The Berlin rent cap, explained

The second phase of Berlin's Mietendeckel law goes into effect today. Here's what you need to know.

The big question: will Berlin's rent cap be shot down in Germany's highest court?
The big question: will Berlin's rent cap be shot down in Germany's highest court?

The second stage of Berlin's rent cap, or Mietendeckel, comes into force today, Monday, 23 November. Inadmissibly high rents are now prohibited and have to be reduced. While landlords as well as CDU and FDP politicians say the Mietendeckel law violates the German constitution, groups representing tenants' are jubilant. 

"The rent reductions will benefit broad segments of the population who have been affected by modernisations or who have had to pay exorbitant rents due to a lack of affordable housing," says Reiner Wild, the managing director of the Berlin Tenants' Association (BMV). The rent cap is intended to reduce the burden of housing costs for many. 

Berlin's housing department estimates that around 340,000 households will benefit from the reduction. The Berlin Tenants' Association believes rents for around 365,000 flats will have to be reduced. But not all landlords are playing along.

"We criticise the fact that private landlords in particular have largely not lowered rents by themselves and have charged the full November rent at the old level," Wild says. "If reductions aren't implemented by December, we'll launch a broad information campaign to ensure that tenants have their claims met."

Here's are our rent cap FAQs:

What do the different phases of the rent cap regulate? The first stage of the rent cap came into force on 23 February 2020. After that date, landlords were prohibited from charging rent for existing leases in excess of the rent effectively agreed by 18 June 2019. The second stage of the rent cap goes into effect on 23 November: rents that exceed the permissible upper values by more than 20 per cent - taking into account any surcharges and discounts - must be reduced.

What is meant by the term "rent?"
When talking about the rent cap the "net cold rent" (Nettokaltmiete) is meant, i.e. the rent excluding operating costs and costs for heating and hot water.

What are the upper rent limits? Rent caps are between €3.92 and €9.80 per square metre, depending on the quality of the flat and what fittings it comes with. In buildings with no more than two flats, i.e. in detached and semi-detached houses, the upper rent limits are 10 per cent higher. For apartments with "modern equipment", the upper rent limit is increased by €1 per square metre. Location also plays a role. A discount of €0.28 per square metre must be taken into account for flats in a "basic" residential area, €0.09 per square metre for flats in a "mid-level" residential area, while €0.74 cents per square metre are added for flats in "good" residential areas. After a modernisation, the rent may be increased by up to €1 per square metre.

What are considered "modern fittings?" Three of the following five features must be present: 1. a lift with no thresholds between it and the apartment. 2. a fitted kitchen. 3. high-quality bathroom fittings. 4. a high-quality floor covering in most of the apartment. 5. a low energy consumption rating.

When is a rent considered excessive? A rent is considered excessive if it is more than 20 per cent above the permissible upper limit, taking into account the residential location and fittings. An example: A tenant currently pays a "cold rent" of €1,000, i.e. €10 per square metre, for a 100 square metre flat with heating and bathroom in a multi-family building constructed by 1918 in a "medium-quality " location and with modern fittings. The upper rent limit according to the rent cap law is €6.45 per square metre. Added to this is €1 per square metre for modern fittings (making €7.45). A deduction of €0.09 per square metre is made for the mid-level residential area. The upper rent limit in this case is thus €7.36 per square metre. This limit may be exceeded by a maximum of 20 per cent: the maximum permissible value is therefore €8.83 per square metre. Anything above that is prohibited, so the cold rent of €10 per square metre must therefore be reduced to €8.83 per square metre. Instead of €1,000 rent, the household will only have to pay €883 euros for the 100 square metre flat. Monthly savings: €117. It's important to remember: The excessive rents only have to be reduced to the upper limit plus 20 per cent, not to the upper limit itself.

Where can tenants check whether they are entitled to have the landlord reduce the rent? We've embedded an English version of the Berliner Mieterverein's calculator for this purpose below. There's also one on the Berlin government's site - but the English info is extremely patchy and poorly translated - and the actual "calculator" is only in German.

What should tenants do if the landlord does not reduce an excessive rent? Landlords are obliged to comply with the law. If they fail to do so, tenants can inform the landlord of the omission or contact the government's department of housing via this special online tool. The government will then ask landlords to state within a period of time whether and to what extent they are complying with the law. Fines of up to €500,000 may be imposed for violations.

Can tenants wait until the Federal Constitutional Court has ruled on the rent cap before being asked to lower their rent - or do they run the risk of losing money? According to the housing department, tenants can also take action later. From 23 November 2020, excessive rents are prohibited by law. "There is no time limit as to when a tenant must take action," say the authorities. The prohibition applies from 23 November 2020, "even if the tenants do not report it until later."

How were the rent ceilings calculated? The upper rent limits are based on average rents calculated in the Berlin 2013 Mietspiegel (rent survey), because 2013 was considered the last year that Berlin had a relatively relaxed housing market. Real-wage development between 2012 and 2018 in Berlin and a forecast for 2019 were also taken into account.

When are rent increases conceivable again? Capped rents will be able to be raised again from 2022. This will have to be in line with the inflation that will have occurred since 18 June 2019, but by no more than 1.3 per cent annually. Such rent increases are only possible, however, if the fixed rent ceilings have not yet been reached or exceeded, depending on the age of the building and the apartment's fittings.

What happens when a flat is re-let? When housing is re-let, the law prohibits taking a higher rent than the "frozen rent". If the frozen rent is above the applicable rent ceiling, the flat may only be let at level of the rent ceiling.

Is there a hardship clause for landlords? Yes. In order to prevent landlords from suffering permanent financial losses or damage to their building stock, the law provides for a hardship clause. This allows for a higher rent in certain individual cases. Low-income tenants are to receive financial compensation in return.

What is legal basis of Berlin's rent cap? The Senat refers to Germany's federalism reform of 2006, under which responsibility for housing was transferred to the German states. The Berlin state government saw this as an opportunity to enact a rental cap law.

Is the rent cap legally watertight? With its rent cap, Berlin's red-red-green coalition is treading new legal territory. So far, no other German state has attempted to limit rents by state law. Whether this is permissible is disputed. Lawsuits have been filed. The Federal Constitutional Court intends to decide on the law's constiutionality during the first half of next year. Until the court reaches a decision, tenants should set aside any savings resulting from their rent being lowered - in order to be prepared for any claims from their landlord, should the rental cap be overturned.

The German version of this article was adapted for Berliner Zeitung English Edition by Maurice Frank.