Berlin rent cap overturned by Germany’s top court

Berlin rent cap overturned by Germany’s top court

Germany’s constitutional court has decided that the Berlin rent cap violates Germany’s constitution. The cap was one of the most-debated laws in the country.

Germany’s constitutional court in Karlsruhe has ruled that the Berlin state government had no right to impose a rent cap in the German capital. 

The court ruling found that since the federal government had already made a law regulating rents, a state government could not impose its own law that infringed upon that, and said the Berlin rent cap law was therefore null and void. 

The constitutional complaint had been brought in May 2020 by Bundestag parliamentarians from the conservative Christian Democratic Union (CDU) and the pro-business Free Democratic Party (FDP), who both welcomed the decision on Thursday. 

Kai Wegner, spokesman for the CDU parliamentary group, called the decision a “sensitive defeat” for the Berlin government, who he blamed for making “a false rent cap promise” to the city’s renters. “The damage is great,” he said in a statement. “Ideology solves no problems, not in the housing market either. In the long-term only a sufficient supply of housing can secure affordable rents.”

The Berlin government had called the rent cap a “breathing space” for tenants while new housing could be built.

Berlin’s rent cap meant that rents for 90% of Berlin’s apartments were frozen for five years at their June 2019 level. New rents could not go above that level, and as of November 2020, any existing rents that were still above that level had to be reduced.

The Berlin rent cap has been one of the most debated laws in Germany over the past few years. Landlords claimed that it was unconstitutional because a state government could not interfere in an area that the federal government had already legislated on. 

Campaigners, meanwhile, argued it was a vital way to preserve affordable housing in the German capital, where rents have been soaring for years. The German Property Foundation (ZIA) calculated last year that rents in new contracts in the city had risen 27% from 2013 to 2019 alone.

The federal government imposed a “rent brake” in 2015, which allowed landlords to raise rents by 10% above the local market level. This law meant, the court ruled, that Berlin could not impose its own regulation infringing on that earlier law.

Since the law came into effect on February 23, 2020, it has caused uncertainty in the German capital’s housing market, largely because landlords have taken to putting a “shadow rent” — higher rents that tenants would have to pay in case the court found the rent cap unconstitutional — in their rental contracts.

Renters associations have called these shadow rents unlawful.

Thursday’s decision could mean a windfall for landlords as rents are instantly raised by hundreds of euros a month, on top of which landlords could now demand their tenants back-pay higher rents for the past year.

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