How will your landlord react if the rent cap is unconstitutional?

The city's biggest landlords told us how they'll react if the country's highest court says the law is a no-no.

We see apartments, landlords see euro signs.
We see apartments, landlords see euro signs.imago images

Berlin - While the Mietendeckel rent cap forced thousands of the city's biggest landlords to lower the rent on thousands of flats last year, the country's top court has yet to rule on the controversial law – a decision is expected by July. If the court overturns the law, tenants may face steep bills for back rent but just how landlords would claw back that cash differs.

How do we know? We asked.  

Sweden's Akelius, which owns owns about 14,000 apartments in Berlin, says it would take a hard line. It would "reclaim" the difference between the lowered rent and the original rent, according to Jordan Milewicz, Akelius' European head.

"The rent cap costs us around €20 million a year," he said. Prior to the Mietendeckel, Akelius averaged €9.33/sqm for existing leases and €14.66/sqm for new tenants, he said. The rent cap has lowered the level significantly to €9.13 and €11.38, respectively.

The five-year cap came into force on 23 February 2020. Rents were initially frozen at the level of 18 June 2019, which affected about 1.5 million apartments. The second stage started on 23 November 2020 and required rents that exceeded the legal limit by more than 20 per cent to be lowered.

While the rent cap is clearly controversial, the mandate Berlin's government – known as the Senat – used to lower the rent is equally contentious. The Senat cited the 2006 federalism reform, which assigned responsibility for housing to the states. But legal experts quibble over whether the state of Berlin has the authority for a rent cap.

Regardless of the legal foundation, the Senat advises tenants who had their rent lowered to squirrel away the difference in case the top court – the Federal Constitutional Court – overturns the rent cap.

Deutsche Wohnen is Berlin's largest private landlord and owns more than 110,000 flats in Berlin (as of 30 September 2020) and will also expect to be paid. 

Individual solutions

"If the rent cap falls, we have to reclaim rents," says company spokesman Marko Rosteck. Like the Senat, Deutsche Wohnen recommends tenants save the reduced portion of their rent payments. But the company is willing to talk. 

"If there are back rent charges, we will have to find individual solutions in individual cases to not put too much of a burden on tenants," Rosteck said. The Deutsche Wohnen spokesman said back-rent could be a "general problem" for Berlin's tenants and landlords and suggests political involvement.

While Deutsche Wohnen reported an average rent of €6.96/sqm in its portfolio before the Mietendeckel, it fell to €6.91/sqm on 30 September 2020. Average rent for new tenants fell to €8.73/sqm from €9.13 in the same period a year earlier.

In its 2019 annual report, Deutsche Wohnen puts the "impacts of potential rent reductions for existing tenants as well as in the context of new leases" at a total of up to around €40 million per year. Although Deutsche Wohnen itself feels the cap is unconstitutional, it classified the law's chances of remaining in place as "possible" in its annual report. That corresponds to a probability of between 20 per cent and 50 per cent.

It's unclear how Vonovia, which rents around 42,000 apartments in Berlin, will react if the law is overturned.

"We're still looking at the possible consequences we will take from the ruling of the Federal Constitutional Court," said Vonovia spokesman Matthias Wulff. However, he says Vonovia wants to assume "social responsibility."

"Social cohesion" is "an important prerequisite for Vonovia to be able to further develop neighborhoods and districts," the company spokesman said. "So we can't imagine returning to business as normal and simply demanding the lost rent payments from everyone."

He added that there are certainly tenants "who just didn't follow the advice of the politicians to put aside the saved rent."

We won't reclaim any rent.

Jörg Franzen, Gesobau

Vonovia has also seen a significant loss of revenue as a result of the rent cap. The average rent for apartments in Berlin has fallen from €6.91/sqm before the rent cap to €6.57 on 31 December.

The company was forced to reduce rents for about a third of its apartments in Berlin in November when the second stage of the rent cap came into force – between a few cents and several euros per square metre.

The Bundesanstalt für Immobilienaufgaben (BImA), which rents out around 4,800 apartments in Berlin on behalf of the federal government, lowered the rent for 262 households because of the rent cap. The range of reduced of rents is between €1.20 and €315.76 per month.

The company isn't planning on reclaiming any lost rent should the law be overturned, a BImA spokesman said.

A waiting game

The Kreis der landeseigenen Wohnungsunternehmen in Berlin, which is a group of state-owned housing companies in Berlin overseeing about 325,000 apartments, feel the same way.

"If the rent cap is overturned and the reduction of 'excessive' rents is declared inadmissible, we won't reclaim any rent," Gesobau CEO Jörg Franzen has said.

State-owned Degewo is somewhat more reserved. It wants to "examine what the ruling of the Federal Constitutional Court means in terms of rental law". And Howoge, which is also owned by the state, said that it was "waiting for the decision of the highest court."

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