German Constitutional Court Scraps Controversial Berlin Rent Cap

Germany’s constitutional court has struck down the city of
Berlin’s controversial rent cap, after a year of legal battles
between supporters of landlords and real estate companies, and
grassroots campaigners fighting rising rents in the capital.

In its decision on Thursday, the country’s highest court
declared the Berlin rental controls null and void, saying the
federal government had already passed laws to regulate the rental
market and no further action was needed by regional
authorities.

“There is no room for the legislative power of the states, due
to the blocking effect of federal law,” the court said in its
decision.

Germany’s 2015 nationwide rent freeze was meant to control
prices in sought-after residential areas. But last year, Berlin’s
senate enforced its own rental caps in response to popular
campaigns arguing the national law did not go far enough to tackle
gentrification and soaring prices in Berlin. Before the pandemic,
the city had become a haven for Brexit refugees, artists and
aspiring tech entrepreneurs, its population growing by 40,000 a
year.

Real estate companies, the construction industry and
conservative politicians responded with outrage, arguing the move
could devastate Berlin’s investment climate, already plagued by
excessive bureaucracy and planning delays.

The constitutional court effectively upheld a complaint against
the rent cap brought by 280 Bundestag MPs from the centre-right
CDU/CSU bloc and the pro-business Free Democratic party who came
together to argue that the Berlin government had exceeded its
powers in enacting the law, straying into an area that was the sole
responsibility of the federal authorities.

Shares rose in German property companies invested in Berlin,
including Vonovia and Deutsche Wohnen (DW), Berlin’s biggest
landlord and one of the main targets of those fighting rising rents
in the capital.

When the Berlin regulation was enforced, many landlords had
notified tenants they could be required to repay rent trimmed by
the cap, should the court rule in their favour. But landlord
Vonovia announced after the ruling that it would not request back
rent.

Speaking to the German newspaper, Der Spiegel, Vonovia boss Rolf
Boch said the verdict would not solve rising tensions within the
city, or its housing crisis.

“It would be an illusion to believe that the decision will
simply be accepted by politicians and initiatives and that
everything will be turned back to the time before the rental cap
was introduced, ” he said.

The cap had popular support in Berlin, particularly because of
anger towards private developers such as DW, which gained a
reputation for renovating buildings and then raising rents. The
company argues its pricing was always within regulations.

Berlin tenant groups regularly accuse large real estate
companies of not performing maintenance or fixing heating, leading
to multiple complaints during this winter’s subfreezing
temperatures.

Opponents of Berlin’s rental cap, however, argued the
regulations would never have solved tenants’ problems, and could
instead worsen the supply of rental units by discouraging
investment and construction.

“Instead of populist symbolic politics, effective, realpolitik
measures are needed to take pressure off the housing markets,” said
Wolfgang Steiger, secretary-general of the CDU’s Economic Council.
“What we need above all are faster building or type approval
procedures . . . The influx into the metropolitan areas can be
absorbed only by the construction of new apartments.”

But the fight looks far from over in Berlin.

A movement of activists and residents is already pursuing a more
radical step — a campaign called “Expropriate Deutsche Wohnen &
Co”, which demands that Berlin “socialise” about 200,000 flats,
most belonging to DW.

Supporters of the rental cap on Thursday saw a silver lining in
the court’s move to block state legislation, arguing they could
still fight against gentrification and soaring rents by taking
their fight nationally.

“If the federal states cannot regulate it, we will address the
federal government with all our strength and a nationwide one
#Mietenstopp [rent cap],” the Berlin Tenants’ Association wrote on
Twitter. “Fight for millions of tenant households in Germany that
need security!”

Germany’s constitutional court has struck down the city of
Berlin’s controversial rent cap, after a year of legal battles
between supporters of landlords and real estate companies, and
grassroots campaigners fighting rising rents in the capital.

In its decision on Thursday, the country’s highest court
declared the Berlin rental controls null and void, saying the
federal government had already passed laws to regulate the rental
market and no further action was needed by regional
authorities.

“There is no room for the legislative power of the states, due
to the blocking effect of federal law,” the court said in its
decision.

Germany’s 2015 nationwide rent freeze was meant to control
prices in sought-after residential areas. But last year, Berlin’s
senate enforced its own rental caps in response to popular
campaigns arguing the national law did not go far enough to tackle
gentrification and soaring prices in Berlin. Before the pandemic,
the city had become a haven for Brexit refugees, artists and
aspiring tech entrepreneurs, its population growing by 40,000 a
year.

Real estate companies, the construction industry and
conservative politicians responded with outrage, arguing the move
could devastate Berlin’s investment climate, already plagued by
excessive bureaucracy and planning delays.

The constitutional court effectively upheld a complaint against
the rent cap brought by 280 Bundestag MPs from the centre-right
CDU/CSU bloc and the pro-business Free Democratic party who came
together to argue that the Berlin government had exceeded its
powers in enacting the law, straying into an area that was the sole
responsibility of the federal authorities.

Shares rose in German property companies invested in Berlin,
including Vonovia and Deutsche Wohnen (DW), Berlin’s biggest
landlord and one of the main targets of those fighting rising rents
in the capital.

When the Berlin regulation was enforced, many landlords had
notified tenants they could be required to repay rent trimmed by
the cap, should the court rule in their favour. But landlord
Vonovia announced after the ruling that it would not request back
rent.

Speaking to the German newspaper, Der Spiegel, Vonovia boss Rolf
Boch said the verdict would not solve rising tensions within the
city, or its housing crisis.

“It would be an illusion to believe that the decision will
simply be accepted by politicians and initiatives and that
everything will be turned back to the time before the rental cap
was introduced, ” he said.

The cap had popular support in Berlin, particularly because of
anger towards private developers such as DW, which gained a
reputation for renovating buildings and then raising rents. The
company argues its pricing was always within regulations.

Berlin tenant groups regularly accuse large real estate
companies of not performing maintenance or fixing heating, leading
to multiple complaints during this winter’s subfreezing
temperatures.

Opponents of Berlin’s rental cap, however, argued the
regulations would never have solved tenants’ problems, and could
instead worsen the supply of rental units by discouraging
investment and construction.

“Instead of populist symbolic politics, effective, realpolitik
measures are needed to take pressure off the housing markets,” said
Wolfgang Steiger, secretary-general of the CDU’s Economic Council.
“What we need above all are faster building or type approval
procedures . . . The influx into the metropolitan areas can be
absorbed only by the construction of new apartments.”

But the fight looks far from over in Berlin.

A movement of activists and residents is already pursuing a more
radical step — a campaign called “Expropriate Deutsche Wohnen &
Co”, which demands that Berlin “socialise” about 200,000 flats,
most belonging to DW.

Supporters of the rental cap on Thursday saw a silver lining in
the court’s move to block state legislation, arguing they could
still fight against gentrification and soaring rents by taking
their fight nationally.

“If the federal states cannot regulate it, we will address the
federal government with all our strength and a nationwide one
#Mietenstopp [rent cap],” the Berlin Tenants’ Association wrote on
Twitter. “Fight for millions of tenant households in Germany that
need security!”