Image: © Nordenfan via Wikipedia Commons

Berlin is freezing everybody’s rent for 5 years

Rent controls are supposed to make housing more affordable, but some worry it'll lead to less homes being available.

Politicians in Berlin have just voted for rent controls in the city. There are a couple of other fiddly bits to do before it becomes official law, but because it will be applied retroactively (to stop landlords putting prices way up just before it comes in), most rented homes in Berlin will now have to be let at their current price for the next five years.,Plus, rents that the government considers too high will be lowered.

Rents can, however, still be raised in three instances: if the home is social housing, if the home is a new build, or if the landlord carries out lots of renovations (but in this case their rent increase has to be approved by the authorities).

Fans of rent controls think they’re a good way to make housing more affordable. Unaffordable housing - which the charity Shelter defines as costing more than 35 percent of your post-tax, after-benefits household income - is a big contributor to poverty and economic inequality. And because competition pushes rents up, poorer people can effectively be shut out of the most desirable places to live - places with lots of jobs or good transport links or fun things to do.

But some people think rent controls have a really problematic side-effect: it leads to less rented homes being available. That’s based on the theory that if there isn’t as much money in renting then lots of existing landlords will sell up (or ride the AirBnB wave) and lots of would-be landlords won’t buy properties to rent, meaning builders won’t build many new places cos there’s limited demand. (This also makes the assumption that most renters can’t afford - or don’t want - to buy their own place at current house prices). The housing market is one of the most seemingly complex and most talked about parts of the economy.

Read our explainer on: is renting good for the economy?

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