The German Constitutional Court, which is examining the constitutionality of the legislation that requires freezing the prices of housing rents in Berlin, has decided not to take precautionary measures. With the decision published today, the third chamber of the First Senate of the highest German court rejects a request for annulment of a provision of the law on the new regulation of rent restrictions of the city-state of Berlin, popularly referred to as’ coverage of rent », by a provisional order, which you have considered inadmissible. The applicants, owners who rent apartments in Berlin, had asked the Court that the violation of the regulations on certain information obligations and the maximum legal rent not be classified as an administrative offense at the moment, until the Constitutional decision is made public , under the Federal Constitutional Court Act itself, but the answer is that the admissibility of an urgent request against a law before its promulgation presupposes that the content of the law has been determined and that its promulgation is imminent.
Property owners must, therefore, comply with the regulations that have already entered into force under threat of fines and penalties. The Court reserves the terms within which it will announce its verdict on the constitutionality or not of these regulations, which has already caused, even before its entry into force, significant changes in the real estate market of the German capital. The number of homes for sale has experienced a “notable increase”, while the number offered for rent has decreased, as a reaction of the owners to the administrative decision to freeze leases for five years. According to ImmoScout24, the leading real estate platform in the country, the offer of housing with prices above the ceiling set by the new law has been continuously reduced since the beginning of 2019, when the proposed law was still under debate, in approximately one 18% and from the established date of entry into force, around an additional 10%. At the same time, the offer of unrented housing for sale increased from 40% as of July last year, as did the properties for sale with tenants, which made it 25%.
“For low incomes it is having a very pernicious effect,” confirms Helge, user of this portal, “who can afford to buy a property now has it easier, but those who like me have a basic income, and we already had difficulties to pay A rental in Berlin, now we can’t find an apartment. The only solution is to live outside the city, go in and out again every day ».
“On the basis of the data we have, it can be deduced that since July 2019 the owners are now moving from renting their homes to sale,” says Thomas Schroeter, manager of ImmoScout24, “many owners complain of uncertainty, that they do not know what will happen to the law in the future, and prefer not to take risks ».
The new law, which freezes leases for five years and also establishes a cap on the rental price of 9.80 euros per square meter for buildings ready to be inhabited before 2014. «This does not solve a problem that it is structural, ”adds Schoeter, who recalls that there are currently between 100,000 and 135,000 rental homes in Berlin.
What has also managed to freeze the new regulations is the interest of the construction companies. Between July and September 2019, 28% less work permits were granted than in the same period of the previous year. «Before we expected that in a few years supply and demand would balance, but now we know that this will not happen and the investment is withdrawn. Berlin, on the other hand, is a deficit city that does not have its own resources to inject into the necessary housing, so now everything is waiting for how the situation develops on its own ».
Around 95% of the rental homes offered between January 1, 2019 and January 23 last exceed the established limits of the new law by an average of 5.92 euros per square meter, which means that, given the refusal of the Constitutional Court, the owners may already be fined. The maximum price cap per square meter established by law depends on aspects such as the year of construction, area in which the house is located, equipment of the house and state of the last renovation. These conditions are in which the teams of lawyers currently work to justify, building by building, the price of rentals, thus trying to avoid fines. .