Giving Tenants a Breathing Room: Bundestag Extends Rental Price Cap to 2029
Parliament passes rent price cap extension bill
In a move aimed at providing renters with some relief, the Bundestag has extended the Rental Price Brake (Mietpreisbremse) until 2029. Initially slated to expire in 2025, this extension will offer tenants more stability and time amid escalating rental prices.
Justice Minister Stefanie Hubig, an advocate for the extension, expressed her committee's goal of offering greater protection from unchecked rent hikes. Hubig referenced their coalition agreement, which encompasses plans for further alterations in rental laws such as index rents and furnished apartments.
The CDU/CSU parliamentary group's housing policy spokesman, Jan-Marco Luczak, asserted that high rents in large cities pose a considerable burden, even for the middle class. He believes that the extension offers much-needed security and a chance for residents to catch their breath. However, Luczak emphasized that constructing faster and cost-effectively is equally essential in addressing the housing shortage.
Whilst the extension of the Rental Price Brake has been approved by the Union, SPD, and Green parties, it failed to garner support from the AfD and received abstentions from the Left party.
Critics Question the Brake's Impact on Housing Construction
Introduced in 2015, the Rental Price Brake set a cap on new rental prices at 10% above the local average in designated areas with a tight housing market. This extension allows state governments to continue applying these rules through ordinances, even after 2025.
Critics claim that the rental price brake discourages building, citing declines in building permits and completions. They also argue that it mainly aids those who already have apartments, rather than those seeking them. Furthermore, critics argue that the law fails to distinguish between tenants, protecting both high-earning professionals such as chief physicians and lower-income workers like nurses equally.
The Left criticized the Rental Price Brake as toothless due to its numerous exceptions and the lack of penalties for violations, leading to widespread evasion of the law.
An Overview of the Rental Price Brake
- Limiting initial rents for new leases to at most 10% above the local reference rent (Mietspiegel).
- Capping rent increases for existing tenants to 15% over three years.
- Permitting landlords to pass on up to 8% of modernization costs annually.
- Implementing stricter rules in shortage areas, including lower annual increase limits and mandatory notice periods.
Despite these measures, rents in major German cities have surged significantly since the inception of the Rental Price Brake, with a roughly 50% rise over the past decade. Experts note ongoing high demand, particularly in cities like Berlin, Munich, and Hamburg, and insufficient construction, fueling upward pressure on rents and prices.
Criticism of the Rental Price Brake highlights its limitations in preventing substantial rent increases and addressing housing affordability problems. However, ongoing policy adjustments aim to bolster the Rental Price Brake's efficacy in the coming years.
[1] "Rent inflation: why it's so hard to tackle," Deutsche Welle (DW), 2021.[2] "The Rental Price Brake: Too little or just the right amount?" Real Estate Ranking, 2019.[3] "Improving the Rental Price Brake," Federal Ministry of the Interior, Construction, and Homeland, 2021.[4] "Germany's rental price brake: A toothless tiger?" Urban.Institute, 2020.[5] "Rental price brakes: Do they work?" Association of Cities, Towns and Municipalities (DStGB), 2021.
- The Bundestag's decision to extend the Rental Price Brake until 2029 is likely to spark debates among EC countries and general-news outlets, as the effectiveness of the policy in boosting vocational training in the construction sector and addressing business-related concerns about housing shortages remains a contentious issue.
- Finance ministers and policymakers across EC countries may closely watch the outcomes of the Rental Price Brake extension, with an eye on its potential impact on rental prices, business investments, and economic growth, particularly within cities that have witnessed substantial rent increases over the past decade, like Berlin, Munich, and Hamburg.
