Berlin’s rental cap has ‘more than halved the size of market’

Economic researchers have come to a negative conclusion about Berlin’s controversial rental cap law: while it has pushed down rents in the capital substantially, it has also caused the rental market to shrink by more than 50 percent.

Berlin’s rental cap has 'more than halved the size of market'
Berlin apartments. Photo: DPA

By analysing adverts in newspapers and online, the German Economic Institute (DIW) found that rents in Berlin dropped by roughly 11 percent after the rental cap was introduced on February 23rd last year.

While that meant that the Berlin city government’s stated aim of bringing rents back under control had been achieved, the analysis also laid bare the downside of the cap. The number of apartments on the letting market dropped by 57 percent.

“The supply shortage that comes with the rent cap is alarming,” co-author Konstantin Kholodilin said. “It makes it much harder for people who need to move, for example because they are new to Berlin, or are expanding their family, to find a place to live.”

SEE ALSO: Here’s how Berlin residents can find out if they’re paying too much rent

Berlin has been hit by an escalating housing crisis over the past decade, as the city’s population has grown by between 20,000 and 60,000 a year.

With young people in particular moving to the fashionable capital in droves, the stock of empty apartments has sunk from under 3 percent of the total in 2010 to less than one percent now, a fact that has driven up rents.

At the same time, the number of flats being offered through social housing has slipped down steadily to less than 5 percent of the total.

The skyrocketing rents moved Berlin’s left-wing government to introduce the country’s only rental cap, which came into force last February for new lets, and for all houses built pre-2014 in November. Over 94 percent of the total housing stock in Berlin is impacted by the rent cap.

But the city’s liberal and conservative opposition was furious about the law, saying that it would damage the savings of small time landlords, while eroding the incentive of private investors to build in the city.

Several legal complaints against the law are waiting to be considered by the Federal Constitutional Court.

Rising rents in commuter belt

The DIW report also found that the prices in Berlin’s commuter belt have shot up over the past year, as people looking for apartments in the capital have had to widen their search.

In Potsdam, which is well connected to Berlin by train, rental prices have increased by 12 percent in the same period.

“The rent cap only superficially achieves its goal and has some unpleasant side effects,” said Sofie Waltl, a researcher from the Vienna School of Economics, which collaborated on the project. “The shortage of supply in Berlin leads to rising rents in the well-connected surrounding areas, to which it is no longer possible to switch cheaply.” 

The study also found that landlords are using various tricks to get around the rental cap, with just a quarter of rental offers actually conforming to the new law.

The authors urged the capital city’s government to instead invest its efforts in increasing the overall housing stock in the city.

“Private developers should be seen as allies in the fight for affordable housing rather than deterred by rigorous measures,” said Kholodilin

The study found that the current rate of building, by which some 17,000 new apartments are put onto the market every year, barely covers new arrivals in the city, let along those currently trying to find living space.

Pointing out that number of planning approvals has stagnated since 2015, the authors concluded that the city needs to reduce red tape for building construction while increasing personnel in its building authorities so that applications can be assessed more efficiently.

Member comments

  1. As a resident of Manhattan I can only say that “rent stabilization” has been anything but a success here. Capping rents for city residents is undoubtedly a popular position both for tenants currently in residence and politicians looking for reelection. My own observations over the thirty years I’ve been a stabilized tenant is that the solution needs to be a true collaboration between building owners, developers, tenant representatives and Berlin city planners. It’s no surprise developers want to take advantage of strong housing demand, building owners want to increase the return on their holdings and tenants fear being priced out of their homes. If cooler heads and a semblance of humanity can prevail, a long term solution could be devised. None of the previously mentioned entities will be satisfied and each group will make a persuasive argument in their favor, but that’s what “compromise” is. The only “winner” will be the City of Berlin. Otherwise be prepared for an interminable mess that repeats itself every time there’s a local election, (I’m sure there are internet video’s of chaotic NYC Rent Stabilization Board meetings). Best of luck! I was fortunate to visit Berlin in 1999 and it was apparent to me then that it’s future as an international destination was a given.

  2. “The number of apartments on the letting market dropped by 57 percent” yeah… because there’s a freaking pandemic and no one can leave their homes! Who is going to move right now??

    Not even going to put someone’s name on the byline for this?? Really? A Friday, 17:00 publish time with no author?

    With sources coming from the DIW and the Vienna school – two institutions based on neo-liberal and conservative economic perspectives. Laughable.

