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Court Decision: Berlin’s ‘Rent Cap’ Violates Germany’s Basic Law

Berlin’s ‘rent cap’ was just thrown overboard by Germany’s Federal Constitutional Court. This is a major setback for the Berlin Senate and the city’s tenants.

Berlin, April 15th, 2021. Update: 4:28 p.m. (The Berlin Spectator) — Years before Corona hit, the housing crisis in Berlin became evident. Not only was there a lack of room for everyone, but the rents kept on skyrocketing. As a result, families and other residents could not afford their rent anymore, meaning the housing crisis was also an affordable housing crisis. For months, the Berlin Senate discussed possible measures against this development. One of Governing Mayor Michael Müller’s coalition partners, the far-left ‘Die Linke’, had even wanted dispossessions of large real estate companies.

Ramifications for Tenants

Then, after a long process, the ‘rent cap’ was approved. This measure was a compromise that was supposed to freeze the rents in the German capital for five years. But, on Thursday morning, the whole thing blew up in the Senate’s face. Today’s decision by the Federal Constitutional Court, according to which the ‘rent cap’ does not conform to Germany’s Basic Law, which is nothing less than the constitution, will now have ramifications of the kind some had predicted.

For instance, tenants will have to pay the difference between lower rents they had paid since January of last year, thanks to the ‘rent cap’, and the higher rents they landlords will insist on receiving, now that the ‘cap’ is gone. This might turn into a rather big mess. The thing is that nobody really had an answer to the affordable housing crisis. Conservatives and liberals kept on saying it was all about “constructing, constructing and constructing” apartment blocks. But the situation did not improve, in spite of many construction projects in Berlin. The solution the center-left Berlin Senate developed just evaporated.

Deep Forward Pass

According to the Federal Constitutional Court, the Berlin Senate’s ‘rent cap’ decision of 2019 is void, also because the state of Germany alone had the legislative powers to take decisions related to the law of tenancy. A federal state like Berlin had no business interfering here whatsoever. This major setback does not exactly improve things on Berlin’s housing market, which means other solutions are badly needed. Supporters of the ‘rent cap’ always knew there was a legal risk. But they had hoped their measure would not only be accepted by the Federal Constitutional Court, but also adopted by other cities or city states in Germany.

In the city state of Berlin, the conservative opposition just slammed the Senate. For the CDU, its chairman Kai Wegner said this was a major defeat for “red red green”. He was referring to the “red” center-left Social Democrats (SPD) of Governing Mayor Michael Müller, the ‘red’ far-left ‘Die Linke’ and the ‘green’ Greens, which are the three coalition parties. With its “false ‘rent cap’ promise”, the Senate had deceived the city’s tenants. The damage was big, since many residents had relied on the statements the Senate had made, Wegner stated. For the CDU and other opposition parties, this mess is a deep forward pass, five months before the elections for Berlin’s House of Representatives.

Minister Altmaier Comments

For the Berlin Greens, their floor leader at the House of Representatives, Antje Kapek, stated her party regretted the court decision. The Senate had wanted to do something against “exploding rents” that had displaced tenants from “our city”. After this setback, the Senate would not let tenants down, Antje Kapek said. from ‘The Left’, Culture Senator Klaus Lederer promised the Senate would look for “creative ways” and use all laws available to get the rents down.

Governing Mayor Müller still intends to improve Berlin’s housing situation. Photo: Imanuel Marcus

Germany’s Commerce Minister Peter Altmaier was asked about his opinion during a press conference he gave about the state of Germany’s economy. He said the ‘rent cap’ had been a peculiarity from Berlin. Other federal states needed to refrain from considering models of this kind. The federal government had invested a lot into the construction of housing, with considerable success.

Social Responsibility

In the afternoon, Michael Müller said he respected the court decision. The verdict did not say anything about the ‘rent cap’, which he still thought was the right measure, but only about the jurisdiction. Now the federal government needed to fight the housing shortage in the entire country, the Governing Mayor stated. He called on Berlin’s landlords to be aware of their social responsibility. The Berlin Senate would still do what it could for the tenants in the city. For instance, the city state would keep on purchasing apartment blocks, Müller announced.

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