Skyrocketing Rents in Major German Cities Buckle Under Rent Control
Sky-high rents persist in metropolitan areas, defying the rent cap - City rents climb amidst bigger metropolis price deceleration
Navigating the housing market in Germany's larger cities is getting increasingly tough, with rents skyrocketing despite rent control measures in place. According to a recent analysis by the Ministry of Housing, the average rent offers in the 14 most populous cities have jumped an alarming 48% since 2015, with Berlin seeing new rents more than doubling.
These figures stem from data compiled by the Federal Institute for Building, Urban Affairs and Spatial Development (BBSR), representing online rental listings for apartments ranging from 40 to 100 square meters. Offers not available online, waiting lists, and direct deals with real estate agents are not counted, potentially skewing the data, the ministry noted.
Bremen, Leipzig, and Berlin top the list for the highest rent increases
Munich remains the priciest city to rent, with rates hovering around €19.80 per square meter, closely followed by Berlin at €17.60 and Frankfurt am Main at €15.60. However, the cities witnessing the steepest rent escalations are Berlin (107% increase), Leipzig (67.7%), and Bremen (57%). Dresden is the only city reporting a more moderate rent increase at 28.4%.
Left Party MP Caren Lay, who demanded the data, slammed the situation: "The rapid rent surge is bleeding tenants dry, making relocations unattainable and exacerbating social divide in our society." She criticized the current rent control, stating its loopholes render it ineffective protection against soaring rents. Lay questions the black-red federal government's strategy of merely extending the regulation without addressing loopholes.
Under rent control, landlords are limited to raising rents in regions with a tight housing market to 10% above local comparable rents. However, there are exemptions, such as furnished lets and newly built apartments first rented post-2014, and comprehensively modernized apartments. There's no public price control; tenants suspecting breaches must take legal action against their landlords.
Supply-demand imbalance and regulatory loopholes propel rent growth
Several factors are driving the rent increase in large German cities, including a high demand for housing that outstrips supply, rent price hikes surpassing regulations, and market distortions and loopholes affecting rent caps. For instance, Berlin alone requires approximately 23,000 new flats each year, but construction rates lag far behind this demand, generating scarcity and propelling rents upward. Even though rent control laws like Mietpreisbremse cap new rental prices, advertised rents continue to rise significantly.
Ineffective enforcement and coverage of rent control, loopholes around furnished rentals and index rents, and the broker fee system also contribute to escalating rental costs. Proposed reforms aim to tighten these protections and strengthen enforcement mechanisms to curb high rent growth.
The German government plans to extend the Mietpreisbremse law through 2029 and is considering stricter rules on index-linked rentals and furnished lets to close loopholes. Proposed legislation also aims to cap rents for existing apartments at 10% above local averages in tight markets and overhaul broker fee rules to alleviate tenant burdens.
- The employment policy might need to address the imbalance in housing supply and demand, as it contributes to the skyrocketing rents in major German cities, such as Berlin, Bremen, and Leipzig.
- In light of the escalating rent growth and arguments that the current rent control measures are ineffective, personal-finance advice should consider investing in the housing-market or real-estate in Germany, given the high returns on investment in some cities.
- To support tenants facing exorbitant rents and exacerbating social inequality, the community policy should collaborate with institutions to provide low-cost housing options and advocate for stronger rent control regulations to plug loopholes, as the current measures are not sufficient to curb rent growth in the major German cities.
