Rent cap lowered: Berlin limits rent increases to 15% over three years

Around 85% of Berliners live in rented apartments (as of 2010). For an estimated 1.2 million of these units, a new ceiling on rent increases now applies: instead of 20% over three years, only 15% up to the local reference rent is permitted.

What changes in practice

For an apartment with a base rent of 600 euros, the maximum increase over three years was previously 120 euros. Now it is 90 euros. That sounds like a small difference, but it adds up across a portfolio of several units. The regulation applies exclusively to existing tenancies. Different rules apply to new lettings.

Graduated rent contracts as a workaround

Critics of the reduction expect landlords to make greater use of graduated rent agreements (Staffelmietvertraege). In these contracts, rent increases are fixed at the time of signing, so the cap does not apply. A side effect: graduated rents feed into the calculation of Berlin's rent index (Mietspiegel) and can thus influence the general rent level. Whether the regulation actually has a dampening effect therefore depends on how the market responds.

Misuse prohibition in preparation

In parallel, the Senate is drafting a law against the misappropriation of residential space. According to the bill, using apartments as holiday lets is to be severely restricted. Estimates suggest there are up to 12,000 such units in Berlin, mainly in Mitte and Pankow. The draft provides for a two-year transitional period.

Boroughs are already acting

Some boroughs are not waiting for the state-level law. Friedrichshain-Kreuzberg already applies its own assessment criteria in social preservation areas (under Section 172 of the Building Code) to prevent the conversion of residential space into holiday apartments. Owners therefore need to monitor not just state-level policy but also borough-specific regulations.

The combination of the rent cap and the misuse prohibition shows the direction of Berlin's housing policy: more regulation of existing rents, less room for short-term letting. Market data on rent trends will show whether the measures achieve the intended effect.