The cost of renting a home in Germany has risen considerably.
A recent analysis by real estate firm ImmoScout24 calculated that asking rents have increased by as much as 30 percent in the past two years in major German cities, with new tenants being hit hardest.
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Although the situation is more stable for households with older rental contracts, which are generally far lower, there is rough news on the horizon as it appears that the Mietpreisbremse - rental price brake - won't be extended past 2025 as previously planned.
Why wouldn't the rent brake be extended?
The issue comes down to the fall of the 'traffic light' coalition government. After the Free Democrats crashed out of the coalition in November, the Social Democrats and Greens are in a minority government without a majority to pass legislation.
So although the coalition already agreed to extend the rent controls until 2029, the draft law hasn't been approved in the Bundestag. And time is running out, with Chancellor Olaf Scholz (SPD) set to call a vote of confidence next week, paving the way for the dissolution of parliament on December 27th.
New elections are scheduled to be held on February 23rd, 2025. During the transition period, the government is in 'caretaker mode' and only basic obligations and matters already rubber-stamped are facilitated while no new big decisions can be made.
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The rent brake came into effect in 2015 under the CDU-led 'grand coalition' with the SPD and aims to prevent landlords in strained housing markets like Berlin, Düsseldorf, Hamburg, Munich, Nuremberg and Stuttgart from setting rents at ‘unreasonable’ rates.
According to the law, asking rents cannot be more than 10 percent above the average rent for comparable units in the same neighbourhood, although there are a number of exceptions such as for new-builds and furnished flats. The legally permissible rent is calculated using a 'Mietspiegel' or rent index.
What happens if the rent brake falls away?
It would give landlords and real estate companies more freedom to raise rents at a higher rate - and tenants would have no legal right to challenge it.
Lars von Lackum, CEO of the LEG real estate group, recently told German newspaper Handelsblatt that he wants to raise rents - and would utilise the freedom that comes with not sticking to the rent brake if it falls away.
"Anyone who knows the laws of the market knows that a scarce commodity will become more expensive," he told Handelsblatt in an interview.
With 166,000 flats mainly in North Rhine-Westphalia, Düsseldorf-based LEG is one of the largest landlords in Germany.
Von Lackum already said that rents would be increased as far as permitted in 2024. In its latest quarterly report, the Group expects an increase of just under four percent by the end of the year.
If the rent brake is lifted, hikes of five percent or more could be expected, von Lackum said.
However, even if the rent freeze remains in place, von Lackum said the firm still plans to increase rents next year.
Tenants across the country could see similar situations, although of course it depends on their rental contract.
Vonovia, the country's largest landlord, has said it wants to increase its rents by around four percent.
For the millions of people who live in large companies' properties, housing will likely get more expensive.
Housing companies and landlords say rents have been rising more due to several factors, including inflation, increasing staff costs and the tight housing market.
Despite rent increases, LEG said it generated less profit in the first three quarters of 2024 than in the previous year.
LEG boss von Lackum said, however, that his company tries to keep rents down at a reasonable rate. LEG lets out flats for an average of less than €7 per square metre, said the CEO.
Rents are generally much higher in other parts of Germany. The ImmoScout study found that in Munich, the most expensive city in Germany, asking rents for new builds have shot up to as much as €25.08 per square metre for an 80 square metre apartment, which equates to about €2006.40 per month - before service charges, or Nebenkosten, and bills.
What would ease the situation?
Rent controls are helpful, but have their limits in their current form.
The main issue is that the current law doesn’t mean that landlords cannot charge tenants too much rent. The onus falls on tenants to figure out if they are being overcharged and challenge it which is often a burdensome and costly process that doesn't guarantee a win.
There are no real consequences for landlords who break it, beyond having to reduce rents to the legal rate and reimburse tenants for the excess that was collected.
READ ALSO: Why are Berlin rents soaring by 20 percent when there's a rent brake?
Another major problem is that not enough affordable housing is being built.
Last week a housing summit held in Berlin highlighted many of the ongoing issues.
The German Tenants' Association (DMB) slammed politicians for not fulfilling promises, such as building 400,000 new homes a year.
The stock of affordable housing is at an "all-time low" of one million homes, and the number of building permits has also sunk to historically low levels, head of the DMB Lukas Siebenkotten said.
Property firms have said that the most effective means of combating rising rents is new construction.
READ ALSO: German government under pressure to ease housing crisis before elections
Siebenkotten has urged politicians to take action - including to extend the rent brake as soon as possible.
"We firmly believe that the rent brake is the only effective instrument for limiting (the cost of) new contract rents," he said.
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