The new federal government has decided: The rent freeze will be extended until the end of 2029. This means that one of the key instruments for regulating rents in tight housing markets will remain in place – to the delight of many tenants, but not without criticism from the real estate industry.
What does the rent freeze regulate?
In cities and municipalities with a tight housing situation, the rent for re-letting may not exceed an upper limit: a maximum of 10 percent above the local comparative rent. Exceptions apply to new buildings and extensively modernized apartments, among others.
The extension affects all of the existing regulations – supplemented by plans to improve enforcement and increase transparency. For example, there are plans to strengthen landlords’ obligations to provide information and to extend the areas affected by the federal states.
What does this mean for landlords?
In future, landlords must continue to ensure that all the criteria of the rent freeze are met for new lettings – provided the property is located in one of the affected areas. Violations may entitle tenants to reclaim rent paid in excess. The obligation to disclose the previous rent or any modernization work carried out also remains in place.
Relief yes – but is that enough for the housing market?
As much as the extension means stability for tenants in the short term, the question is whether the instrument can solve the real problem in the medium and long term: the glaring housing shortage in major German cities.
This is because the rent freeze protects existing tenants, but does not create any real incentive for the construction of new apartments. Private investors and smaller property developers in particular could be deterred by continued regulation. At the same time, construction costs, interest rates and requirements are rising – and the profitability of new projects continues to fall. This is slowing down precisely the area that could provide sustainable relief on the housing market.
Criticism from the industry
Many experts and associations warn that if you want to secure affordable housing, you need to facilitate new construction, speed up planning procedures and promote investment – not further inhibit the market mechanics with ever new interventions. Extending the rent freeze may alleviate symptoms in the short term, but it does not solve the structural causes of the housing shortage.
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