Berlin’s rent cap should lead to some relief in the tense rental market. A new study now shows: In fact, it has drastically reduced the supply of apartments.
It was controversial from the start, and now it’s clear once again that Berlin’s rent cap, which has since been struck down by a court, has done more harm than good to the capital’s housing market. At least that is the conclusion reached by the Munich Ifo Institute in a study published on Tuesday.
Consequently, the supply of rental apartments in Berlin has been reduced by 60 percent as a result of the cap. It has remained at this level ever since, the researchers said. “Even after the rent cap was announced, the supply of apartments in Berlin fell sharply,” says Ifo expert Mathias Dolls.
With the single rent cap across the country, Berlin’s red-red-green state government is gearing up to curb rising rents in the capital. Between 2015 and 2020 alone, rents in Berlin increased by more than 40%, starting from a significantly lower level than other cities such as Munich.
“The recovery effect can be observed”
State intervention in the market managed to stop this increase, according to the Ifo researchers. On average, rents per square meter in Berlin increased eleven percentage points less than in other German metropolises.
However, with the abolition of the ceiling, the rents in the affected apartments have increased significantly again. “A recovery effect can be observed,” said Ifo researcher Florian Neumeier. “However, rental prices are still not at the level they would be if the rent cap had not existed.”
The introduction of the rent cap has led to a split in the property market in Berlin, the institute continues. Since the rent cap was abolished, rent levels in formerly regulated and unregulated areas have converged again, but only slowly.
The rent cap was unconstitutional
The rent cap was declared unconstitutional by the Federal Constitutional Court in April 2021. The reason for this was that Berlin was not responsible for this form of legislation.
Previously, numerous business associations and the CDU, FDP and AfD opposition parties in Berlin had strongly criticized the cap, partly out of fear of the consequences that the Ifo Institute says it has actually caused.