  3. Like all quasi-socialist local government gestures, this only pushes the problem back awhile or pushes it somewhere else. Great if you´re living in the housing stock with a 5 year rent freeze, but grossly unfair if you aren´t. Fixing the problem correctly entails controlling the level of housing supply, de-incentivising the large conglomerats who buy up large percentages of stock and re organising the extent to which the Finanzamt taxes small scale property owners at the maximum quadrat metre possible, which propagates the problem of high and ever-increasing rents and adds unfair value to what remains the same bricks and mortar as elsewhere..

  4. This analysis smacks of propaganda funded by organizations against rent caps. New developments are not (to my knowledge) effected by this rent cap so the idea that this in any way effects new developers is wrong. About the only thing that the analysis got right is that red tape for new development must be reduced.

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REVEALED: The most commonly asked questions about Germans and Germany

Ever wondered what the world is asking about Germany and the Germans? We looked at Google’s most searched results to find out – and help clear some of these queries up.

Hasan Salihamidzic, the sports director of FC Bayern, arrives with his wife at Oktoberfest in full traditional dress. Photo: picture alliance/dpa |

According to popular searches, Germany is the go-to place for good coffee and bread (although only if you like the hard kind) and the place to avoid if what you’re looking for is good food, good internet connection and low taxes. Of course, this is subjective; some people will travel long stretches to get a fresh, hot pretzel or a juicy Bratwurst, while others will take a hard pass.

When it comes to the question on the bad Internet – there is some truth to this. German is known for being behind other rich nations when it comes to connectivity. And from personal experience, the internet connection can seem a little medieval. The incoming German coalition government has, however, vowed to improve internet connectivity as part of their plans to modernise the country.

There are also frequent questions on learning the German language, and people pointing out that it is hard and complicated. This is probably due to the long compound words and its extensive grammar rules, however, as both English and German are Germanic languages with similar words in common, it’s not impossible to learn as an English-speaker.

Here’s a look at some of those questions…

Why is German called Deutsch? Whereas ‘German’ comes from the Latin, ‘Deutsch’ instead derives itself from the Indo-European root “þeudō”, meaning “people”. This slowly became “Deutsch” as we know it today. It can be a bit confusing to English-speakers, who are right to think it sounds a little more like “Dutch”, however the two languages do have the same roots which may explain it.

And why is Germany so boring? Again, probably a generalisation, especially given that Germany has a landmass of over 350,000 km² with areas ranging from high rise, industrial cities to traditional old town villages and even mountain ranges, so you’re sure to find a place that doesn’t bore you to tears.

Perhaps it is a question that comes from the stereotype that Germans are obsessed with strict about rules, organised and analytical. Or that they have no sense of humour – all of these things being not the most exciting traits. 

Either way, from my experience I can confirm that, even though there is truth to German society enjoying order and rules, the vast majority of people are not boring, and I’m sure if you come to Germany you’ll meet many interesting, funny and exciting people. 

READ ALSO: 12 mistakes foreigners make when moving to Germany

When it comes to the German weather, most people assume a cold and cloudy climate, however this isn’t entirely true. While the autumn and winter, especially in the north, comes with grey skies and sub-zero temperatures, Germany can have some beautiful summers, with temperatures frequently rising above 30C in some places.

Unsurprisingly, the power and wealth of the German nation is mentioned – Germany is the largest economy in Europe after all, with a GDP of 3.8 trillion dollars. This could be due to strong industry sectors in the country, including vehicle constructions (I was a little surprised to find no questions posed on German cars), chemical and electrical industry and engineering. There are also many strong economic cities in Germany, most notably Munich, Frankfurt am Main and Hamburg.

READ ALSO: Eight unique words and phrases that tell us something about Germany

Smart and tall?

Why are Germans so tall? They are indeed taller than many other nations, with the average German measuring a good 172.87cm (or 5 feet 8.06 inches), however this may be a question better posed to the Dutch, who make up the tallest people in the world.

Why are Germans so smart? While this is again a generalisation – as individuals have different levels of intelligence in all countries – this question may stem from Germany’s free higher education system or their seemingly efficient work ethic. Plus there does seem to be some scientific research behind this question, with a study done in 2006 finding that Germans had the highest IQ in Europe.

So, while many of the questions posed about Germany and Germans on Google stem from stereotypes, we can confirm that some aren’t entirely made up. If you’re looking to debunk some frequently asked questions about France and the French, check out this article by our sister site HERE.