The German Constitutional Court overturns the rule that limits the price of rents in Berlin



The limit on rental prices in Berlin, legislated by the regional city-state authorities more than a year ago, was controversial from the start, but now the Federal Constitutional Court has ruled that it is unconstitutional. As the owners warned when the rule came into force, they will now ask tenants to pay the part of the rent that they have been saving over the past year.

The ruling published by the German Constitutional Court establishes that the rent limit violates the Basic Law and declares the nullity of the state law, after meeting the request of the deputies of the Bundestag of the Liberal Party (FDP) and the CDU / CSU, in total 284 deputies. Two civil courts in Berlin had also asked Karlsruhe for clarification, burdened by the owners’ demands.

The law passed by the red-red-green coalition of the Berlin regional government, which froze rental prices from February 23, 2020 to 1.5 million apartments in the German capital, so that tenants could not paying more than the prices of the June 2019 level will automatically cease to be in effect. Its effects on the housing market, despite having been in force for only one year, had been felt with particular impact. The number of homes for sale had experienced a “notable increase”, while the number of houses offered for rent has fallen, as a reaction of the owners to the administrative decision to freeze the leases for five years.

According to ImmoScout24, the leading real estate platform in Germany, the supply of housing with prices above the ceiling set by the new law had been steadily declining since the beginning of 2019, when the bill was still under debate, by approximately 18 % and from the established date of entry into force, around an additional 10%. At the same time, the supply of non-rented housing for sale increased from July last year by 40%, as did properties for sale with tenants, which did so by 25%.

“Based on the data available to us, it can be deduced that since July 2019, owners are moving from offering their homes for rent to putting them up for sale,” says Thomas Schroeter, manager of ImmoScout24, “many owners complain of the uncertainty, that they do not know what will happen to the law in the future, and they prefer not to take risks ”.

The regulation now unauthorized by the Constitutional Court frozen leases for five years and also established a ceiling on the rental price of 9.80 euros per square meter for properties ready to be inhabited before 2014. “This cannot be solved a problem that is structural, ”adds Schroeter, who recalls that there are currently between 100,000 and 135,000 rental homes in Berlin.

What had also managed to freeze the new regulations is the interest of the construction companies. Between July and September 2019, 28% fewer construction permits were granted than in the same period of the previous year. “Before we expected that in a few years supply and demand would balance, but now we know that this will not happen and investment is withdrawn. Berlin, moreover, is a deficit city that does not have its own resources to inject into the necessary housing, so now everything is waiting for how the situation develops by itself “.

The owners trusted in such a way that the Constitutional Court would agree with them, on the other hand, that in many cases the regulations were not complied with. Around 95% of the rental homes offered between January 1, 2019 and January 23, exceeded the limits established by the new law by an average of 5.92 euros per square meter.

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