Update April 2021The Federal Constitutional Court has ruled: The rent cap introduced by the Berlin Senate in February 2020 is unconstitutional and therefore void, shadow rents are permissible.
Would the planned rent cap also apply to furnished apartments?
Yes, the rent cap would also apply to furnished flats that are rented short-term. However, it is unclear whether or not furniture surcharges can be demanded, as was originally planned. For the time being, the drafting of the proposed law has not dealt in any detail with furnished rentals. It is therefore unclear whether a furniture surcharge would still apply.
Initial occupancy of accommodation + equipment
|Rent limit p/m2|
|Up to 1918 with central heating + bathroom||6,45 €|
|Up to 1918 with central heating / bathroom||5,00 €|
|Until 1918 without central heating / bathroom||3,92 €|
|1919 to 1949 with central heating + bathroom||6,27 €|
|1919 to 1949 with central heating / bathroom||5,22 €|
|1919 to 1949 with central heating + bathroom||4,59 €|
|1950 to 1964 with central heating + bathroom||6,08 €|
|1950 to 1964 with central heating / bathroom||5,62 €|
|1965 to 1972 with central heating + bathroom||5,95 €|
|1973 to 1990 with central heating + bathroom||6,04 €|
|1991 to 2002 with central heating + bathroom||8,13 €|
|2003 to 2013 with central heating + bathroom||9,80 €|
Will the rent cap really happen?
All reasonable parties with Berlin's best interests at heart in the long-term are not in favour of the rent cap. Even housing cooperatives are against it - pointing out that this will lead to further problems; no reserves can be formed, no modernization carried out, and no new housing can be created. The rent cap ultimately harms those who it claims to help, and means that in future the tenant's level of income will completely determine their chance for accommodation.
It is also unclear how the state of Berlin intends to hire enough new employees by January 2020 to ensure that the rent cap is observed. Recent years have proven that a shortage of personnel has been the reason why very few building permits have been issued, so it is doubtful that Berlin will succeed in meeting this quota.
In addition, a large number of lawsuits against the rent cap are to be expected, heralding in a time of legal uncertainty and chaos.
Is the rent cap in accordance with the constitution?
Housing policy is a matter for the federal states. Therefore, the land of Berlin can theoretically make this decision. Constitutional lawyers point out, however, that the planned Berlin rent cap interferes too much with federal legislation, and is therefore unconstitutional.
Is the rent cap an opportunity for landlords of furnished apartments?
Should the rent cap become law, landlords would be stuck between a rock and a hard place in terms of finding short-term tenants for furnished apartments. It is a common claim that the rent cap is an opportunity for landlords to infiltrate the rent index, without considering that furnished letting offers many people newly arriving in Berlin or between apartments more flexibility.
What should landlords of furnished apartments do now?
The best move for landlords to make currently is - nothing. If as a landlord, you can hold on, it's best to wait and see if the rent cover will be implemented in its current form. If this happens, then, as always, the small print will be decisive. It will only be apparent for short-term rental agencies and landlords once the exact wording is available, where possibilities present themselves, and how they can prepare themselves for the new conditions.
What are the alternatives for landlords who rent out furnished apartments?
For landlords who have rented out furnished apartments up to now and who would like to remain flexible, unlimited renting is not an alternative - and neither is the sale of the apartment. The prices for standard rented flats will in all probability fall, because hardly anyone will buy a flat as a long-term investment. Speculators and foreign investors will profit from the fall in prices, and buy up an increased apartments in Berlin - which is exactly what needs to be prevented. The argument that prices will continue to rise because many tenants cannot find a rented apartment, and therefore buy, is distracting from an even more threatening reality. If the rent cap comes, the income of the tenant will play an even more decisive role in the search for a flat, and those who earn a better living will always find one. If renting is cheaper than buying, buying a home, even for one's own use, will become less attractive. Exceptions to this would only be high-quality new buildings suitable for families, which will most likely continue to be built and sold. However, these are not the typical apartments that are rented for a certain period of time.
