According to the DIW study, the rental price brake has had a moderate effect

Many Berlin old building tenants save a few euros, but hardly anyone can afford a new apartment. The rent brake plays a role in both. Does the rule do what it should?

Average earners can no longer afford new apartments.

According to a study, the rental price brake has moderated the rental explosion slightly in the three years since its introduction. Accordingly, the increase in rents is slowing down where the rent brake applies. However, the effect is only in the order of 2 to 4 percent, as study author Claus Michelsen from the German Institute for Economic Research (DIW) said. Without the rent brake, existing rents in popular residential areas would be 2 to 4 percent higher.

At the same time, according to DIW, the price brake meant that rents for new buildings that are excluded from the regulation rose more sharply than before. According to another study, average earners can hardly afford to rent new apartments. In many cities, they would have to pay more than 27 percent of their net income for the rent excluding bills, according to the data analysis carried out by real estate specialist Empirica on behalf of the ARD magazine “Panorama”. A value above 27 percent is considered problematic by experts, because then there is only relatively little money left for the rest of life.

DIW expert Michelsen said that at the same time it is now also more worthwhile to invest in new buildings. In municipalities with a rental price limit, positive effects on the number of new apartments approved for construction can be seen.

Effectiveness remains controversial

The rent brake was introduced in June 2015 to curb the rapidly rising rents in popular residential areas. Its core is that the rent for new rentals must not be more than 10 percent above the so-called local comparative rent. There are exceptions for new buildings, renovations or if the rent of the previous tenant was already higher. Tenants’ associations criticize that many landlords do not adhere to the regulation. Local associations also doubt the effect.

Justice Minister Katarina Barley (SPD), on the other hand, was satisfied with the effect. At the same time, however, she emphasized that the rent brake alone could not cure the market. “The situation in the cities is still tense,” she said. Therefore, the rent brake does not just have to be extended beyond 2020. In addition, however, more new buildings and more social housing are needed. In the spring, Barley wants to submit a draft to extend the price brake.

In addition, the quality of the rent index is to be improved through statutory minimum requirements. Rent indexes show the local comparative rent, so they established “equality of arms” between landlords and tenants, said Barley.

Since the price brake was introduced, dozens of tenants – especially in Berlin – have taken their landlords to court. According to the Ministry of Justice, they were at least partially successful in around three out of four proceedings. After an evaluation of all the proceedings published by the courts, the plaintiffs were able to reduce their rent by an average of 167 euros, in extreme cases even by 650 euros.