Prolongation of rental price cap announced
Germany Moves to Extend Statutory Rent Cap until 2029
In a bid to stabilize housing markets, particularly in regions with tight housing conditions, the German federal cabinet has proposed extending the statutory rent cap, known as the "rent brake," until December 31, 2029. This move follows escalating concerns over rising rents and housing affordability.
Federal Minister of Justice Stefanie Hubig, who oversees this matter, stated, "Housing should not become a luxury good." She believes that extending the rent brake will give tenants the protection they need, stating that "it's a matter of justice."
To ensure fairness in housing, the government aims to:- Introduce stricter rules for contracts with index-linked rents, aiming to prevent excessive price increases tied to inflation.- Create more transparency in ancillary costs, enabling tenants to understand their expenses better.
In addition to these measures, the government plans to address concerns over circumvention of the rent cap. It seeks to remove exemptions from the cap for modernization and older new buildings.
The extension of the rent brake is controversial with some critics arguing that it has not prevented price increases in metropolises and has made the construction of new apartments less attractive. However, the Ministry states that the legal regulation has, at least, slowed down the rent increase.
The extension of the rent brake is seen as a temporary measure, with the need for broader reforms to address broader issues in the housing sector. Some stakeholders, like the property owners' association Haus & Grund, have called for stronger measures like more building land, faster approvals, and lower costs to address housing shortages.
In light of the extended rent brake, concerns remain over its impact on investment in new buildings. LEG Immobilien SE anticipates that the extension could reduce incentives for such investments.
[1] Source: ntv.de, lar/rts[2] For details on tight housing markets, see data on municipalities with tight markets in North Rhine-Westphalia and Lower Saxony.[3] LEG Immobilien SE, Germany's largest property manager, stated its concern over the rent brake's impact on investment.
In the context of Germany's plan to extend the statutory rent cap, also known as the "rent brake," the government intends to implement stricter rules for employment contracts and community policies to ensure fair housing practices. These policies include introducing stricter rules for index-linked rents in employment contracts and creating more transparency in ancillary costs, which fall under the purview of general-news and business. Additionally, the government aims to address concerns over the rent cap's circumvention by removing exemptions from the cap for modernization and older new buildings, which brings finance and political aspects into focus as well.
