German parliament passes law to cap rent increases

Germany’s lower house of parliament has passed a law to limit rent rises in metropolitan areas to 10% above local averages when properties change hands, in a bid to stop tenants being priced out of the market.

Rents have shot up by as much as 30% or 40% since 2007 in cities such as Berlin, Hamburg, Munich and Frankfurt.

The rises have had a particularly big impact in Germany where nearly half the population lives in rented accommodation. Home ownership, at just 46%, is the second lowest in Europe after Switzerland.

“It’s a good day for the German tenant,” said justice minister Heiko Mass, a Social Democrat. Around five million properties will be affected by the new rules.

The rent cap was originally proposed by the Social Democrats before the 2013 election and later adopted by Chancellor Angela Merkel’s conservatives.

The new law will only apply to areas where the housing market is particularly tight. In addition, landlords or the person who engages the broker will have to pay the broker’s fee not the tenant — sometimes as high as two months’ rent.

Real estate firm Deutsche Wohnen has criticised the cap, saying the new rules will discourage investment and exacerbate a housing shortage in big cities.

Reuters