Berlin’s radical new rent laws will destroy €5.5B in real estate investment: landlords

Berliners will see their rents capped for five years after a doubling over the last decade

Feb.February 02, 2020 09:00 AM
Berlin (Credit: Wikipedia)

Berlin (Credit: Wikipedia)

Berlin’s legislature passed a package of rent regulations on Thursday that will cap revenues for landlords and freeze rents for five years.

A spokesperson for Chancellor Angela Merkel’s Christian Democratic Union party plans to challenge the measure in constitutional court “as soon as possible,” according to Bloomberg. That can happen after the measure takes effect, which could be as soon as the end of February.

Berlin is one of the cheaper cities in Europe and rents are comparable to cities like Turin, Italy and Porto, Portugal, according to Deloitte. But rents have doubled over the last decade and the measure’s backers intend it to stave off further speculation.

“We don’t want Berlin to become a copy of overpriced cities like London or Paris, where many people can no longer afford an apartment,” said Katrin Lompscher, the head of urban development and housing for the Left Party, who introduced the measure.

The measure includes regulations adopted in the U.S. over the last year or so, but go farther in some respects. The five-year rent freeze will apply to any units built through 2013 and a cap will be determined by a property’s age plus 1.3 percent inflation.
Landlords must reduce rents so they exceed the cap by no more than 20 percent within nine months, according to Bloomberg. Increases will be allowed for property improvements and violations carry a fine of up to half a million euros.

BBU, the biggest landlord association of Berlin, whose members own 43 percent of homes in the city, said that their collective loss of rental income would reach €1.1 billion in five years, according to the Wall Street Journal. That would result in a €5.5 billion drop in investment over the same period, the group claims. “As a result of this law, 12,000 new apartments that would otherwise be built, will not be built. Our legal team strongly believes that the law will be overturned by the courts,” said the spokesperson, David Eberhart.

Shares of some of the city’s larger landlords fell after the vote, including those of Deutsche Wohnen, Vonovia SE, and Adler Real Estate AG. [Bloomberg] — Dennis Lynch

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