For landlords who do not need the money urgently, it is more advisable not to sell, but to hold out for the five years and hope that the rent cap will be abandoned earlier.
Does the rental cover mean the end for short-term renting?
This can't be assumed to be the case yet. Berlin needs temporary apartments - especially as the employees of start-ups who move to the city from abroad are the target group of temporary housing. These tenants want to start work quickly and easily, without having to worry about furniture, internet, electricity, etc., and they need to stay flexible. Those that require furnished apartments on time usually earn well-above average, register their main residence in Berlin and pay taxes. This means that the capital profits economically from these new Berliners, especially since companies cannot find enough skilled employees on the job market.
Why does the rent cap also harm tenants who want to rent for a limited period of time?
It is a valid fear that the rent cap will reduce the number of apartments on the market, as it is more than likely that an increased number of landlords of temporary flats will decide to use their own flat occasionally, but leave it empty for the rest of the year. Without a sufficient supply of furnished apartments available for short-term renting, most new Berliners, especially those from abroad who do not speak German, would only have the alternative of a hotel or serviced apartment - both of which are infinitely more expensive options. In addition, the German rental market is known to openly discriminate against tenants from other EU countries. EU citizens have the right to freedom of movement and free choice of job - but in Germany have little chance of getting an apartment without a Schufa credit score, proof of three pay slips, and a certificate of freedom from rent debts. Therefore a furnished temporary flat remains the only practical solution for them. With this option they can register, open a bank account, get a Schufa, and a certificate of freedom from rent debts - and ultimately use these documents if they wish to apply for their own unfurnished apartment.
Why is the rental cap for furnished apartments a ridiculous 'solution'?
Furnished apartments are fully equipped with everything you need - usually to a very high standard. It does not make sense to suggest that the rent for such a well-equipped and well-maintained furnished apartment should only be determined by the year of construction of the house, or criteria such as collective heating or recent renovations.
The expenditure, the maintenance, and the support for furnished renting is understandably larger than the renting of an unfurnished dwelling.
Temporary flats charge a warm rent. The advantage of this is for tenants; they have no expenditure for the readings of gas and water, the rent is transparent and permits planning security. With the rent cap in force tenants would have to pay a cold rent, possibly plus furnishing as well as equipment surcharge, and would have to worry about consumption costs. Most short-term tenants who have to work would rather pay a higher rent, than take over these tasks.
Why is the rental of furnished living space under criticism?
Critics of furnished renting claim that landlords only want to avoid the rent index for furnished renting. They assume that it is normal for landlords to just place a few old pieces of furniture in an apartment and then rent it out as furnished. However, this is in actual fact not how it works. Tenants compare offers, prices, and equipment to decide on the best price-performance ratio. Not every furnished apartment offered on the market rents out well, and although there are certainly black sheep among landlords, this is not the rule. Most landlords let short-term because they plan to use the apartment themselves in the near or distant future. Politicians and many voices in the media seldom distinguish between holiday home rentals and temporary rentals. It is also never considered that temporary renting is important and sensible for the economic and social growth of a city like Berlin.
Do the rent cap and rent freeze also apply to furnished temporary accommodation?
The new law rewriting Berlin renting culture - the rent cap!
In recent weeks, the Berlin Senate's plan to introduce rent caps and upper rent limits has led to great uncertainty among landlords who rent for limited periods of time. The rent cap law has been passed, and will now also apply to furnished apartments.
What action should short-term landlords take?
For the time being, nothing. At the moment, it's important you don't make any hasty decisions. Even if the law should come into force, the exact wording is yet to be determined. Until then, it is hoped that reason will prevail, and the importance of the existence of furnished apartments in Berlin will be recognized. In addition, many see the planned law as a violation of the constitution and it could ultimately be overturned by the Federal Constitutional Court. A large number of lawsuits by the landlords concerned are also expected, as this law massively encroaches on property rights.
Is short-term letting actually to blame for the housing shortage in Berlin?
