Bundesrat Approves Extension of Rental Brake in Germany
Introduction:
The German Bundesrat, the upper house of parliament, has recently passed a draft bill that aims to extend the existing rent control measure known as the "Mietpreisbremse" (rental brake) until the end of 2029. This move is designed to curb rising rents and ensure affordable housing for tenants.
Background and Key Provisions:
The rental brake has been in place since 2015 as a temporary measure to regulate the housing market. It was initially introduced for five years and then extended for an additional five-year period. The current law governing the rental brake is set to expire at the end of 2025. However, the breakdown of the previous governing coalition had stalled efforts to extend the measure further.
The newly approved draft bill proposes to extend the rental brake for another four years, until December 31, 2029. This is intended to provide continued protection for tenants against excessive rent increases. Under the rental brake, landlords are prohibited from charging new tenants rents that exceed 10% above the local comparative rent. The calculation of local comparative rent can be complex, and there are certain exceptions to the rule. Additionally, the rental brake does not apply to newly constructed or extensively renovated apartments.
Justification and Debate:
In the Bundesrat debate, several speakers argued that the root cause of high rents must be addressed through increased housing construction. However, they acknowledged that the current supply-demand imbalance in major urban areas requires the continuation of the rental brake as a necessary measure.
Proponents of the extension maintain that it provides essential protection for tenants in areas where the housing market is particularly tight. They contend that the rental brake helps prevent landlords from exploiting the shortage of affordable housing to charge excessive rents.
Opponents argue that the rental brake is a distortion of the market and hampers the development of new housing. They contend that it discourages investment in rental properties and makes it more difficult for landlords to cover their costs.
Legislative Process and Outlook:
The draft bill for the extension of the rental brake will now be submitted to the Bundestag, the lower house of parliament. If approved by the Bundestag, it will become law and take effect after the expiration of the current legislation at the end of 2025.
It remains to be seen whether the Bundestag will follow the Bundesrat’s recommendation and approve the extension of the rental brake. The outcome of the parliamentary debate and vote will depend on the balance of opinions within the Bundestag and the political priorities of the governing coalition.
Conclusion:
The extension of the rental brake in Germany is a significant development that has important implications for the housing market. It provides a lifeline for tenants facing rising rents but raises concerns among some stakeholders about the potential effects on new housing construction. The Bundesrat’s decision to approve the draft bill sets the stage for further debate and ultimately the Bundestag’s decision on the fate of the rental brake.
