Senate of Berlin Moves to Toughen Landlord-Tenant Law
The Senate of Berlin is planning a legal initiative in Germany’s upper house, the Bundesrat, that would drastically tighten existing landlord-tenant legislation. Berlin’s state government passed a draft bill to that effect on 25 April. The bill is to be discussed in the Bundesrat in July.1
The idea behind the initiative floated by the left-wing senate coalition of Social Democrats, Left Party and Greens is to add several severe constraints to landlord-tenant law. If the Senate gets its way, the so-called “rent freeze,” a state-level rent control measure that will expire at the end of 2020 in Berlin, will be made permanent. The rent-freeze exemptions that apply to thoroughly modernised flats and to passing rents that exceeded the permitted headline rent at the time the rent freeze entered into effect are to be abolished. Moreover, it is planned to lower the mark-up limits for furnished apartments.2
Senate Plans Would Cause a General Rent Freeze
At the same time, the Senate of Berlin intends to reform the modernisation allocation. From a currently permitted rent hike of eleven percent after modernisation measures, the tolerance will be lowered to six percent and be temporally limited to the time it takes the allocation to refinance the refurbishment. Rent increases motivated by modernisations are also not supposed to exceed two euros per square metre within an eight-year period.
The rent increase cap, which currently limits the rent growth to a maximum of 15 percent over any period of three years, is moreover to be expanded to apply to a five-year period. But Berlin’s state government also wants to reform the way the rent index is compiled. The reference period used to calculate the local reference rent is to be extended from currently four to ten years, which in the eyes of real estate experts will, for all practical purposes, be tantamount to a rent freeze.3
Upper House Legal Initiative at Odds with Mayor’s Protestations
Although the coalition agreement of the Grand Coalition that forms the incumbent federal government also envisions regulatory efforts to amend landlord-tenant law—for instance by tightening rent control or by curbing tolerated modernisation allocations—the initiative by the Senate of Berlin goes far beyond the plans of the federal government. This is remarkable insofar as the Lord Mayor of Berlin, Social Democrat Michael Müller, played a part in negotiating the housing policy of the Grand Coalition on the federal level on behalf of the Social Democrats. What is more, Berlin’s state government with its legal initiative in Germany’s upper house and the drastic rent restrictions it seeks to enact contradict announcements the Lord Mayor himself made more than once in recent months. In the time since late 2017, Müller repeatedly criticised the housing policy of the left-wing Senate for its bias in favour of tenant rights, and emphasised the need to meet the housing industry half way because of the current housing shortage.4
It is in any case rather unlikely that the legislative initiative the Senate of Berlin introduced in the Bundesrat will ever enter into law. Even if it carried the vote in the upper house, the draft bill would be forwarded to Germany’s lower house, the Bundestag, where its chances are narrow, given the present majority ratios.