On 23 February 2020, the so-called Berlin Rent Cap regulation came into effect:
"The policy freezes rents on about 1.4 million homes for the next five years, at the rate that they were rented for on June 18, 2019 — the day that state Senate decided on the first key points of the measure." (Source: Deutsche Welle)
"It represents a law of the federal state of Berlin creating rent limitations based on its federal authority for housing. It prohibits exceeding of these caps and includes fines for breach of this law. The law is effective for a period of five years.
"The rent freeze law does not apply to publicly funded residential accommodations (social housing) and not to flats repaired or modernized with public funds and which are subject to rent control.
"In addition, the law does not apply to new buildings which became ready for occupancy for the first time on or after 1 January 2014 and not to former living space permanently uninhabitable or vacant which was restored for residential purposes with expenses corresponding to newly built space.!
Source and more information: Berliner Mieterverein (Berlin Tenants' Association)
A few days after the Berlin Rent Cap came into effect, Deutsche Bank, one of the biggest European banks, published an analysis aimed at investors of how the Rent Camp might affect the Berlin housing market: "Rent cap may decouple real estate cycle from economic supercycle for a number of years" (PDF, 650KB)
The key points of the report are:
The key message: if the rent cap is constitutional, the situation for investors will change dramatically. (...) Risk-averse, short-term oriented investors have incentives to leave the Berlin market. We believe Berlin remains an attractive market for long-term oriented investors.
Previous regulatory approaches including rent brakes, revisions to the rent index, and a housing summit were footnotes in the German real estate boom.
The city senate’s main concern is freezing rents across the entire private residential market for five years.
This also legally prohibits rent increases until 2021. After that point, rent increases of 1.3% per year will be permitted.
The economic supercycle in Berlin marches on undiminished.
The negative effects of the rent cap on the housing market are likely to emerge clearly in the long run. We therefore do not expect the scheme to be extended beyond 2030 and believe that Berlin remains an attractive location for long-term oriented investors on account of the economic supercycle.