21 Aug Living in Berlin Soaring Rents and House Prices Part 1
The Cost of Rent in Berlin is skyrocketing.
There was a time not too far back when living in Berlin was a young person’s dream, cheap rents cool neighbors but with gentrification has come not only soaring house prices but massively increased rents. The other factor that is less talked about is demand, throughout Germany, is outpacing supply. When this happens prices increase. Eventually, an equilibrium will be found but I don’t see this happening in the short term
Mietpreisbremse What is This
Rent brake is the literal translation of the German term “Mietpreisbremse” but probably a more accurate translation might be rent control. The main driver of the “rent brake” or expand rent controls, has been the booming rental market in Germany. Berlin was the first city to implement the new rent controls with them taking effect June 1 2015
Mietpreisbremse how does it work
The government passed legislation whereas individual states can designate specific areas or districts as having an “overheated” or a “tense” housing situation. When this happens, restrictions are supposed to come into place how much a landlord can increase the rent. As we will see in a moment the effect of the law has been very limited. The basic point of the law is that the rent cannot be increased by more than 10% if currently rented, or if it is a new lease, then no more than 10% above the local index.
The previous rent for the apartment was 7.50 euros per sq. mtr. For comparable apartments, prices of up to EUR 10 were being gotten. However the local leasing rate is EUR 8.50 per sq. mtr. If the apartment is to be rented again, the maximum landlord can demand is EUR 9.35 per sq. mtr.
Unfortunately there are loopholes large enough to drive a truck through
The law does not apply to new buildings.
If the apartment is a new build or one that is being rented for the first time, then the law does not apply. Note only applies to leases signed after 1st Oct 2014.
Also the law does not apply If the building has had major improvements or comprehensive modernization. It should be noted that this applies once a new tenant moves in. For landlords itÄs important to remember that you have to increase the rent before the next tenant moves out and a new tenant moves in. If you don’t take advantage of this than you have to stick to to the rent brake law.
Modernization increases: It should be noted that while the rent brake does apply an upgrade surcharge is still allowed. In this situation, it’s best to seek expert advice on exactly what one is allowed but in general terms, you can increase the rent by 11%.
Ignorance is an excuse.
There is an old saying that ignorance of the law is no excuse. Not knowing something was illegal is not a valid defense. In the case of the rent brake ignorance is a valid defense. If the landlord raises the rent above the allowed limit and the tenant agrees to it (by paying the new rent amount) the landlord is under no obligation to reduce the rent should the tenant complain. This also applies if the tenant moves out and someone else moves in.
As a reminder for landlords when sending a notice of rent increase, you need to note that the tenant has the right to object and that it needs to be in writing. Once the tenant starts paying the new amount the tenant can no longer object
As well as all exceptions to the rules I’ve mentioned there is the ongoing legal case in Berlin. The issue is the official “Mietspiegel” (rent index) or more specifically the lack thereof.
…. if you are going to use an official Mietspiegel as the basis for determining local comparative rents (the “ortsübliche Vergleichsmiete”), you’d better be sure of the methodology and data used to compile the index. Otherwise, you are just asking for trouble (and a wave of lawsuits).”
The article goes on to mention “The fact that so many cities across Germany do not have reliable “qualified” rent indices makes it nigh on impossible to determine the local comparative rents, upon which the maximum 10% increases are to be based. For years this didn’t matter as landlords tended not to raise the rent. But with the booming sales market more and more landlords are starting to bring in regular rent increases. The challenge here is what is allowed. I suspect that many landlords simply “create” their own by looking online for examples of higher rent. Regardless of how you determine the new rent it can’t be increased by more than 15/20%.
No Supervisory Authority
The other issue is that even if one suspects the landlord has raised the rent illegally there is no supervisory authority tenants can turn. In reality, the Mietpreisbremse only works if tenants themselves are diligent and complain if the rent is too high. Very few people have taken advantage of this right.
Rents and the laws surrounding them are in a great flux at the moment. The days when you could live in the same place for decades and the landlord never raised the rent are, unfortunately behind us. As a tenant this doesn’t mean you have to accept the rent increases. Landlords it means you need to be careful how you raise the rent. In the next two blog posts I will go into more detail on how this has played out in Germany.
Part 2 I talk about real life experiences
Part 3 What to do if you think your landlord has raised the rent above what is allowed.