Germany’s highest court has ruled that Berlin’s rent cap is unconstitutional, leaving renters facing the prospect of paying backdated rent.

The ruling comes as a huge blow for supporters of rent limits across Europe, including Sadiq Khan, who’s determined to demand powers to implement a cap on rents in London if he wins the upcoming mayoral elections.

The Federal Constitutional Court said the policy passed by the Berlin Senate in February 2020 to freeze rents for five years was unlawful as it violated the Basic Law.

The cap – aimed at combatting soaring living costs – had pushed landlords to cut rents in the capital for more than 300,000 tenants until 2025, after which time any increases would have been limited to 1.3% per year in line with inflation.

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Shadow rents

Berlin’s policy had been widely criticised by the property industry, which claimed it deterred investors from urban areas. There have also been reports of landlords sliding “shadow rent” into contracts, increasing the price that tenants would have to pay in case the court found the cap unconstitutional.

Renters now face paying rent back for the months they paid a lower price; some could get a bill of thousands of euros. However, many landlords have already said they won’t demand the backdated rent such as Germany’s largest housing company, Vonovia, which isn’t asking tenants for rent arrears.

Another large landlord, Deutsche Wohnen, will be demanding the money back, but has offered payment plans for tenants so that nobody is made homeless.

“No tenant and no tenant of Deutsche Wohnen will lose the apartment as a result of the decision, we will proceed with the greatest sense of social responsibility,” it says.

Head of political economy at the Institute of Economic Affairs, Dr Kristian Niemietz, recently compared rent controls to socialism and insists they are always doomed to failure.

PIC CREDIT: Jeff Kayzer, Flikr.

3 COMMENTS

  1. Rent controls……Hmm!! Great idea.

    Lot s of LL will dump their LA and will be collecting Brown envelopes.

    HMRC will lose billions in tax.

    BTL lenders will only be able to base lending on controlled rents and not brown envelope rents.

    Desperate tenants will pay Brown envelope rents.

    LA will go out of business.
    A LA can hardly collect brown envelopes!!

    BTL supports property values.

    No LL buying HPC!!

    Rent controls will cause mass rent tax evasion.

    Only controlled rents will be declared as legally that is all that can be.

    Brown envelopes will be used to evade tax on illegal rents.

    Only a fool LL will let at controlled rents rather than market rents.

    All tenants will know there will be some brown envelope rent to pay in cash only.

    Silly old Govt thinking it can buck a market with ridiculous rent controls.

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