Due to the steadily increasing rents in the city of Berlin, there was much enthusiasm from renters as a law proposing a five-year rent freeze was passed by the Senate of Berlin in October 2019.
Christine Whitehead, emeritus professor of housing economics with the London School of Economics and member of the LSE London team, was summoned to comment on the issues that the proposed rent-freeze law may raise as well as what lessons may be learnt from other capital cities in a radio feature (click here to listen to the story).
The law has been proposed with good intentions, aiming to ease the fiscal strain current renters but, unfortunately, it is becoming clear that should the law be passed, only those who are present occupants may benefit. This notion is summarised by Whitehead below who explains that the rent control model for London as proposed by Mayor Sadiq Khan may not be appropriate in the Berlin context.
“Rent controls are quite good if they can provide stability, but if all you’re providing is stability to people who are already in place, that’s not very helpful.”
– Christine Whitehead
The repercussions of this less-stable application of a rent freeze detrimentally affects future rent-seekers, as should landlords be less willing to invest in new housing stock due to less potential profitability therefrom, developers will be less likely to keep developing in the city. This creates a dilemma for politicians as renters, represented by powerful tenant groups, are active in voicing their dissatisfaction with the city’s expensive trajectory, whilst the state has ambitions of modernisation and continues to tackle an under supply of housing.