In almost every article about the unfolding Berlin housing market situation, it is repeatedly claimed that holiday and temporary rentals are responsible for the housing shortage in the city. Often, there is no distinction between the renting of holiday apartments to tourists, which is subject to approval and strictly regulated, and furnished temporary renting. However, in principle, the letting of furnished apartments for longer than two months, to those who move to Berlin for work - is not a misappropriation of living space. In addition, it is assumed that all landlords of temporary flats are attempting to infiltrate and disrupt the rent index by buying a few cheap or old pieces of furniture in their flat and labelling it as 'furnished'.
This is not the case. Although there is the exceptional black sheep among landlords, offering the simplest dwellings at exploitative prices, this is not the rule. The vast majority of real furnished apartments are high quality and fully equipped for families and professionals and their day-to-day life. Internet as well as TV reception is also available, and as with permanent tenants, all consumption and additional costs, such as radio license fees are included in the rent.
Can and should a furnished apartment be rented according to a Senate-approved rent index?
Not only does this not work, but would present a huge ripple effect of problems for landlords and tenants. The owner of the apartment would in this case be forced to calculate a cold rent based on the newly-determined rent index, without adequately taking account of the location and condition of the flat, plus 10% of the cost of furnishing and equipment of the apartment - with depreciation over 10 years. It has also been stated that the landlord would be obligated to provide the tenant with proof of the furnishing and equipment in the apartment. However, with well-equipped flats that have the normal features of a furnished space - carpets, curtains, blinds, lamps, pots, dishes, cutlery, towels, bedlinen etc. - this would present masses of paperwork and filing for both parties.
This leads to the question of where to draw the line - would the landlord also be required to assign each receipt and each invoice to a certain piece of furniture or item of equipment? And what happens in the case of special pieces of furniture that will need replacing? Or regular household maintenance? Already if, for example, a technical device or the internet doesn't work, the landlord must take care of it. The same goes for readings, cosmetic repairs, inspections, etc. This means that if temporary letting were to become regulated in such a way that the landlord can only include the rent index and 10% of costs per year, (i.e. approx. 1% of the total sum per month) in the rent price, but still bears all previous obligations and, after the introduction of the ordering principle, must also pay all agency fees, they are better off leaving the apartment empty.
Why do landlords rent for a limited period - and what would be the consequences of the rent cap?
Apartments that are rented in the short-term are often second homes for the owners. Landlords have bought them in order to use themselves from time to time, or in the future - or for their children or other family members, e.g. elderly relatives who may be in need. In order to keep them flexible and have quick access to their apartment in an emergency, they are rented out on a temporary basis.
The planned rent cap would result in these flats being left vacant, thereby exacerbating the problem that it claims to solve. For a landlord to claim the use of their apartment for their own needs would become even more complicated, as it would have to first be approved by the district office. Due to the difficulty for the tenant to find a new apartment, the new law would lessen the owner's grounds even further to reclaim the use of their property. Many speak of expropriation in this context, as well as a worsening of the already considerable number of vacant apartments in Berlin, and could lead to a mounting crisis.
Who are the tenants of furnished temporary flats?
Those pushing forward the cap on temporary renting argue that tenants would be forced to live for years in overpriced furnished flats because it is no longer possible to find empty flats on the open market. Without real investigative research, many journalists have leapt to the defence of alleged "rent victims", while in actual fact acting against their best interests. It is important to consider that furnished flats are inevitably set at a higher price than unfurnished flats for the obvious benefits - the tenant can move in at any time, they doesn't have to worry about anything, or pay for any costly repairs. The rent for temporary accommodation is higher, but in proportion to the cost for the owner.
