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Controversial Rent Cap Kicks In

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  • Why it matters

    Why it matters

    The rent cap aims to prevent landlords from exploiting tenants in popular urban areas but the measures have been attacked as both too strict and not strict enough.

  • Facts

    Facts

    • Eight German states plan to introduce rent controls by early 2015.
    • Under the new law, landlords will only be allowed to raise rents by 10 percent over a benchmark figure.
    • Critics say that the new measures will lead to rent controls only applying in cities, not entire states.
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    Audio

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Dirk Hilbert is actually opposed to Germany’s new rent cap. But the Dresden city council demands that Mr. Hilbert, the city’s newly elected mayor and a member of the pro-business Free Democratic Party, introduce the new rent control law, known as the “Mietpreisbremse,” which was approved by the federal government more than a year ago.

The government of Saxony, where Dresden is located, has commissioned a study to determine whether a rent cap is truly necessary in the eastern German state, given that such a measure is such a serious intervention in the marketplace. The report is expected by this fall.

Other German states are much further along, according to a survey of all 16 German states conducted by Handelsblatt. Bavaria was the first to introduce the cap in 144 towns, followed by the city-states of Berlin and Hamburg and the industrial state of North Rhine-Westphalia. Nine additional states plan to introduce rent controls by 2016.

Under the scheme, the rent for new tenancy contracts can only be up to 10 percent higher than the local reference rent, which is set by the local authorities. The goal is to control spiraling rental prices in popular urban areas.

The cap will apply to about 20 percent of all rental properties in Germany by the beginning of next month, according to the German Tenants Association (DMB).

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