the owners lose 250 million euros.
Old-style renovated apartment tenants are likely to benefit in particular
Therefore, most of the rental reduction potential can be seen in the around 165,000 well-equipped older apartments built up to 1918. In this segment alone, rents could be a total of 6.8 million euros cheaper. In contrast, apartments in East and West Berlin from 1965 to 1990, which include many large and pre-fab housing developments, only have a depreciation potential of € 5.7 million. “We assume that renters in particular will benefit from high-quality renovated older apartments in good locations,” says Bernd Leutner, CEO of F + B.
If the Berlin rent cap is necessary and sensible, this has long been a political issue. One thing is clear: nationwide, the trend toward rent increases has recently weakened significantly even without such intervention. According to the F + B index, rents from new leases fell 0.9 percent in the third quarter of 2020 compared to the previous quarter. Compared to the same quarter of the previous year, they increased slightly by 0.1 percent. “On the national average, exorbitant rent increases are finally a thing of the past,” says Leutner. If state support measures had not been implemented in the spring in the wake of the corona pandemic, this likely would have led to even bigger drops in rents.
Unlike rents, home purchase prices continue to rise, although not as much as in previous years. These increased in price by 0.5 percent compared to the previous quarter and by as much as 8.6 percent year-on-year. The plus is significantly higher than condo prices, which have almost always risen significantly more over the past ten years. Now more single-family homes with gardens are becoming more expensive. “We are of the opinion that the corona pandemic has generated a further and apparently sustainable increase in demand here,” says Leutner.
The F + B-Wohn index measures the evolution of rents and prices on the German property market. According to the company’s own information, the basis of the index is supply data for more than 30 million properties throughout Germany.
