Rent Control / Rent Brake in Germany, for example Berlin Part II Berlin, January 9th 2018
Let stakea look at the history: 1917: First rent regulation, at first for soldiers/sailors & their households, than across the country After second world/1956/1960/1987: Rent control was also adopted as government control of the housing economy. Rent increase was not allowed due to allies acts till 1956. After than, rents in private financed houses built after 1949 have been free. Rent increase in old houses was allowed up to 20% till 1960 and up to 15% more in 1960. Rent regulations for new and existing leases have been abolished since 1960 in several german cities and federal states in the private housing sector. Last city which lost a public defined rent was the western part of Berlin in 1987. 1971: Essentially for the German rent act was the law about protection against eviction in 1971. From this time it was no longer allowed to withdraw from leases in cause of rent increase and rent increase in existing tenancies has been limited to local comparison rents. With the exception of Munich and Hamburg (till 1974) and Berlin West (till 1987) rents in new leases have been free.
How does the system of local comparison rents (lcr) work Landlords are allowed to increase the rent in running leases up to the local comparative rent. The lcr is composed of rent increase and rents of new leases between last four years. Lcr s are most suitable represented in tabular overviews (Rent Index Mietspiegel). Landlords are at the same time not allowed to increase the rent than more as 15% (in tight housing markets if the federal state government has set an executive order law) or 20% (in all other housing markets) about the rent paid three years before (since 1982, firstly with a cap of 30% in 3 years), rent increase due to increase of operating costs or modernisation remains unconsidered.
Main issue of the system of local comparison rents (lcr) The lcr assures sufficient rents for proper management and landlords are allowed to realise profit. But: In dull or relaxed housing markets landslords abstain from investment (structural maintenance) in favour of the profit. The lcr assures, that tenants have secure tenancies and don thavetomoveout due to rent increase. But: In tight housing markets the tabular overview/rent Index is supplied also with the high rents of new leases. Due to tenant change 35 40% of lcr cases are from new leases. Rent increase of the lcr is delayed in time.
Constructional fault of lcr system Landlords have to substantiate the rent increase. Therefore the landlords have a few possibilities and they are not forced to use the rent index. In fact they could refer to five comparison rents from their own stock, or of an expert opinion. But if there is an rent index in the city, landlords are restricted with the rent increase to the top value of the margin. But normally, the real lcr is not the top value. Now tenants have to prove with the rent index, what the real lcr is und wether the rent increase is above this lcr or not. But the tenant associations know, only 5 to 10% of tenants prove their rent increase. The rest agree. Tenants have to agree to the rent increase because rent increase is an important amendment of the contract. If the tenants don t agree, they could be forced to the court. Without insurance they have a fincial risk, because judges prefer compromise settlements with costs for both contracting parties.