The fundamental reason for the scarcity of apartments in Berlin is that too few have been built to accommodate the city's growing population. There is not enough social housing, resulting in the dependence of even low-income earners on the free housing market.Temporary tenants are specially skilled workers, very often in the field of IT, that come to Berlin from all over the world, boosting the city's reputation as the start-up capital of Europe. An empty local job market means that companies depend on recruiting highly qualified employees from abroad. Not only do those invited to relocate rarely speak German, but naturally have no Schufa credit score yet, no bank account, no pay slips in Germany for three months and no certificate of exemption from rent debts. This means they have zero chance on the German rental market for the first period they are living in Berlin. Although European law guarantees freedom of movement for EU citizens, EU foreigners in Germany face immovable structural obstacles when looking for accommodation.
This is the group of people who rent on a temporary basis. After a few months, these tenants will have acquired a Schufa score, and a certificate of exemption from rent debts and can then apply for unfurnished flats if they so wish. As this group earns above average, those who are seriously looking will always find an apartment. Some prefer to rent for a longer period because they don't know how long they will stay in Germany and need flexibility. Even if tenants move into an apartment higher than their budget at first, they will move into an apartment with a better price-performance ratio after a few months of settling in. Stating that these tenants have to rent for a certain period of time because they cannot find an empty flat is misleading and leads to further confusion around the real potential effect of the Mietbremse.
Why do these tenants need to rent on a short-term basis?
Companies often pay a lot of money for the placement of these professionals. They are particularly interested in ensuring that their new employees do not have to worry about anything when they arrive in Berlin - no time-consuming apartment searches, furniture purchases, or trouble with internet providers, and registration of gas and electricity. They need their employees to be able to perform from day one of arrival.
Short-term renting allows newcomers to get started asap, no matter where they come from. With a furnished apartment, you can not only live - but you have an address, you can register in Berlin, and you are flexible. After a few months, you can look around for your own apartment without stress while working, and without the pressure of being without a home.
What would the consequences of the rent cap for tenants be?
The rent cap is intended to relieve tenants financially. But is this logical for short-term renting, when a higher-income tenant is paying to have a stress-free and flexible living arrangement? This would also have an effect on consulting services provided by agencies. No tenant who is looking for an unfurnished apartment can go to a real estate agent and expect them to find one - and if temporary letting becomes as unattractive as possible for landlords, the same will happen for furnished apartments. What would this then mean for temporary tenants?
On the normal rental market they would have no chance without the right documents, which are only possible to get after having already spent time working in Berlin. In addition to this catch-22, the majority of people don't want to rent a permanent apartment immediately but want to settle in and organize their move step by step. This group of people would alternatively have to switch to hotels or serviced apartments in the future, which would be significantly more expensive than furnished living. As a result, more hotels and serviced apartments would be built in the inner city. This raises new questions, such as; why aren't the gaps between buildings used for housing throughout the city? And why further increase costly and timely bureaucracy in the future to monitor compliance with the rent index, where landlords have to pay for a failed housing policy?
What is the aim of the rent cap?
The rent cap does not create new living space but benefits affluent tenants in prime locations, whose luxurious apartments were built before 2014. It is also, in part, a way of accepting that the Berlin economy will be weakened, and acknowledging the idea that people are no longer interested in moving to Berlin. It looks to a bleaker future, where nobody will move out or move, and people who want to move to Berlin will no longer have a chance to find an apartment. Berlin to the Berliners - Berlin first. Isn't Berlin still a liberal, open, multicultural city?
Now tourists are also identified as a main problem of the city. More left-wing parties want to act by reducing the number of tourists in Berlin. It is said that many Berliners feel disturbed by tourists in their neighborhoods. But it's a familiar argument - the tourist is always to blame for everything, commercialization, Disneyland, and all noise pollution. Has anyone asked how many Berliners feel disturbed by other Berliners? And what next? Will all craft beer pubs and burger shops soon be replaced by Berliner-only institutions? These ideas, although based on democratic social intentions are fast becoming misguided in the other direction.
In the debate about the rent cap, ideology has become more important than pragmatic solutions among Berlin politicians. If in the future the unbureaucratic rental of furnished apartments for limited periods of time, which has for decades been a win-win situation for tenants and landlords, is no longer possible, it will become even more difficult for foreigners and residents to move to Berlin. This will have disastrous consequences for Berlin as a business hub. The city will return to being poor once again - but this time, definitely not sexy.
