German Bundestag extends housing rent brake by another five years

Out-Law News | 14 Feb 2020 | 5:28 pm | 1 min. read

The law against excessive rents is being extended and strengthened, the German Bundestag has announced.

The rent brake, which was introduced in 2015, has been extended until 2025. In addition, tenants will be able to claim back excess rent in future. However, the rent brake will not apply to new buildings, but only to existing apartments.

Real estate law expert Dr. Wolfram Pätzold of Pinsent Masons, the law firm behind Out-Law, said: “For investors, this may mean a drastic cut in returns. In this respect, the rental price brake makes the German real estate market less attractive, and some international investors have already withdrawn from the market.”

Ptzold Wolfram

Dr. Wolfram Pätzold

Rechtsanwalt, Partner, Head of Real Estate, Germany

The rental price brake makes the German real estate market less attractive, and some international investors have already withdrawn from the market.

The rental price brake is intended to stop the rapid rise in rents in regions with a tight housing market, and ensure that living space remains affordable. Where the rent brake applies, the costs for new and re-letting may exceed the local comparative rent by a maximum of 10%. The federal states decide in which cities and regions it will be used.

Asking rents in Germany rose by 3.5% last year, according to industry association the Central Real Estate Committee. In the previous year, the rate was 3.8%. It is unclear whether this development can be attributed to the introduction of the rental price brake.

The owner association Haus und Grund warned that the rent brake should not become a permanent vehicle for regulating the rental market. In the past, the federal, state and local governments had not built enough apartments, which has contributed to the current market tension, it said.