Berliner Mietspiegel 2017 (Rent Index Local comparison rents) Before 1919 adress Less than 40 qm 7,45 simple 5,44 10,00 8,01 middle 5,25 10,11 8,31** good 6,91 12,52 40 till 59 qm 6,51 Simple 4,81 9,22 6,61 middle 5,11 10,06 7,03 good 5,81 8,75 60 till 89 qm 90 qm and more simple middle good simple middle good Year of construction 6,00 4,40 8,62 6,78 4,75 10,27 7,32 5,81 10,00 5,72 4,22 8,41 6,39 4,38 10,18 7,25 5,44 10,00 1919 till 1949 6,45 5,60 7,17 7,37 6,82 8,40 7,04* 6,04 10,00 5,93 5,30 8,09 6,34 5,52 7,65 6,88 5,71 8,88 5,65 4,90 7,56 6,09 5,18 7,62 7,10 5,52 9,20 5,80 4,29 7,51 5,63 4,97 7,10 6,65 5,35 9,50 1950 till 1964 6,17 5,18 8,80 6,64 5,89 8,00 7,48 5,87 10,20 5,71 5,16 7,29 6,11 5,43 7,48 6,66 5,18 8.98 5,48 4,74 6,68 6,00 5,18 7,28 6,81 5,58 8,82 4,87** 4,29 6,60 6,46 5,77 8,03 8,26 6,77 9,61 1965 till 1972 6,58 5,78 7,74 6,57 5,71 8,36 8,83 7,70 9,84 5,75 5,13 7,01 5,72 5,39 7,20 7,39 6,17 9,00 5,22 4,76 6,30 5,49 5,05 6,59 6,90 6,09 8,59 5,29 4,80 6,14 5,53 4,91 7,50 8,05 6,99 8,54 1973 till 1990 (West) 7,68 5,33 8,15 8,08* 7,18 12,00 8,59* 6,93 10,11 6,77 5,80 8,43 7,39 6,65 7,97 8,00 7,30 9,12 6,12 5,08 7,59 7,50 6,16 8,76 8,24 7,07 9,69 6,49 5,39 8,05 7,48 5,17 8,80 8,83 7,60 10,49 1973 till 1990 (East) 6,81 6,13 7,63 6,77 6,40 7,94 8,04 6,93 10,11 5,61 5,30 6,67 5,83 5,37 6,75 6,84 6,11 8,29 5,07 4,72 5,71 5,11 4,68 5,78 6,00 5,37 7,00 4,70 4,24 5,60 5,11 4,76 5,60 5,63 5,24 6,92 Average value SenStadtUm 2017 1991 till 2002 7,43* 6,21 9,17 8,18 6,84 9,37 9,00 7,48 10,34 7,10 5,76 8,23 7,59 6,52 8,96 8,77 7,31 10,54 7,18 5,95 8,47 8,00 6,30 9,27 9,24 7,18 11,13 2003 till 2015 7,50* 7,50 9,51 14,19* 13,85 15,72 8,50 6,90 12,50 10,10 8,40 13,94 9,44 8,00 11,30 10,13 6,90 12,99 10,31 8,61 13,93 9,01 8,44 11,07 10,70 8,60 13,56 10,19 8,69 13,10 10,00 8,40 12,50
Development of local comparison rents Increas of rents approx. 4,5% annually 2017 6,39 /qm 2015 5,84 /qm 2013 5,54 /qm 2011 5,21 /qm
How to define the exact local comparison rent I The exact lcr is calculated up from the mean value till the the low value if the standard is lower than the average and till the top value if the standard of the flat is higher than the average. For calculating the correct lcr, the tenant must have some informations about the house, for example the construction year and the quality of the adress.
How to define the exact local comparison rent II There are lot of different kinds, calculating the exact lcr in rent indexes. The German government has only given some notes for compilation of rent indexes In Berlin youhavefivegroupsofmarks(bathroom, kitchen, flat, building, living environment). For example the rent could deviate one fifth up and down from the mean value for each group, depending whether good or bad marks predominate.
More Informations about Rent Indexes There are two kinds of rent indexes: Qualified rent index, based on approved scientific principles. For Rent values of this index, the assumption applies, that the values are correct and judges don`t need to order expert opinions. Red wine rent index: organisations of landlords and tenants negotiate the rent values. In juridical dispute, this rent index is only an estimation. Costs by 12.000 cases/rent values: 250.000 500.000
Requirements The cap for rent increase must be reduced to 2% annually or 6% in three years in tight housing markets Executive order law for compilation of Rent Indexes Limitation of substantiation from rent increase Landlords have to substantiate, why they deviate from the mean value
Some informations about housing market in Berlin: Population 3,5 million inhabitants (largest city in Germany) since 2011 the city has grown by 40,000 to 50,000 inhabitants anually Between 2012 and 2015 the city expandet bei 175,000 people. 84 % of the Berlin residents rent their homes 54 % single person households
Some informations about housing market in Berlin: Income situation Average household income: 1,600 monthly Housing costs without heating: about 28 % of the netincome 55 % of the Berlin households would be entitled to receive a social housing home 22,4 % poverty stricken households
Some informations about housing market in Berlin: Housing stock Berlin has a total of 1.89 million apartments o 302,000 condominiums (16%) o o 300,000 are owned by municipal housing companies, within 35,000 apartments in social houses 105.000 Social housing flats, within 35.000 owned by municipal housing companies
Thank You very much for Your attention.