The Real Deal National

Berlin backlash: Voter discontent leads to 5-year rent freeze

The move follows sharply rising property prices in Germany's capital
June 22, 2019 10:00AM

Demonstrators are seen in Berlin's Alexanderplatz protesting the city's rising rent prices in April 2019 (Credit: Getty Images)

Demonstrators march to Berlin’s Alexanderplatz protesting the city’s rising rent prices in April 2019 (Credit: Getty Images)

Lawmakers in Berlin have approved a five-year rent freeze, significant move that follows voter backlash over rising property prices.

The law will apply to an estimated 1.5 million apartments, and is likely to face legal challenges from property owners, the Financial Times reported. The law is supposed to start in 2020, but will apply retroactively to all rental agreements starting earlier this week.

Similar battles are playing out throughout the U.S. In New York, state lawmakers passed a new rent reform law last week, which the real estate industry is already describing as devastating. in Los Angeles are also trying to rein in the industry, especially after California failed to pass Proposition 10, which would have opened the door for rent control statewide.

The Berlin decision has sparked worry among German investors who have seen their shares take a hit, the Times reported. For example, shares in Deutsche Wohnen, a major landlord in Berlin, have dropped 14 percent in two weeks since the rent freeze plans started.

The rent freeze is the first attempt by a city government to cap rents in Germany, and it shows growing anger over the lack of affordability in a city that once touted its low cost of living. But rental prices throughout Berlin have more than doubled over the past decade.

The real estate industry has argued that the rent spikes are a result of the large-scale privatization of public housing recently. But others point to Berlin’s restrictive policies on construction. [FT] — Gregory Cornfield