Germany to cap rent increases

Muahahaha

Germany's Justice Minister has come out and said that rental properties are homes, not just commidities and from 2015 they are planning a new law that will mean a landlord can only increase rent by 10% above the local average. If a new tenant is signed up they still will not be allowed to go beyond 10% above the local average, this is apparently to stop landlords increasing rents by 30-40% in some urban areas.

Exemptions will be made for new builds and landlords who carry out substantial renovations so as not to discourage investors from investing further in their property.

http://www.theguardian.com/world/2014/sep/23/germany-imposes-rent-caps-inner-city-properties

Unwanted market interference or good social policy ? I think its interesting to see a Justice Minister come out and say what he has said, I could never imagine it happening here.

The_Pretender

Wouldn't be that big a help here I'd imagine, as it's the local average in most areas that's the killer. I suppose it might slow down increases a bit though.

Bucklesman

Makes sense for a country that has long tenancies, but it wouldn't do much here. With 1yr leases, landlords can be very responsive to market fluctuations if it suits them.

Gatling

I'd gladly take a 10 + year lease over a rent cap I think especially having kids now .

Crusades

Gatling wrote: »

I'd gladly take a 10 + year lease over a rent cap I think especially having kids now .

10 year leases are all very fine until the landlord's son/daugher needs to move in (in which case the Residential Tenancies Act trumps your lease).

Bigcheeze

Crusades wrote: »

10 year leases are all very fine until the landlord's son/daugher needs to move in (in which case the Residential Tenancies Act trumps your lease).

No it doesn't.

Crusades

Bigcheeze wrote: »

No it doesn't.

Fair enough.

Victor

I had a friend who lived in Köln and rent increases were linked to a formula, based on the property's characteristics.

D3PO

well it doesnt really do anything does it.

You can increase 10% over the market rate, enough LL's do this and the market rate jumps allowing you continually jump the rent with the rising market cap.

Political stunt with very little true impact.

drumswan

D3PO wrote: »

well it doesnt really do anything does it.

You can increase 10% over the market rate, enough LL's do this and the market rate jumps allowing you continually jump the rent with the rising market cap.

Political stunt with every little true impact.

Exactly, this at best slows the wider market rates growth. Its not a 'cap' at all.

murphaph

It's not a cap but it does slow the rate of increase. Germans still tend to stay longer in their places so it will take longer for the increases to filter through. In german this policy is called a rent brake (ie to slow down) rather than a rent cap.

I am opposed to this policy while I do believe in rent controls for sitting tenants. A fresh tenancy is and should remain a free agreement between parties.

mdebets

D3PO wrote: »

well it doesnt really do anything does it.

You can increase 10% over the market rate, enough LL's do this and the market rate jumps allowing you continually jump the rent with the rising market cap.

Political stunt with very little true impact.

That would only work if the Landlord would get in new tenants every year, a thing, you can't do in Germany, as there are strict rules as of when a lease can be cancelled.
This new cap, together with the already existing cap on rent increases to sitting tenants is a good way against the raising rents too high in too short a time frame.

DubDani

There has been a law in Germany around that for at least 30 years, as that you can't increase the rent by more then 20% every 3 years (§ 558 Abs.3 BGB). And even then only with good reasoning, evidence etc.

In some high density Areas the limit has recently even be lowered to 15% every 3 years, and again never above the average rent in that specific location.

D3PO

mdebets wrote: »

That would only work if the Landlord would get in new tenants every year, a thing, you can't do in Germany, as there are strict rules as of when a lease can be cancelled.
This new cap, together with the already existing cap on rent increases to sitting tenants is a good way against the raising rents too high in too short a time frame.

I dont really know the German system tbh but why would getting new tenants in every year have any bearing ?

Your not locked into a rent rate for the duration of your tenancy. I'm sure German LL's can review rent with sitting tennants too .....

mdebets

D3PO wrote: »

I dont really know the German system tbh but why would getting new tenants in every year have any bearing ?

Your not locked into a rent rate for the duration of your tenancy. I'm sure German LL's can review rent with sitting tennants too .....

Yes, they can, but only to a certain percentage (I think its 20%) every 3 years and it's not allowed to be over the local cap.

The new rules are only for new tenants. Up to now, the LL could raise the new rent as much as he liked (to a certain degree, there are still some possible ways to restrict this). The new rules would limit this to 10%.

irish gent

I think the Irish government should now get heavenly involved with capping the rent payments to landlords . People now struggling because of this and the extra taxes.. 1200 euro average rent on a 3 bed family home this is a joke now .A bed sit 800 and share accommodation 400 monthly.

dealhunter1985

I'm surprised the demand for a rent cap isn't something which is given more attention considering the huge increases I hear people getting hit with. Increases of 10% plus in one year are completely unreasonable.

In Toronto, the rental cap is determined considering the CPI.
I don't know the ins and outs but the numbers below seem fair to me!
http://www.torontosun.com/2013/12/28/2014-rent-increase-to-be-second-lowest-in-two-decades

Ontario Rent Control Annual Increases
2014: 0.8%
2013: 2.5%
2012: 3.1%
2011: 0.7%
2010: 2.1%
2009: 1.8%
2008: 1.4%
2007: 2.6%
2006: 2.1%
2005: 1.5%
2004: 2.9%
2003: 2.9%
2002: 3.9%
2001: 2.9%
2000: 2.6%
1999: 3.0%
1998: 3.0%
1997: 2.8%
1996: 2.8%
1995: 2.9%
1994: 3.2%
1993: 4.9%
1992: 6.0%
1991: 5.4%

Claw Hammer

Nobody was calling for a rent floor when rents dropped by more than 30%. Capping rents without compensating landlords has been found to be unconstitutional in the past. The only way to reduce rents is by increasing supply.

antoinolachtnai

In Ireland, you cannot raise the rent a nickel above the market rent. Only the market rent is permitted.

The problem is that the market rent is too high.

Ultimately, the problem is supply. Rent controls often make supply problems even more acute.

It is worth reading about rent controls in san francisco. http://techcrunch.com/2014/04/14/sf-housing/