Critics within the real estate sector express stern disapproval towards the proposed extension of rent control measures. - Critics in the real estate sector vehemently oppose the expansion of the rent cap policy.
Federal government extends rental price brake, drawing mixed reactions from real estate industry
The federal cabinet approved the extension of the rental price brake until the end of 2029 on Wednesday. Under the measure, federal states can cap rental price increases for new tenants in high-demand areas by no more than 10 percent above the local average.
The rent control provision, applicable to over 400 municipalities, was initially set to expire in 2024. However, the coalition government led by the CDU and SPD has extended it until at least December 31, 2029.
The government believes that the rental price brake protects tenants from escalating rents and prevents the housing market from becoming unaffordable. Justice Minister Stefanie Hubig underscored the importance of safeguarding tenants' rights and promoting transparency in ancillary costs.
Additional measures have also been proposed, including stricter rules for index-linked rents, closing loopholes for furnished and short-term rentals, and amending modernization levies by increasing the threshold for minor modernizations from €10,000 to €20,000.
Tenant advocacy groups have largely welcomed the extension, acknowledging its necessity for shielding tenants in high-demand cities such as Berlin. However, they have also called for tighter regulations, particularly in light of exceptions for new constructions.
Representatives from the real estate and investment sectors, on the other hand, argue that rent controls diminish incentives for housing investment. They claim that such measures restrict the supply of housing, suggesting that increased construction is a more effective long-term solution to housing shortages.
The planned changes to modernization levies are seen as an attempt to incentivize landlords to invest in maintenance and upgrades, though its effectiveness in encouraging broader investment in new housing remains uncertain.
Stakeholder Type Main Response to Rental Price Brake Extension
Tenant Organizations Strong support; argue for even tighter regulationsLandlords/Investors Critical; claim reduced investment incentives
The extension of the rental price brake is met with support from tenant advocacy groups, who maintain that it is vital for securing tenant protections but call for additional measures. In contrast, the real estate industry, particularly the landlord and investor sector, criticizes the extension for undermining investment incentives, advocating instead for increased housing construction.
Vocational training programs could be implemented for real-estate investors and landlords to educate them about the economic benefits of maintaining affordable housing, aligning with the government's community policy. Finance institutions might consider investing in vocational training initiatives that focus on sustainable real-estate development and affordable housing solutions, thereby promoting long-term investment in the sector.
