The Mitendecker and Heimstatten's Impact on Property Investments

This month residents of Berlin should experience the biggest collective rent reduction in history. About 340,000 residents - one in six - may be eligible for a rent cut under the Mietendeckel, Berlin’s radical new housing policy. But landlords are doing their best to stop it.

On November 23 landlords must reduce rents to regulation levels or face fines of €500,000. Tenants can check if they're paying too much at this website: http://www.mietendeckel.berlin.de And they can cheating landlords to the city government here: https://service.berlin.de/dienstleistung/330040/

Anyone who gets a rent reduction should save the money, as they might have to pay it back. The Mietendeckel is being challenged in Germany's constitutional court, with a ruling expected in mid-2021. Jöran Mandik explains the court process - and the judges' red robes.

Furnished flats are not exempt from the Mietendeckel. But some companies are offering a buy-and-lease-back service model to help landlords get around the law. Tenants are told they have no choice but to rent both the flat and the furniture together. Other tricks include renting expensive basements, parking spaces and coworking desks inside their flat.

Double contracts have become standard: residents are offered two prices - a lower one that matches the rent freeze legislation, and a higher one they'll have ot pay if the law is later ruled unconstitutional. Such double contracts are most likely legal and enforceable, says rental expert Daniel Halmer from Conny.de (formerly Wenigermiete). But they could still be challenged using the Mietpriesbremse law, an older regulation which limits rent prices under some conditions.

What's the effect of the rent freeze so far? If you already have an apartment, the rent freeze appears to be working as expected. If you’re looking for an apartment, things are tougher due to landlords restricting supply. A study by the ZIA found average rental prices have sunk by 5.7% in the first half of 2020. But availability has also fallen by about 50%, as property owners withhold empty flats from the market. For new flats built after 2014 - which are exempt from the Mietendeckel - prices are up 7.5%, and availability has increased by 18%, according to real estate portal ImmobilienScout24.

Swedish property management company Heimstaden Bostat isn't deterred by the rent freeze. The company is trying to purchase about 130 buildings with almost 4000 apartments at a cost of €830 million. Heimstaden told us they had factored the rental regulations into their financial planning.

Researcher Christoph Trautwetter recently produced a report called 'Who Owns Berlin' for the Rosa Luxemburg Stiftung. He debunks the myth that warned the Mietendeckel would scare investors away. "There is an excess of capital looking to invest under any condition, and ready to accept the Mietendeckel as a condition to invest in Berlin," Trautwetter said. You can read his report here: https://www.rosalux.de/publikation/id/43284

Next up on this series - who is to blame for Berlin's lack of new properties? We'll also hear from small-time landlords who face financial ruin under the rent freeze.

Rent Freeze is produced and presented by Joel Dullroy, Maisie Hitchcock, Jöran Mandik and Daniel Stern. Music by Tom Evans. Artwork by Jim Avignon. Produced in partnership with RadioEins, Berlin's public broadcaster.

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