Tenants' rights

Germany tightens rent controls amid housing shortage

Wohnungsbau am Gleisdreieck in Berlin
Housing shortage? What housing shortage? Source: DPA

Germany has some of the toughest rent control laws in Europe, but the government wants to make them tougher still.

A new bill approved by the cabinet calls for fuller disclosure of previous rents, reduces opportunities to increase rents after “modernization” work, and puts the burden of proof on the landlord to show such renovation improves the value of the property.

It is part of the coalition’s attempt to ease a critical housing shortage in booming metropolitan areas and to protect tenants against landlords tempted to price-gouge in this environment. The majority of Germans rent their homes rather than own them, with the percentage of renters in cities such as Berlin as high as 85 percent. This makes rent controls a hot topic.

Existing laws limit rent increases in new leases in under-pressure markets to a maximum of 10 percent above the average rent in the area. The new bill requires landlords to inform new renters if the previous rent was below that average. For existing rentals, the landlord is allowed to raise the rent to the area average, though no more than 20 percent over a three-year period.

Better living?

The other provisions target the “modernization” loophole, the most contentious aspect of existing rent control laws. A landlord can’t charge for keeping a property up to standard, but can add a surcharge for renovation that raises the standard – for instance, installing double-paned glass. The surcharge is capped at €3 ($3.50) per square meter (11 square feet) over a six-year period. When there is a dispute, the landlord must supply proof of what the improvement cost.

The new bill reduces the maximum amount that can be charged from 11 percent of the cost of the work per year for five years to 8 percent. Renovations costing less than €10,000 will simply be split as 30 percent to maintenance and 70 percent to modernization.

In principle, renters have to go along with such modernization. But the renter does not have to pay for luxury renovations – replacing a laminate floor with marble, for instance. And a landlord who plans a renovation simply to force out a renter faces a fine up to €100,000.

Landlords are not allowed to terminate leases simply to raise rents. The most common justification for getting rid of renters is to claim own use, which is limited to the owner or a direct family member. A fake claim for own use can be expensive because the renter can claim damages. One recent case involved a Hamburg woman whose lease was terminated by an owner claiming own use, but who instead rented the apartment out through Airbnb.

Renters are not allowed to sublease through the likes of Airbnb or for any other purpose without the express permission of the landlord. Violations can be grounds for termination, though the landlord must give at least warning notice.

Matthias Streit is a financial reporter for Handelsblatt. Darrell Delamaide adapted this article into English. To contact the author: streit@handelsblatt.com

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