Last year the Berlin state government agreed a controversial new rental cap law designed to curb the rocketing costs of housing.
It will mean around 1.5 million homes in the capital will have their rents frozen for five years and capped at €9.80 for Kaltmiete (cold rent, or costs before utilities) per square meter.
The draft law states that landlords cannot charge rents higher than what the previous tenant paid and, if their rent is above the limit set out in a rent table, they can even apply to have it lowered.
Existing rents also may not be more than 20 percent above this upper limit, or else tenants can demand a reduction.
The law on the rent cap (Mietendeckel) still has to be passed by Berlin's House of Representatives. That is likely to happen in the first quarter of this year. The law will then be applied retroactively from June 18th, 2019, which means that any recent rental increases may be deemed as not valid.
It should be noted that the regulation to reduce excessive rents will not take effect until nine months after the law is passed.
Meanwhile, landlords will be allowed to raise the rents in line with inflation – by around 1.3 percent each year from 2022.
- Berlin to freeze rent for five years: What you need to know
- Berlin rents rise above record €10 per square metre
According to the Berlin Senate's Urban Development department, some 340,000 Berlin households will likely be eligible to successfully apply for a reduction in rental costs as provided for in the rent cap, the Berliner Zeitung reported on Monday.
The Berlin Senate estimates that in the first two years after the introduction of the rent cap, around 20 percent of these tenants, i.e. 68,000 per year, will successfully apply for a rental cap. In the following years, 34,000 applications are expected.
How do tenants apply for a reduction?
In order to benefit, tenants have to take action themselves and apply for a reduction through the local government.
If the request is successful, tenants will have their rent reduced with effect from one month following the day of application.
So that means if a tenant submits an application in January 2021, the rent will be reduced in February 2021, provided they are eligible for the discount.
During the five-year term of the rent cap, Berlin's Urban Development department expects that tenants will be relieved by around €2.5 billion. Landlords will in turn lose income of about the same amount.
However, tax losses of around €421 million are also expected because landlords will have less income and profits will therefore be lower.
Since Berlin is entering uncharted legal territory with the rent cap and lawsuits against the regulation have been announced, there is still some uncertainty over whether the rental freeze will go ahead in its current form.
The real estate industry has slammed the move, saying it is “unconstitutional”.