Germany plans three-year rent freeze for tenants

Tim Wallace
Mon, 28 August 2023 

Aerial view of Berlin skyline with famous TV tower and Spree river

Olaf Scholz is considering imposing a three-year rent freeze on Germany’s landlords as his ruling Social Democratic party attempts to ease the strain of the cost of living crisis on tenants.

Landlords could be forced to repay rents deemed “usurious”, if the rate charged is more than 20pc above the typical local level, in areas with limited supplies of homes.

Rules already in place to limit rent rises will also be tightened, under the plans, as furnished apartments and homes let for temporary use are not always covered by the restrictions.

Verena Hubertz, a senior SDP politician, told the German national Bild am Sonntag: “We need a breather for tenants – we need a rent freeze for the next three years”.

The party’s parliamentarians are meeting on Monday to hammer out new policies to cut living costs, with rents on the agenda.

The measure is on the table “in view of the enormous rent increases in recent years and the drastically increasing ancillary and heating costs caused by the war,” Ms Hubertz said.

Of Germany’s 41 million households, almost half live in rented accommodation, according to the Organisation for Economic Co-Operation and Development (OECD).

Just over a fifth own their own home, the OECD found.

Official statistics show that the average tenant household spent almost 28pc of their income on rents last year.

The IFO Institute, an influential economic think tank, estimates that rents in Germany will rise by an average of 7.2pc per year over the next decade.

In 2020 a five-year rent freeze came into force in Berlin, locking most payments at their 2019 level and even reducing the monthly payments of tenants deemed to be overpaying for their accommodation.

But the Federal Constitutional Court, the highest court in the land, ultimately struck the measure down in 2021, ruling that the local authority did not have the power to impose the cap.

Economists typically reject rent controls on the basis that the policy undermines the supply and quality of rental properties available for tenants as landlords cut investment.

In the UK, Labour’s shadow housing secretary criticised rent control policies this summer.

Lisa Nandy said: “When house building is falling off a cliff and buy to let landlords are leaving the market, rent controls that cut rents for some, will almost certainly leave others homeless.”