Why Berlin is paradise for renters: a 1,100 sq ft flat could be capped at US$886 a month under new rules
- Berlin’s city government considers plan to cap rents as part of a rent freeze agreed earlier this year
Even though it was long considered a paradise for renters with prices so cheap that hardly anyone wanted to buy their own flat, steep increases in recent years have rattled Berlin to the point that the city government is working on plans to impose a five-year freeze on rents – and possibly even to force some landlords to cut their prices.
The draconian measures being drafted by the city housing department comes amid rising pressure for action from the public, where about 85 per cent of the residents are renters with only about 15 per cent owning their flat.
A doubling in rents over the last decade, albeit from strikingly low levels, has also revived nostalgic memories of the Communist past in the eastern half of the city, where the clamouring for dirt-cheap rents after a half-century of socialism is especially loud and home ownership rates are even lower.
“We want to put up a ‘stop sign’ against speculation and fight for affordable rents in a social city,” said the Berlin city government minister in charge of housing, Katrin Lompscher, a local leader in the Left party that traces its origins to the Communist SED party.
She is also looking into public demands to expropriate property from some of the private companies that, critics say, have raised rents excessively since acquiring formerly public housing at rock bottom prices more than a decade ago.
It is, however, uncertain if the other two parties in the Berlin city coalition government, the Social Democrats and Greens, will agree to such extreme measures.
“We do want to make Berlin unattractive for international capital investors who are hunting for large profits with these steps like the cap on rents,” Caren Lay, a member of the federal parliament for the Left party, told South China Morning Post.
She added the city had become a hotspot for speculators in recent years from China, the United States and countries across Europe precisely because rent levels had once been so low – and are still fairly moderate by international standards.
“We want to protect renters from being forced out of their neighbourhoods.”
Lay, who is leading the charge against rising rents and hopes efforts will spread to other cities in Germany, said Berlin’s traditionally low rents had helped make the German capital a haven “for artists and writers and intellectuals from around the world who came here because you can get by without a lot of money
“That’s what made Berlin special.”
The controversial draft of the plans to put a citywide cap on rents at €7.97 (US$8.60) per square metre from January for all flats built before 2014 was leaked to the media this week and triggered passionate debate across the country.
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The monthly rent for a 1,100 sq ft flat would thus be limited to about €800 (US$886) – and that could mean, according to local media reports, that rents for about half the flats in Berlin would have to be lowered and in some cases even halved.
While some argue the rent freeze and rent cuts, if enacted, would only exacerbate the worsening housing shortage by scaring away property developers from the city of 3.7 million, others say it is the only way to stop “speculators” and maintain Berlin as a culturally diverse city where people with low or medium incomes can afford to live in the same buildings as millionaires.
We want to protect renters from being forced out of their neighbourhoods
“Putting a cap on rents will only worsen the housing shortage and won’t create a single new apartment,” said Horst Seehofer, Interior Minister in Chancellor Angela Merkel’s cabinet.
“It would send the wrong signal and only frighten investors away.”
The Berlin population was stagnant for about two decades after the Berlin Wall fell in 1989 but in the last decade it has been growing by 40,000 people per year. But only about 16,000 housing units were added last year.
It is generally not possible to build apartment buildings taller than five storeys because laws from 1862 limiting the height of buildings to 22 metres for fire protection reasons at the time are still on the books.
The city has just 14 office buildings and hotels that are more than 100 meters tall.
Even though rising rents have long been a fact of modern urban life in cities from Hong Kong to New York, many Berliners accustomed to decades of cheap rents eschew any notion that trend is inexorable in the German capital.
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They claim German exceptionalism when it comes to housing and point out that the country’s constitution guarantees everyone the right to “Wohnraum”, or a place to live.
Housing is not a commodity, they argue. Indeed, it is extremely difficult to evict tenants who pay their rent on time and don’t break any laws.
Berlin was on the verge of bankruptcy at the turn of the century, plagued by high levels of unemployment and vacancy rates.
Property prices fell in some areas from the early 1990s through the early 2000s and the deeply indebted city sold more than 220,000 of the 360,000 rent-subsidised social housing units when prices were depressed.
A former mayor, Klaus Wowereit, coined the slogan “poor but sexy” that along with low rents helped draw artists, Bohemians and start-ups from across Germany and around the world.
But rents have doubled in the last decade and the price of a standard 750 sq ft flat has risen to €1,100 (U$1,200), according to local property indices.
“We want rent levels that are affordable for the vast majority of the population,” said Rainer Wild, managing director of the Berliner Mieterverein renters lobby association.
“We don’t want a city where only the rich live with the rich and the poor with the poor. We want to keep it all mixed.”
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Thomas Jaeger, a political scientist at the University of Cologne, said the housing shortage had become a major political issue in Germany but that Berlin’s socialist leanings would probably not catch on anywhere else in the country.
He attributed those Utopian hopes, in part, to the city’s Communist past.
“It’s an ideological problem in Berlin where some people think you can solve problems like the housing shortage by freezing rents or expropriating property,” Jaeger said.
“There’s a subculture that still believes in that ‘poor but sexy’. But the reality is the moment you make threats like that, the problem will only get worse because investors will bail out. Munich, Hamburg and Frankfurt are also facing similar problems with rising rents but coming up with other answers.”
