On Tuesday, the left-wing parliamentary group in the Bundestag presented a study on the possibilities of a nationwide rent cap. In the study, the authors, the Berlin urban sociologist Andrej Holm and the tenancy law attorney Benjamin Raabe, come to the conclusion that a rent cap would be constitutionally possible on the basis of federal law. According to them, the lid could also make a significant contribution to solving the housing crisis in many large and medium-sized German cities.
It is high time for that. Because an evaluation of the rent development in 42 large cities shows the drama of the situation. Existing rents there rose twice as much as the general price index between 2013 and 2018. In the case of new rentals, it was even five times as much. Although federal law provides for some instruments to limit rent increases, these have largely remained ineffective.
The “rent brake” adopted in 2015 stipulates that rents for new contracts may not exceed the respective rent index value by a maximum of 20 percent. But there are numerous exceptions, and generally grandfathering applies to already excessive rents. The rules for drawing up rent indexes also prove to be driving up rents, where not all existing rents are used to determine the local comparative rents, but only those that have been contractually agreed in the past six years.
Although there is the “usury paragraph” in the Economic Criminal Law, which classifies “inappropriately high fees” as an administrative offense for rents and a criminal offense when the comparative rent is exceeded (more than 50 percent), it is hardly applicable in practice. Because the affected tenant has to prove individually that the landlord has deliberately exploited an emergency, as there were no alternatives when looking for an apartment. In practice, this proof can hardly be provided in a court-proof manner.
The State of Berlin attempted to regulate rents comprehensively for both existing and new contracts last year. Core elements were staggered rent ceilings according to age class and equipment features and a temporary rent freeze with limited options for the allocation of modernizations. But 14 months after it came into force, the rent cap was overturned by the Federal Constitutional Court in April 2021. However, not because of its material content: Rather, the Karlsruhe judges decided that the State of Berlin had no legislative competence for this, since tenancy law was already comprehensively and conclusively regulated in federal laws.
The idea for a nationwide rent cap is therefore literally in the air. In the study, the authors outline the basics of a corresponding law that also takes into account the different living and income conditions in Germany. A distinction is made between countries or cities with a balanced housing market, with a tight housing market and housing emergency areas. The calculations for a rent cap should be based on “real average rents” for all existing tenancies.
While in areas with relaxed housing markets above all rent increases should be prevented by a corresponding reformulation of the “usury paragraph” with a cap of 20 percent, the authors propose in areas with strained housing markets to generally stop rent increases apart from compensating for inflation.
Significantly tougher interventions are planned for areas in need of housing. There it should be possible to completely freeze the rents for a limited period of time. In addition, the states are given the opportunity to set an “affordable rent” that should not exceed 30 percent of the monthly net median income of local households.
Criteria for determining a housing shortage are above-average rent increases in the past five years, above-average discrepancies between existing and asking rents and an average rental cost burden of over 30 percent of median income. According to the study, if two of these three criteria are met, a housing shortage should be identified. This would currently affect Berlin, Bielefeld, Frankfurt, Hamburg, Cologne, Munich and Stuttgart, among others.
Caren Lay, rent policy spokeswoman for the Left parliamentary group, assessed the study when it was presented as a “realpolitical, differentiated proposal” that was also “constitutionally watertight”. It is now the task of the new federal government to initiate a corresponding fundamental reform of tenancy law. In view of the realistically expected government coalitions, however, it can be assumed that this will probably not happen. This makes it all the more necessary for the tenant movement to continue to exert great political and social pressure.