Rent controls, which have been widely publicized, are often a cause of concern for investors. Luckily, despite the hype, for investors of new builds the laws are not a problem. This article lays out the details so you can feel secure in your investments potential returns.
What are the rent controls?
In Berlin and other major German cities, rents on new leases for existing property owners are rising at an above-average rate. For this reason, legislators announced in April 2015 the law to dampen rent increases in housing markets with a tight supply of newly available housing under the following legislation: Mietrechtsnovellierunsgesetzes (MietNovG). These Rent Controls came into effect throughout Berlin as of 1st June 2015.
What are the limits to rental increases on Rent Controlled Units?
As a landlord for a rent-controlled property you can only increase the rent by a maximum of 10% above the average local rent. The average rents can be checked on the following site by inputting the street name and number: http://www.stadtentwicklung.berlin.de/wohnen/mietspiegel/
In addition to the above, even in the event the current rent is significantly below the average, landlords are only allowed to increase rent by a maximum of 20% over a three-year period.
As of June 2019, due to rapidly escalating rents and pressure from local Berliners, the Berlin senate decided to regulate these units even further by approving a five-year rent freeze to take effect from January 2020 on all previously rent controlled units. In all other parts of Germany the standard rent controls were still in effect.
As was predicted, this rent freeze faced opposition as it acted against the rules for rent control imposed by the national government to be applied throughout Germany. In 2020 this freeze was deemed unconstitutional and landlords were able to claim rents to make up for any lost income. The rules in Berlin now once again follow the rent controls of Germany as a whole.
Exceptions to the Rent Freeze & Rent Controls
The rent controls are only applicable to residential units completed as of October 2014. Any newly built housing beyond the 1st October 2014 are to be excluded and landlords are permitted to raise rents for these units without restriction. These apartments fetch anywhere between 50%-100% higher rents.
Social apartments will equally not be subject to any new regulations. These units may be let out for €6.50 per square meter with an increase of 20 cents per year for the duration the apartments are regulated to be social. This can vary by development and is determined by the planning authorities but usually falls between the range of 20 to 30 years after which they become normal newly built units and can be let out without restriction.
