February 07, 2020

Berlin's rent freeze shows the city is not simply a playground for the rich

topic:	Human Rights
located:	Germany, USA
editor:	Gurmeet Singh

One day a letter arrives. It says simply: your new rent is twice what it was. If you cannot pay the new rent, then you must leave your apartment.

It’s difficult to estimate just how many people around Berlin have received letters like this over the last few years. Homelessness in the country (and city) is estimated to have increased by 15-20 per cent, some of it at least fuelled by housing shortages and these kinds of letters – letters that purport to be about rent increases, but are de facto eviction notices.

This is why it’s so important that the city has adopted a five-year freeze on rental prices. It may introduce a whole host of problems for capital and construction, but it at least demonstrates to landlords and property developers that they cannot simply get away with exploiting tenants.

Deutsche Welle writes:

“Berlin's parliament…passed a law to freeze rent prices in the rapidly gentrifying city-state for five years, becoming the first federal state in Germany to introduce a rent cap. The new law puts a cap on residential rental prices in the German capital, where the cost of rent has doubled in the last 10 years.

The cap is pegged to go into effect mid-February and freeze rent prices until 2025. Following that, the law limits increase to 1.3 per cent per year in line with inflation.”

The move has caused immense unrest among property developers and investor groups. They claim that the city’s move demonstrates an irrational hostility towards new landlords and that no investor will want to invest in the city in the future. What’s more, construction firms have also complained that the rent freeze will slow work down.

A construction slump will, of course, cause problems in the city. However, the problem has a Gordion-knot type of complexity. By law, landlords could not raise rents without significant improvements to buildings and apartments. Construction firms were brought in to renovate buildings, and then rents substantially increased. Freezing rents will cause a freeze in renovations, meaning construction will slump. However, continue renovations and landlords will continue to jack-up prices unfairly. Often, rents were increased without noticeable renovations. In general, one of the main problems has been that rents have increased while wages have not. This is taking place despite a much-vaunted startup and digital boom in the city. So what do you do? The city has decided to err in favour of its residents rather than investors.

The New York Times commented: “Renting is more common in Germany than homeownership, with more than half of the country’s residents renting their homes. In Berlin, a city of three million people, only 18 percent of residents own their homes.” In other words, rent controls are vital to ensuring Berlin’s residents can continue to live there.

The international media have not always looked favourably upon the move. Bloomberg Businessweek, for example, adopted a patrician tone, and almost outright calls the city churlish:

“Until about 15 years ago, Berlin was unimaginably cheap…Today, Berlin is still affordable by international standards. A decent apartment in a good part of town costs about half as much as a comparable place in New York and far less for those lucky enough to possess an old lease. More than 80% of Berliners rent, in part because renting was, until recently, so cheap. Tenant regulations also distinctly favor renters, while federal tax laws offer no incentives to homeowners.”

Don’t you know how lucky you are? The magazine practically screams. The rest of the developed world is paying through the nose in rent, and it’s inevitable that you will too. Why fight it?

With material pressure from investors and soft-pressure from the international media, it might be easy to dismiss the rent-freeze as the act of a few desperate and lazy left-wingers. But the move demonstrates to the entire developed world that living in a major city in the 21st Century need not be a constant struggle. Cities should not simply be playgrounds for the rich, but can house low and middle-income residents; all it takes to create such conditions is political will.

The battle for Berlin’s property market is not over but for the next five years at least, developers will learn that they cannot get away with murder.

Image: wal_172619 / Pixabay 

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