Rent freeze in Berlin ends calls for expropriation, but may spark disinvestment

City’s biggest landlord could face losses of 330M euros ($363M) over 5 years

Berlin, Germany (Credit: Getty Images, iStock)
Berlin, Germany (Credit: Getty Images, iStock)

Berlin’s rent freeze may spark disinvestment, according to the city’s largest landlord.

Deutsche Wohnen CFO Philip Grosse said in an interview with Bloomberg that the firm is holding off on construction in Berlin, and instead will look to other cities to make new investments. The company said earlier this month that limits on raising rents and potential mandated rent cuts put cash flow at risk. The damage done to its bottom line, the landlord calculated, could be to the tune of 330 million euros ($363 million) over five years.

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Relief may be on the way for the city’s landlords, however. German Chancellor Angela Merkel’s party, the Christian Democratic Union, has vowed to challenge the municipal measures in Germany’s constitutional court. But that can only happen after the legislation is in full effect, which won’t be until the first quarter of next year. In the meantime, said Grosse, the uncertainty will chill investment.

The rent freeze, according to Grosse, does have one advantage: calls for the government to take over big apartment owners, including Wohnen, have ceased. Now, only 29 percent of Berliners are in favor of a proposed referendum to expropriate landlords, according to a recent survey, while 71 percent backed a rent freeze in the same poll.

“It’s losing steam, and it’s not going to happen,” said Grosse, who attributed the loss of momentum to the other measures passed targeting landlords. “If there’s one good thing about the rent freeze, it’s that.” [Bloomberg] — Georgia Kromrei