12 Reasons why the Rent Cap will be a Disaster
80% of all Berliners allegedly support the rent cap. In order to achieve this level of approval, the new lowered rents will not only be for those who can no longer afford to live in the city. The rents of those who opt for expensive apartments in central locations will also become cheaper, a strategy that inevitably boosts the overwhelming support in favour of the cap.
The standard of equipment and furnishings in the apartment and its location no longer play a role. Dictators such as Franco and Hitler were also known to give rent cap gifts to the population. These unsuccessful attempts to enforce a rent freeze were intended to move things forward - but ended up having the opposite effect.
Here are 12 reasons why the rent cap will be a disaster.
The rent cap creates sham offers
What use are cheap rental offers if they are scams with hidden costs? Theoretically good value, but not in reality.
The rent cover brings everything to a standstill: no changes and more vacancies
Cheap rent means tenants will never move out – or move house. Couples who wanted to move in together will hang on to their second apartment. And those who previously planned to move away, or are only in Berlin occasionally will only use their apartment now and then, leaving it empty the rest of the time.
The rent cap in Berlin creates ruins
Without any competition or the prospect of profit, hardly any landlords will be able to build up a buffer for the continuous maintenance of their property. Why would a landlord also invest in keeping a property in a better condition if it does not bring a higher yield? This means buildings are set to become more and more dilapidated.
The rent cap stops climate targets from being reached
The rent cap prevents investment, including in energy-efficient renovations, and the nationwide achievement of climate targets.
The Rent Cap in Berlin prevents building and does not create new Housing
New buildings built after 2014 don't fall under the rent cap. Nevertheless, private investors are now not expected to invest in the construction of new rental apartments in the near future. With so much legal uncertainty, this is unsurprising. Who can guarantee that rents for new buildings after 2014 will not also be capped in the near future? New buildings will then most likely only be of interest to owners who live in them.
The Rent cap will lead to wasted Living Space
If a large apartment in an old building becomes vacant, it has been more profitable to divide it up and convert it into two apartments. The landlord was able to achieve a higher rent, and the existing space offered space for several tenants. In Berlin, apartments are an average of 39.2m². This places Berlin at the top of the European metropolises in terms of living space. Contrary to popular belief, this presents an encouraging figure of how much space is available. Instead of continuing to divide up large apartments, the rent cap means that large apartments in old buildings will be preserved. With cheap rents, one person can then afford a huge apartment.
The Rent Cover destroys Values
For years, people were encouraged to make private provisions for their old age and not to rely on pensions. Many have invested in real estate for this - and not only the wealthy. The rent cap reduces the yield expected, and the value of the real estate. In worst-case scenarios, loans can no longer be repaid.
The Rent Cap is uneconomic
High-income tenants can pay high rents, which in turn are taxed by the landlord. It remains unclear why Berlin is foregoing these tax revenues. It would make much more sense to use tax revenues to support construction projects or needy tenants, by paying housing subsidies to some.
To enforce and review the rent cap, the authorities intend to hire additional staff. This is wishful thinking. There are already many vacancies in positions of public office, but no employees. It is uncertain whether the recruitment of employees for the rent cap project will be successful. This also raises the question of why the city of Berlin is not hiring people to work on future-oriented projects, such as construction, or building permits. Instead, there will be even higher controls and more bureaucracy, with no economic gain.
The rent cap prevents people from moving to Berlin
The rent cap means that those who are already here will live cheaply, no matter how wealthy they are. And those that want to move will no longer have anywhere in the city to move to, and no reason to come. So everything will remain as it is. The rent cap prevents people from moving to Berlin from abroad. However, Berlin is dependent on the influx of specialists from other countries, especially from the IT sector. If new tenants relocating for start-ups can't find apartments, the start-ups will soon settle in a more open city where they can.