Rent cap extension faces harsh criticism from the property sector - Critics within the real estate sector strongly oppose the expansion of the rent price cap.
The German federal government extended rent control measures to the end of 2029, sparking disagreement within the real estate sector. These measures allow state authorities to limit rent increases in dense housing markets when new tenants move in, with cost escalation not to surpass local average rent by more than 10%.
Critics contend that rent controls may discourage construction and investment, as they reduce potential returns. This could worsen the ongoing housing crisis, as fewer new buildings might be built. Additionally, the current exemptions for short-term rentals and furnished apartments enable landlords to bypass the controls, potentially increasing the supply of such rentals at the expense of long-term tenancies. However, the government plans to tackle these loopholes.
By capping rents at 110% of the local average, landlords may experience reduced profits, requiring increased outlays for maintenance and repairs. Moreover, the extension could reduce construction activities, aggravating the already strained housing market. Furthermore, controls can distort market dynamics, causing a decline in the supply of new housing units as developers seek more profitable ventures elsewhere.
On the other hand, the government claims that keeping housing affordable is vital, especially for vulnerable segments such as families and retirees. They contend that rent controls are crucial to ensure that housing remains accessible rather than becoming a luxury commodity. The authorities also outlined intentions for new measures to strengthen tenant protections, such as increased transparency regarding additional costs and stricter regulations for index-linked leases. These proposals aim to address existing loopholes and protect tenants more comprehensively.
- The government is planning to address concerns regarding the reduction of construction activities and investing by introducing new measures to strengthen vocational training programs for the real estate sector, in order to encourage business growth and stimulate the creation of affordable housing.
- To mitigate the potential negative impact of rent controls on business, finance, and investing in the real estate industry, the government is proposing to enact a community policy that focuses on vocational training for constructors, providing them with the necessary skills to build affordable housing efficiently, thereby creating opportunities for profitable ventures and maintaining a balanced housing market.
