The Federal Constitutional Court said that a policy to freeze rents in Berlin for the next five years to combat soaring living costs was unlawful in a ruling published on Thursday morning.
The capital’s “Mietendeckel” law or rent cap “violates the Basic Law and is thus ruled void”, the court in the southwestern city of Karlsruhe said in a blow to millions of tenants.
A total of 284 parliamentary members had filed the petition for a judicial review against the rent cap, questioning whether such a regulation could be implemented at a state level.
In addition, several private landlords also appealed to the Constitutional Court.
The tribunal ruled in favour of MPs from the centre-right Christian Democratic Union (CDU) and the pro-business Free Democrats, who are both in opposition in Berlin.
The court agreed with their argument that rent policy falls under federal not state jurisdiction.
The rent freeze, passed by Berlin’s legislature in January 2020, was a flagship policy of the local governing coalition of the centre-left Social Democrats, the Greens and the far-left Linke parties.
It is a blow to them ahead of September elections both in Berlin – its own city-state – and for a new federal parliament and successor to Chancellor Angela Merkel who is stepping down.
Once described as “poor, but sexy”, Berlin has seen its housing costs double over the last decade as employees lured by a strong job market moved into the city.
What effect did the rent cap have?
The law capped rents until 2025, after which any increases would have been limited to 1.3 percent per year in line with inflation.
According to the city’s department for urban development and housing, it affected more than 1.5 million apartments.
Exceptions included social housing and new apartments built since 2014.
Some particularly high rents were even temporarily lowered, pending the court ruling, with landlords who broke the rules facing fines of up to €500,000.
Those tenants will now generally be required to repay back rent. Several took to social media to express their disappointment at the ruling.
The rent cap in Berlin was ruled unconstitutional 🙁 https://t.co/YNKy9FyQl7
— nathan ma (@nthnashma) April 15, 2021
The rent cap faced fierce opposition from the property sector, which argued that the freeze discouraged developers from building in Berlin and ultimately worsened the capital’s housing crisis.
According to the property website Immowelt, Berliners spend an average of one-quarter of their income on housing costs.
Only 18.4 percent of the city’s roughly four million residents own their own property, one of the lowest rates in Europe.