Leasing brake options to remain active until the end of 2029
German Cabinet Proposes Extension of Rent Brake Until 2029
In a move aimed at curbing rising rents, particularly in urban areas, the German federal cabinet has initiated a draft to extend the legal rent cap, known as the rent brake, until December 31, 2029. The current regulation, enacted in 2015, was set to expire at the end of this year.
Justice Minister Stefanie Hubig, representing the Social Democratic Party (SPD), highlighted the urgency of the matter, stating, "People must have affordable housing." The extended rent brake is aimed at preventing disproportionate rent hikes and ensuring that tenants, especially those in vulnerable situations, can find appropriate housing.
The coalition agreement between the Union and SPD had agreed to extend the rent brake in tight housing markets, which are designated by the respective state government. Under the proposed extension, the rent for a new apartment may not exceed the local comparative rent by more than 10%. This regulation does not apply to newly built apartments rented out after October 2014 and those that have undergone a comprehensive modernization.
According to the ministry, the rent brake has moderately slowed the increase in rents in tight housing markets and has been particularly effective in areas with strong annual increases exceeding 3.9%. However, the rental housing market remains tense, especially in metropolitan areas, making it a financial challenge for both low-income individuals and average earners.
The German Tenants' Association welcomed the extension of the rent brake but expressed disappointment that exemptions for new builds and other loopholes were not abolished. They also called for stricter penalties to address violations of the rent brake regulations.
On the other hand, the Home & Grund owners' association criticized the extension, arguing that it does not specifically target those who benefit most from it and that support via housing benefit would be fairer.
The extension of the rent brake is part of a broader plan to protect tenants, with further proposals outlined in the coalition agreement, including increased transparency in ancillary costs and stricter rules for contracts with index rents. Harmonization of tenancy law, reforms of rules on rent profiteering, and the introduction of fines for breaches of rent control are also part of these reforms.
The modernization levy, which allows landlords to recover costs through rent increases, is being reformed, with the value limit for minor modernization work set to increase from EUR 10,000 to EUR 20,000 by the end of 2025. This aims to incentivize property owners to invest while ensuring affordability.
In addition to the rent brake, over 50 more municipalities in North Rhine-Westphalia and Lower Saxony have been added to the list of tight housing markets. This extension provides quick security for tenants, according to CDU politician Jan-Marco Luczak, although he emphasized that the rent brake is a temporary solution.
The extension of the rent brake and the proposed reforms aim to protect tenants from high rent increases and address the housing market's tightness, particularly in urban areas. Challenges remain, especially for low-income earners and families, as the market remains tight in many urban areas.
- The extension of the rent brake in Germany, a move aimed at capping rising rents, could have a significant impact on the finance sector, particularly for property owners and investors.
- The ongoing debate surrounding the rent brake in Germany extend beyond just politics; it also touches on business and general-news, as it involves the housing market, which is a vital part of the economy.
- The proposed extension of the rent brake and the subsequent reforms could have repercussions in the crime-and-justice realm if stricter penalties for breaches of rent control are indeed implemented, potentially leading to reduced incidences of housing-related crimes.
