Law & Politics
Regulation of Berlin's housing market
Berlin rent cap: Revised key points tie rent reductions to income
The red-red-green coalition has agreed on revised key points for the rent cap. Tenants will be able to apply for rent reductions if their rent exceeds 30 percent of household net income.
Peter Guthmann
After weeks of negotiations, Berlin's red-red-green coalition has agreed on a revised draft for the rent cap. Senator Lompscher's (Left Party) original proposal did not prevail. The compromise still carries considerable implications for owners and investors.
The 30 percent threshold as a new risk
The most important change: rent reductions are tied to household net income. Tenants will be able to apply for a reduction to the statutory ceiling if their rent exceeds 30 percent of their net income. In central locations such as Mitte, Friedrichshain-Kreuzberg or parts of Neukoelln, the housing cost ratio for a large share of households already sits above this threshold. For landlords in these neighborhoods, this creates hard-to-predict income losses.
Landlords will scrutinize salary documents
The rule will change how vacant apartments in Berlin are allocated. To avoid the risk of an immediate rent reduction, landlords will check applicants' creditworthiness even more closely. This could mean that applicants with lower or middle incomes face worse odds in popular inner-city areas. An effect that runs counter to the Senate's stated goals.
The key points of the draft
The draft proposal of 30 August 2019 includes the following provisions: rents are frozen retroactively to 18 June 2019. Rent ceilings by construction period range from 5.95 to 9.80 EUR per sqm. Surcharges apply for buildings with a maximum of two units (10%) and for modernizations (up to 1.40 EUR per sqm). From 2022, annual adjustments in line with inflation are to be possible. Modernization levies up to 1.00 EUR per sqm require notification; amounts above that need approval. A hardship clause is intended to protect landlords from sustained losses. The law is limited to five years.
For owners, the situation remains complex. Tying rent levels to tenant income introduces a variable that is hard to plan around. Modernizations become less economically attractive due to limited pass-through options. The overall market trajectory now depends heavily on the final form of the legislation.