Rental price brake - the name already indicates subject and intention. Here is a brief overview of what the rent brake is and how it affects landlords.
The rent control, or rent brake, which has been in place since 2015, is a regulation described in § 556 BGB (German Civil Code) that is intended to curb a rapid increase in rents in tight housing markets, particularly in large cities and congested urban areas. The federal states are asked to designate areas with tight housing supply and large demand, and establish or enforce the rent brake there. The law limits the rent to a maximum of ten percent above the level of the local comparative rent. This is intended to prevent low and normal earners from being squeezed out of popular residential areas. According to current law, this regulation applies for a maximum of five years, although an extension of the deadline is under political discussion.
The rent brake does not apply without exception in the affected areas or cities. Excluded from this are apartments that have undergone extensive renovation work and apartments that are being occupied for the first time after 01.10.2014. A further exception is that if a previous tenant already paid rent which is above the comparable rent in the neighbourhood, the landlord can continue to ask the same rent from the subsequent tenant.
The rent brake applies to the whole of Germany or in the major cities and congested urban areas designated by the federal states. In Brandenburg, the rent brake has been in force in 31 municipalities since the beginning of 2016. These include the state capital of Potsdam and many municipalities that share a border with Berlin. The federal capital Berlin has introduced the rent brake for the entire city area with effect from June 1, 2015 by means of a separate legal ordinance. Since the beginning of 2020, the so-called rent cap has replaced this ordinance (see also our article "Rent Cap in Berlin" under our Immo-News section).
Basically, the housing market is driven by supply and demand, like any other market. Particularly in congested urban areas or large cities there is a high demand for rentable housing, which usually drives the rent up due to insufficient housing offers. One reason for this is the continuous influx in the big cities. The government and the market players failed to take appropriate countermeasures in the past to provide sufficient living space. However, the blame cannot be laid entirely on the housing industry. Bureaucratic hurdles on the part of the responsible authorities, rising costs of available land and high construction costs make it harder to developers to realize new residential projects. The lack of subsidy programs, inflexible tender offers for building land and the privatization of once state-owned apartments only increase the sensitivity of the already delicate issue.
We, the TRUST-AGN Holding GmbH, represent numerous apartment owners and observe a growing uneasiness among investors due to the ever-changing legal regulations of the Federal Government. A legal regulation such as the rent brake, an event which according to many caused by political mistakes made in the past, provides neither security nor optimism for capital investors. Other means, such as the promotion of private or public housing construction, the acceleration and simplification of building application procedures, as well as an increased willingness to put building sites out to tender must be chosen in order to adjust the stagnating supply to the high demand. It is already becoming apparent that the temporary legal regulation of the rent brake has failed to have its effect and that rents are nevertheless rising. In addition, many landlords have decided to sell their apartments as soon as the tenant has moved out. In most cases, the buyers use the apartment for their own use, which in turn reduces the number of apartments to let. This causes even greater tension on the market as it deprives tenants of the opportunity to find sufficient rentable accommodation.
Is selling the most reasonable response in the face the new law? We believe it is not necessarily so, and that each case should be assessed individually. If you yourself are the owner of one or more apartments, please feel free to contact us. Together we can show you the possibilities according to all legal regulations and work out a secure and success-oriented strategy with you.
We are looking forward to hearing from you and will consult you with every question you might have regarding your investment: firstname.lastname@example.org