On November 23, more than 340,000 Berlin households – that’s one in six – became eligible for a rent reduction as the latest phase of the Mietendeckel, or rent cap, came into effect. Reductions were determined by rent limits imposed by the Berlin Senat. In some cases, those reductions amounted to hundreds of euros. Landlords were required to contact their tenants with their new, lowered rent, and it appears most of them – including landlord giants like Deutsche Wohnen – have done so, leaving many renters with substantial savings.
But the story isn’t over. The Mietendeckel’s fate now rests with the Federal Constitutional Court in Karlsruhe, where a panel of judges will weigh up its legality, including whether or not the Berlin Senat had the legal authority to implement such rules. One thing is clear: experts on either side, powerful real estate companies and local tenancy lawyers alike, are confident the decision will go their way. And they do agree on an important aspect: if your rent was lowered, don’t spend the difference just yet.
For an update on the situation, we spoke with Wibke Werner, a tenancy lawyer and deputy managing director of Berlin Tenants’ Association.
Berlin’s rents have doubled in the last 10 years. How did we get here?
There’s a problem with supply and demand, but it’s not the only reason. Another is that, in the absence of alternative investment opportunities since the global financial crisis, more and more companies have invested in real estate. Landlords renting out apartments must serve those investors in the background. More big investment companies are speculating in the real estate sector, which has led to higher rents. Rent increases are allowed through modernisation, so investors try to modernise the apartments, and therefore raise the rent. Before the Mietendeckel, this was a strategy by landlords. However, modernisations have declined sharply after a legislative reform on January 1, 2019, which severely restricted rent increases following modernisation.
It shows us they weren’t doing it to make better houses, but to get more money from their investments. With the rent cap, the possibility of a rent increase after a modernisation is again reduced, so many landlords have announced that they will no longer invest in the housing stock.
Real estate companies, like ImmoScout24, are already sharing material about the negative effects of the Mietendeckel, such as less apartments available to rent. Can we believe them?
We’ve seen some of those statements. And we also see that there aren’t as many apartments available to rent. The problem is that we don’t have enough apartments in Berlin, and we have a lot of demand for affordable housing. So the Mietendeckel is not the problem – the problem is that we don’t have enough flats. And, of course, because of the Mietendeckel, tenants don’t have a reason to leave their apartments. We also have the coronavirus crisis, so people are less likely to move houses at the moment, because they are unsure about their financial stability.
You can’t simply blame the problem of not having enough apartments on the Mietendeckel – there are other aspects you must keep in mind. Yes, there are more apartments for sale, but you have to look at how many are actually purchased. The number of sales is far lower.
What does your own research tell you about Mietendeckel?
I’ve calculated how many tenants’ houses benefited from the reductions from November 23. Using data from Berliner Mietspiegel 2019 I calculated 365,000 households – a similar number to the Berlin Senat’s. We now need to find out how many landlords actually reduced the rents. We’ve heard the bigger landlords, like Deutsche Wohnen, have already reduced the rents. But we don’t know about the private landlords.
Another problem is for tenants with new leases. At the moment, the landlords can only ask for the rent at the Mietendeckel price. But, in reality, they are including two rents in the lease – a “shadow rent” – and that’s a big problem. At the moment, they only ask for the Mietendeckel rate, but in the case the law is struck down, they will ask for a higher rent.
Is this allowed?
We say it’s not, because it’s not transparent for the tenants. But there are very different perspectives around this. There are a lot of questions at the moment, and usually tenants signing leases don’t have any other options – they’re unable to wait for the court’s decision.
A rent cap in Bavaria was recently struck down by a constitutional court. What’s the difference there?
The Bavarian rent cap relied too heavily on civil law. In Berlin, we say we’re not using civil law – or tenant’s law – but public law. This is a big difference, because the question is whether or not Berlin has the legislative competence for such a law. The same question was asked in the Bavarian case.
The state of Berlin refers to a competence title called Wohnungswesen in Germany’s basic law. According to this title, the state of Berlin may enact public law. Critics say the Mietendeckel doesn’t regulate Wohnungswesen, but is pure tenancy law, which only the federal government has the competence to do. In Bavaria, the court decided they didn’t, because it was pure tenancy law, and that can only be passed by the Federal government.
But the Bavarian law and Berlin laws are different. The Berlin rent cap has clear elements of a public law, like the competence of an authority that can impose a fine in case of violations.
What exactly will the judges consider?
There are different proceedings pending before the Federal Constitutional Court, which are decided by two different senates of the court. In one of the proceedings, the political parties CDU, CSU and FDP have filed a lawsuit for a review of the terms. The issue at stake is whether Berlin has the legislative power to pass the law. In the other proceedings, landlords filed constitutional complaints with the Federal Constitutional Court. This is intended to clarify whether the rent cap encroaches too much on the landlords’ property rights.
And what’s your personal opinion on the Mietendeckel’s chances?
I’m pretty optimistic. I think Berlin has the competence, especially since there have already been public regulations on rent in the past for which Berlin had such competence. So far, we’ve had two decisions from the Federal Constitutional Court related to this. In October, landlords tried to stop the rent reductions from taking place in November. There, the court said that the question of Berlin’s legislative competence was still open – it hadn’t been decided. That’s a good sign.
In the same ruling, they also said the landlord’s problems – the reason the landlords sought to delay the reduction – weren’t strong enough to delay the Mietendeckel. We think that, if the court decides Berlin has the competence, then the second element, the reduced rents, will be passed, too. Maybe some points will be corrected, but I think most parts will remain.
Some tenants have been told they will need to repay the difference in rent if the law is struck down. Is this legal?
Since we cannot predict what the Federal Constitutional Court will decide next year, we recommend that anyone who reduces their rent should save the difference. If the Federal Constitutional Court declares the rent cap unconstitutional, the amounts saved may have to be paid back. However, it is also possible that the court may declare the rent cap unconstitutional, but only for the future, so that no repayments are due. Of course, it would be best if the court confirms the rent cap. We expect a decision in the middle of next year.