Rent crisis in Germany: Where have the cheap apartments gone?

Rent crisis in Germany: Where have the cheap apartments gone?

The housing crisis in Germany continues to worsen. According to current information, real estate portals show exorbitant rental prices, especially in cities such as Munich, Berlin and Frankfurt. It is hardly possible to find an apartment for less than 15 euros per square meter. Demand is huge and many local authority housing associations are struggling with long waiting lists as desperate house hunters fight for every available space. This not only has individual consequences, but also economic consequences, as skilled workers and foreign workers avoid moving, which further exacerbates the situation.

The housing market crisis has been going on for about a decade now, with no quick solutions in sight. The “Bauturbo” law initiated by Construction Minister Verena Hubertz (SPD) is intended to accelerate housing construction, but the effect remains uncertain. At the same time, the rent cap is often ignored, which means that rents in new contracts are often well above the permitted 10 percent above the local comparative rent. Current data shows that the average basic rent in the 14 largest German cities was 8.65 euros per square meter in 2022, while the median asking rent for new contracts rose to 13.43 euros per square meter.

Tightening of the rent cap

Justice Minister Dr. Stefanie Hubig (SPD) plans to tighten the rent cap by the end of 2029. These legal regulations, which have been in force since their introduction in 2015, are intended to slow the increase in residential rents in metropolitan areas. When re-letting, the rent may be a maximum of 10 percent above the local comparative rent. The problem with rent control, however, is that the pre-rental rent, which is already above the permitted amount, is crucial, so many new buildings do not really benefit from this set of rules. BMJV reports on an extension of the rent cap, which is seen as the first step in adjusting rental law in the interests of tenant protection.

A central aspect discussed in the debate about rent control reforms is the possible deterrence of private investors by stricter regulations. While public housing companies cannot meet the demand on their own, a focus on protecting tenants with cheap old contracts could worsen the housing crisis in the long term. The gap between cheaper old contracts and more expensive new contracts is also growing, which makes moving unattractive for many tenants. Even when living conditions change, many people do not give up their cheap apartments.

Outlook for the future

Germany has set itself the goal of avoiding extreme rental conditions such as those seen in cities such as London and Paris. But the way there is still long. While final proposals for deregulation are being discussed, it is emphasized that these measures should be accompanied by new construction offensives. These include, among other things, subsidies for social housing and higher property taxes on undeveloped land in order to control market mechanisms accordingly. However, uncertainties regarding market conditions and the ongoing crisis make it difficult to provide a clear forecast. FAZ informs that the housing crisis will continue for the foreseeable future, which is a worrying reality for many people.