Berlin’s rent cap ‘experiment’ scrapped by top German court

Karlsruhe, Germany (dpa) – A controversial rent cap to control soaring rents in the German capital has been scrapped in the courts, in a ruling welcomed by landlords but panned by tenants.

The legislation came into force in February 2020 and theoretically froze the rents of around 1.5 million flats in Berlin at June 2019 rates, for five years.

Landlords who were charging over a limit prescribed by the city government had to reduce the rents, sometimes by hundreds of euros.

But those restrictions came to an end on Thursday when the Federal Constitutional Court ruled that the Berlin government had overstepped its powers in introducing the law.

Previous federal laws had “attempted to ensure a fair balance between the interests of tenants and lessors, interests that are protected by fundamental rights” meaning that “the [German states] are precluded from passing rent legislation in this regard,” an English statement from the court said.

The Berlin rent cap was therefore “void in its entirety.”

The court decision means that rents that had been frozen or reduced in line with the law can now go back up to their previous level.

Furthermore, many thousands of tenants are legally required to backpay their rent to cover the months where they were paying less thanks to the law.

This won’t be the case for every tenant, however. Large property firm Vonovia for example said it would not demand back the 10 million euros (12 million dollars) that it was owed due to the rent reductions it agreed while the law was in place.

Vonovia said that it wanted to signal to tenants that there shouldn’t be any further “escalation over the issue of affordable housing.”

Economy Minister Peter Altmaier and Interior Minister Horst Seehofer welcomed the ruling.

“We all want there to be affordable housing. But the rent cap was not the way,” Altmaier said.

The Berlin decision was being carefully watched in other parts of Germany.

In Bavaria, a campaign to introduce a local rent cap was immediately shelved, with campaigners saying they would focus instead on making a change at national level.

The National Tenants’ Association called it a “bitter decision.” The president, Lukas Siebenkotten, said it was “a wake-up call to federal lawmakers to finally tackle this issue, and put a stop to the rent explosion in many German cities.”

The rent cap was unique to the German capital, where a left-wing coalition has been in power under Mayor Michael Mueller.

Mueller had described the law as a necessary “breather” for tenants struggling to deal with the soaring cost of renting property in the city.

The challenge in the Constitutional Court was originally brought by the centre-right CDU and CSU parties and the liberal FDP party, who argued that the city government had exceeded its powers.

The FDP welcomed the ruling on Thursday as “good news.”

FDP lawmaker and housing expert Daniel Foest said the Berlin Senate had “exploited renters in Berlin for an ideological experiment, and it had failed.”

Shares in major German property firms such as Deutsche Wohnen rose sharply after the decision. Deutsche Wohnen shares settled at 3 per cent higher than at yesterday’s close.