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Berlin’s rent cap, though defeated in court, shows how to cool overheated markets | David Madden and Alexander Vasudevan


The housing question is one of the central issues of our time, and events last week in Berlin underscored what’s at stake. In a much-anticipated ruling, Germany’s constitutional court in Karlsruhe ruled that Berlin’s Mietendeckel or rent cap was unconstitutional, and therefore null and void. The product of years of concerted organising by housing movements and leftwing parties in the city, the rent cap is wildly popular with Berlin’s tenants, who make up three-quarters of the city’s households. But it was hated by landlords, real-estate investors and members of Germany’s conservative political parties. The lawsuit against the cap was filed by 284 parliamentary members of the centre-right Christian Democratic Union (CDU) and Christian Social Union (CSU), and the neoliberal Free Democrats (FDP).

Berlin’s rent cap was part of a new law passed by the city in January 2020. The cap prevented owners of flats built before 2014 charging more than what had been agreed in June 2019. It also stipulated that any rents that were 20% in excess of acceptable levels should be reduced, varying according to location and quality. Landlords who did not comply with the new law faced heavy fines. The policy was to be in place for five years. New-builds were exempt.

The rent cap meant that hundreds of thousands of households were eligible for significantly lower rent, which had been skyrocketing in recent years. It also meant that it was no longer possible for speculators to buy buildings for the sole purpose of rent gouging.

The court decided, however, that Berlin – which is a state in the German federal system – did not possess the constitutional authority to pass the cap.

The immediate implications of the ruling are stark. The rent freeze has already been lifted and increases can be demanded on existing leases. Landlords are also entitled to demand back-payments on previously frozen rents. Countless evictions now loom for tenants facing significant arrears.

The court’s decision was met with dismay in Berlin. It brought tens of thousands of residents on to city streets in a hastily organised show of anger, indignation and defiance. Significant efforts to support tenants facing arrears and eviction are now needed.

Over the past few years, as rents in many cities worldwide have shot up, rent control has become an increasingly urgent demand. This has horrified economists and neoliberals, for whom it’s an article of faith that rent control always spells disaster. But this is based more on outdated definitions of rent control and ideological first principles than on any serious engagement with actual contemporary housing regulation.

Today’s rent control strategies are not the hard price ceilings implemented during the second world war. They are a diverse set of strategies that place limits on the amount that landlords can boost rents, but they do so flexibly, usually allowing increases with improvements and in line with inflation. Rent regulation also limits the circumstances under which landlords are allowed to evict tenants, and may mandate automatic lease renewal in the absence of a just cause to terminate a tenancy.

Contemporary rent regulations are, in other words, targeted, sensible protections for tenants, not the blunt instruments of a wartime housing emergency. When they are well designed, they work.

Opponents of rent control frequently invoke the spectre of long-abandoned hard rent ceilings in order to try to lessen the popularity of contemporary rent regulation. But no one is proposing crude rent ceilings today. Rather, housing activists mobilise in support of rent regulations that can be found in hundreds of cities. In her study of housing policy in New York, Oksana Mironova points out that while rent regulation is not perfect, it “mediates the severe power imbalance between tenants and landlords” and “acts as a counterbalance to gentrification and as a bulwark against displacement and homelessness.” In New York and elsewhere, when rent regulation is rolled back, undermined or abolished, the result is not the free-market paradise of efficient affordability that detractors envisage but dispossession, displacement, insecurity and rising rents.

The geographer Tom Slater argues that economic orthodoxy around rent control works to perpetuate ignorance on the subject. Rent control’s opponents recycle the same tired arguments: that any restriction on housing profitability forces landlords out of business or otherwise restricts housing supply; that lower rental income will be passed on to tenants in the form of reduced maintenance and overall housing quality; and that regulating the price of housing is an inherently inefficient intrusion on the natural operation of the market.

But, as Slater points out, these arguments ignore how many of these problems (and more) proliferate when housing is unregulated. They also fail to see how today’s rent regulation measures avoid the mistakes of the past. And not all economists agree with the orthodox view. Contemporary rent regulation is no more economically problematic than other forms of pro-tenant housing regulation, or minimum wages.

On its own, of course, rent regulation will not solve the housing problem. But no single housing policy can succeed in isolation. What’s needed is an integrated strategy across different tenures and locations, aimed at reorienting the housing system away from the pursuit of profits above all and towards actually meeting the social need for housing. Residents, social movements, progressive politicians and others with an interest in democratising and de-commodifying the housing system need to act in alliance to pursue change at multiple scales, from municipal governments to national and transnational institutions.

Last week’s ruling represents a defeat for Berlin’s housing movement, but it may yet prove to be a pyrrhic victory for the city’s landlords and speculators. Anger over the nullification of the rent cap is fuelling support for the expropriation and remunicipalisation of thousands of units of public housing that had been privatised. Some activists would like to go further and expropriate empty flats. If federal politics allow it, the rent cap may even return, as the court ruled narrowly about which jurisdictions have the right to regulate housing, not the legality of the Mietendeckel itself. This time, the court found in favour of landlordism. But the struggle over the shape and purpose of the housing system continues, in Berlin and around the world.



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