The challenge
Rents in Berlin were rising fast and tenants feared being priced out.
The case
In February 2020 Berlin froze rents for around 1.5 million older apartments at their mid-2019 levels, required some rents to be cut, and set fines of up to €500,000 for breaking the rules. Rents for covered apartments fell, but studies found the number of apartments advertised for rent dropped sharply as landlords sold or held units back, while rents for newer, exempt apartments rose. In April 2021 Germany's Constitutional Court struck the law down because rent regulation falls under federal law, and many tenants had to pay back the difference. An ifo Institute study found the supply of rental apartments advertised in Berlin fell by up to 60 percent because of the cap, and stayed low after it was struck down.
Why it didn't work
Freezing prices without adding supply helped sitting tenants but made it much harder for anyone else to find a home. Its legal basis was also unsound, leaving tenants with back-payments.
Sources
- Hahn, A. M., Kholodilin, K. A., Waltl, S. R., & Fongoni, M. (2024). Forward to the Past: Short-Term Effects of the Rent Freeze in Berlin. Management Science.
- ifo Institute (2022). Berliner Mietendeckel verknappte Angebot an Mietwohnungen stark (press release, 12 April 2022).
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