Mietpreisbremse in Berlin, it’s official, but what does it actually mean?
It has been coming for some time and it didn’t come quietly. Demonstrations, loads of uproar, discussions and it’s own hashtag #Mietendeckel. The Senate of Berlin has, after months of discussion, decided to introduce the #Mietendeckel. It will come into force at the beginning of 2020 and will be backdated to the 18th June 2019.
Rising rents and the ever increasing difficulty to find affordable places to rent, coupled with not enough rentable properties in the first place, haven driven the red-red-green coalition to want to put a stop to this development
With the new law the coalition wants to ‘freeze’ rents for five years, for about 1.5 million properties, which were built before 2014. Landlords will then no longer be allowed to increase their rental charged for five years. In addition to this, upper limits for newly rented properties and limits for current rental prices have also been introduced.
Though most of those 1.5million properties belong to big companies like Vonovia, Deutsche Wohnen but also to the six Berlin owned housing associations. It is estimated that round about 500.00 properties though belong to private investors, homeowners and small companies.
So what does the new law entail?
Rents for about 1.5 million properties are being frozen.
Upper limits, based on the #Mietenspiegel of 2013 (average rent within the surrounding area) to rents shall be enforced, according the year the property has been built and depending on the fittings, furnishing and standards of the property. Rents of newly rented properties are not allowed to go above this threshold. The table which was set by Senat sets the maximum rent between 3,92 Euro per square meter for a property which was built prior to 1918 without collective heating and no bathroom and 9.80Euro for properties that were built between 2002 and 2013.
Though there will be slight exceptions: If a property gets modernised, landlords can increase the rent by 1Euro per square meter on top of the maximum rent, but only if those modernisations addressed climate protection issues or solved constraints to accessibility. Additionally, one can charge one more Euro per square meter if the property is of exceptional high quality. Exceptional quality exists when at least three out of five of the following criteria are met:
If there is barrier free access from the apartment and the entrance door to a lift
Built-in-Kitchen (yes, that’s not so typical in Germany)
High quality sanitary equipment
High quality flooring in most of the rooms
or an Energy consumption of less than 120 kWh/(m²a).
If the property is situated in a building with less than two flats the maximum chargeable rent can be increased by 10%.
Current rents can not be higher than 20% above the upper limit otherwise they are considered as ‘usury rents’. In that case, tenants would be allowed to apply for a reduction of their rent to the Senate administration. However, surcharges or decreases are possible depending on where the property is situated (-0,28 Euro/m² if it’s a common location, -0,09 Euro/m² bei slightly better location and +0,74 Euro/m² excellent location). These rules for reduction will not come into effect nine months after the #Mietendeckel comes into force, which is probably around End of 2020.
From 2022, landlords and property owners will be allowed to increase the rental fees on a yearly basis by 1.3% to allow for inflation, but only if the maximum rental limit has not be reached yet.
Very low rents of below 5.02Euro per square meter can be increased if they are newly rented out, to a maximum of 5.02Euro.
This law has not been introduced anywhere else before, so it will be very interesting to see what the final affects are going to be. As you can see there are quite a few rules and regulations that need to be considered and it remains to be seen which affects this new law will have. One thing is for certain, if this new law comes into force landlords and tenants will both feel the impact. In my next blog entry, I shall talk about the side effects the #Mietendeckel could potentially have for tenants, landlords and the industry.