On April 15, Germany’s top court overturned Berlin’s Mietendeckel, or “rent cap” law, which had helped tenants throughout the city maintain their rent at a reasonable rate for the past year (despite the rampant property speculation and rising housing costs the capital city has experienced in the last decade). This decision has tenants and politicians in Berlin and throughout Germany calling for radical action from their government, including the reappropriation of residential housing and a nationwide rent cap.
“We will now put all our efforts into improving the federal regulations. The decision… will give a new impetus to the nationwide campaign that has already started to stop rents. Efforts to socialize the large, profit-oriented housing companies will also gain momentum,” said Reiner Wild, head of the Berlin Tenants’ Association in a press release on the day of the ruling.
Mietendeckel changed the lives of many Berlin residents
Berlin has maintained a reputation throughout Europe as an affordable big city, unlike London or Paris, where real estate speculation has made it next to impossible for poor tenants to find suitable housing. However, despite this reputation for affordability, over the past decade Berlin’s rental market has experienced rising rent prices caused by booming investment in real estate—investment that signals capital’s refusal to build or innovate and, instead, vulture cheap investment opportunities in housing markets.
This kind of property speculation is directly tied to an increase in the cost of rent. The Germany Property Foundation found that between 2013 and 2019, rents in the city rose 27%. This “investment” purchasing and subsequent rent increase has been seen frequently in the poorer neighborhoods in Berlin, which have seen an influx of new property owners who are forcing traditional working-class residents out of their homes in a wave of gentrification.
In January last year, Berlin’s Red-Red-Green coalition (a governing coalition of the social democrats, SPD; the left party, Die Linke; and the Greens) sought to halt these soaring rental prices by imposing a rent stop. Since its passage, rents for 90% of Berlin’s apartments were frozen at their June, 2019 level, with this freeze intended to last for five years. New rental contracts could exceed that level, and starting in November of 2020, any existing rents above that level had to be reduced. This led to a reduction in rent for more than 300,000 households. Landlords could also face fines up to 500,000 euros for violating these laws (a penalty that added teeth to many other existing German rent laws).
At the time it was overturned, the rent cap law was starting to have an impact on the market, as rents over the past year had dropped by 7.8%. There was also a correlated drop in sales of residential properties, indicating a reduction in speculative investment by real estate companies.
“Berlin was the only prosperous metropolis that I know where rents were not rising, in fact they were falling. Therefore, success also lies in the fact that we have shown that rising rents are not a general law of nature. A bold policy and a strong movement can make a difference,” Gaby Gottwald, a Die Linke representative in the Berlin state parliament told TRNN.
Landlords with the backing of Angela Merkel’s party sued to protect their interests
Unsurprisingly, landlord associations were vehemently opposed to this rent cap, and with the support of over 284 Bundestag parliamentarians from both the CDU/CSU (Angela Merkel’s party coalition) and the FDP (a more libertarian conservative party) brought a case before Germany’s Constitutional Court to have it overturned. Their main legal argument was that, because the federal government had already made a law regulating rents, the state government of Berlin could not make a separate law regarding the same thing. The court, which has two former CDU politicians on it, ultimately agreed. Supporters of the rent cap law had argued that the states have long maintained power over housing within their borders, and that Mietendeckel was well within Berlin’s legal purview.
One of the immediate consequences of the Constitutional Court’s decision was that landlords began demanding that tenants repay the higher rents that had been waived since November. “We expressly regret that the decision of the Federal Constitutional Court to make the rent cap unconstitutional may oblige tenants to make additional payments, which are extremely problematic as a result of the economic consequences of the corona pandemic,” said Wild.
Not all real estate companies are demanding that their tenants repay rent. However, the companies that have not demanded repayment faced consequences in the stock market. Berliner Zeitung reported that Vonivia, Germany’s largest landlord, said they wouldn’t request a rent repayment, but Deutsche Wohnen, another large landlord, said they would. Vonivia’s stock stayed mainly the same, whereas Deutsche Wohnen’s stock went up 3% after the announcement. Within a week of the court’s decision, the Berlin Senate passed an emergency measure to provide financial aid to some tenants as the move to compel tenants to pay hundreds of euros in back rent may create a financial crisis for many households.
Tenant activists in Berlin are not backing down
Activists and tenant organizations in Berlin are not giving up on their movement for a more fair and equitable housing market. The day the decision overturning the rent cap law was announced, over 15,000 people protested in the streets. Activists are calling for the federal government to impose their own rent cap. There was a rent cap in West Berlin from 1917 until 1988, and in East Berlin until the fall of the Berlin Wall, so this kind of regulation has actually been normal for most of modern German history. Activists are also asking for all state-subsidized landlords to honor the rent cap law even after the decision.
There is also a strong movement in Berlin for reappropriation of housing companies. Over 48,000 Berliners have signed a petition, championed by Die Linke, asking for these companies to be taken over by the state. “As the left party, we have always supported, and continue to support, the referendum on the socialization of large real estate corporations. This is proper, because the right to housing should not be traded on [the] stock market and rents should not end up as dividends in the pockets of a few superrich,” Gottwald told TRNN.
Rent caps and housing reform may also play a large part in the upcoming German elections. Both federal and state elections will be taking place in Germany this year, which may even lead to a Red-Red-Green coalition government in all of Germany as renters reject the pro-landlord policies of the CDU.
“The rental policy of [the CDU] shows as a good example that these scandals are only an expression of exuberant greed and idiocy. [Their] own enrichment or that of [their] own clientele is the principle of this party and it shows in the rent policy for years,” said Gottwald. “Without shame they let themselves be financed by the property owners, swap posts between party and lobby and prevent any protection of tenants.”
However, the CDU is not the only electoral roadblock to a comprehensive plan to handle rising rent. The CDU has governed in a coalition government with the SPD on the federal level since 2013, but the housing crisis has led to increased pressure on the (theoretically) more left-leaning SPD to embrace a nationwide rent cap, which so far they have rejected. The SPD seems devoted to resisting any movement that would push it more politically leftward, despite having their lowest support since 1949.
Tenants around the world can learn from Berlin’s struggles
Berlin’s experience trying to take a stand against property owners has implications for cities everywhere. Balakrishnan Rajagopal, the UN special rapporteur on the right to housing, told Deutsche Welle that he was concerned about the negative message that the ruling would send. “[There is interest in] the influence that Germany’s record will have on other countries that are also facing similar crises of affordability in other large global cities like Berlin around the world — how will [the ruling] affect their ability to control the problem of affordability,” he said.
As more and more organizations around the world, even in the U.S., call for checks and balances on the rental market, it is clear that the ruling and investment class will not permit tenants to pass laws to protect themselves without marshalling a powerful backlash. However, it is also true that tenants always will outnumber landlords and can push for broad radical changes to the current system.
“For those who desire a more social rent law, this is a setback, obviously. But the movement is strong, and the concern is huge. The struggle continues,” said Gottwald.