Berlin rent cap: Rents frozen from June 18, 2019 for five years

With the rent cap (Mietendeckel), Berlin's red-red-green coalition took housing policy in a new direction. On June 18, 2019, the Senate passed the framework for a state law that freezes rents for five years. Despite sharp criticism from the real estate industry, rents in Berlin may not be raised from that date onward.

The three pillars of the rent cap

The planned law rests on three rules:

1. Rent freeze: Existing rents are frozen at the level of June 18, 2019 for five years. Rent increases are not permitted during this period.
2. Rent ceilings on re-letting: When a tenant changes, the new rent may not exceed the previous rent, provided it falls below a ceiling yet to be defined.
3. Reduction of existing rents: Tenants can request that rents deemed "excessive" be lowered to a permissible ceiling.

The rules apply to roughly 1.5 million rental apartments in multi-family buildings constructed before 2014.

What changes for landlords

Previously, it was standard practice to adjust the rent to the local reference level when re-letting, which in dynamic boroughs like Mitte or Neukoelln led to increases. Going forward, re-lettings may charge no more than the last agreed cold rent. This reduces return expectations and makes it harder to refinance property loans. The option for tenants to request a reduction of existing rents creates additional uncertainty for long term planning.

Modernization: New rules

Modernization surcharges that raise the gross warm rent by more than 0.50 EUR/sqm per month must be reported to the Investitionsbank Berlin (IBB). Energy efficiency renovations require prior approval. Landlords must prove through an expert report that the rent increase is proportionate to the achieved savings in operating costs. Other modernizations, such as accessibility improvements, are only approved if they use public subsidies.

Exceptions and hardship rules

Exempt are new apartments completed from January 1, 2014 onward, and publicly subsidized housing. For landlords in financial distress, a hardship provision is planned. Applications must be filed with the IBB, and the shortfall must be documented.

Timeline and penalties

The law is scheduled for Senate approval on October 15, 2019 and is to take effect by early 2020. All provisions apply retroactively to June 18, 2019. Violations may be treated as administrative offenses with fines of up to 500,000 euros.

Market trends and the value of apartments in Berlin are directly affected by these rules. Property owners should review existing lease agreements and planned modernizations promptly.