Berlin’s planned five-year rent freeze might be popular among locals, but the city may have trouble navigating a legal minefield to protect the law when it takes effect in January.
That much was confirmed Saturday when newspaper Berliner Morgenpost dropped a bombshell by publishing emails from Germany’s interior ministry to the Berlin head of Angela Merkel’s CDU party. In those emails, German Interior Minister Horst Seehofer expressed his belief that the rent freeze is illegal, as it would “distort” national laws.
In a relatively inexpensive city whose housing sector is dominated by rental units—80 percent of residents rent their homes—the plan has found broad support. The law, approved in October, caps rent increases at 1.3 percent per year (to account for inflation) for all homes built before 2013, while owners of newer homes, including those recently built and buildings planned for the future, are able to raise rents as they see fit.
The minister’s objections paint the issue as a turf war between national and regional powers. The rent freeze won’t fly, Seehofer says, because it would mean the State of Berlin overstepping its jurisdiction under Germany’s constitution. Federal legislators make Germany’s real estate laws on a national level, and a decision confined to only the State of Berlin could risk distorting that national legislation.
The rent freeze, Seehofer’s October 31 email says, would unfairly ban landlords from factoring rising maintenance costs into the rates they charge tenants. What’s more, while rents for new contracts have been galloping higher in the city, not every Berlin landlord has raised their rents to the maximum level. This group would now be prevented from raising rents even though their tenants are now paying substantially below-market rates.
These objections are a problem for the State of Berlin. They aren’t necessarily a nail in the law’s coffin, however, because the national government doesn’t itself decide the law’s legality—and as a body dominated by the right-wing CDU, it tends by default to look askance at policies forged by Berlin’s ruling center-left coalition. Furthermore, as CityLab previously reported, these issues were not entirely unforeseen. Any ruling would be up to the courts if (or, more likely, when) landlords legally challenge the law.
Seehofer’s emails are, nonetheless, a warning sign that courts might rule in landlords’ favor, and will certainly heat up a debate over the law, against which the backlash is particularly fierce. This month, a developer withdrew from a project to build 900 new apartments on the edge of the city, citing the rent freeze. These apartments would not have been subject to the freeze, but the developer claims that rent freezes at its other properties would reduce the amount of cash it had for further investments, and thus make the development unviable. Sections of the media have also gone on the attack. A representative of the center-right party FDP, writing in the business publication Handelsblatt, recently damned the law as an example of “German envy culture,” motivated more by a vindictive attitude toward wealth than a desire to improve market conditions. Others have accused the city of trying to “rebuild the wall.”
That view is not going unchallenged. As an article in left-leaning newspaper Tageszeitung points out, the abuses the law seeks to remedy are real enough. It cites as an example the Swedish landlord company Akelius, which has relied on the legal loophole of “modernization” as a justification for hiking rents on its 14,000 Berlin apartments. These rent increases can happen even if the actual quality of the supposed modernizations is poor and does nothing to improve living conditions. Meanwhile, other sections of the business media are asking if, rather than being an example of Berlin radicalism, the city’s new laws might become a template for action across Germany.
The debate isn’t over, and it may just be heating up. For now, Berliners are left in a curious position. They can’t be certain that the rent freeze will genuinely make the city more livable. They also can’t be certain, at this point, that it will come into force at all.