Berlin rent cap declared unconstitutional

murphaph

Probably not very interesting to most but I thought I'd post it up as it has been mentioned in passing in previous threads. The Berlin rent cap has been found to be unconstitutional by the federal constitutional court in Karlsruhe today:

https://www.dw.com/en/berlin-rent-cap-overturned-by-germanys-top-court/a-57209268

Tenants will now have to pay the previously agreed rent from May and back pay the deductions made by themselves or allowed by the landlord. Some landlords might forego the back payments but the rents will definitely be going back to where they were if they were reduced and or they will be increased as if the law had never happened..

Claw Hammer

Irish landlords are too mean to challenge the rent caps here.

ted1

Claw Hammer wrote: »

Irish landlords are too mean to challenge the rent caps here.

We don’t have rent cars here. We have caps on rent increases

Yurt2

Interesting decision.


Interesting also, is the CDU spokesperson who decries 'ideology' and then says 'only a sufficient supply of housing can secure affordable rents.' That in and of itself is an ideological statement, one blind to itself, and frighteningly prominent despite buckets of evidence that supply is only one part of the problem. Supply alone does not produce affordability.

Claw Hammer

ted1 wrote: »

We don’t have rent cars here. We have caps on rent increases

If you are capped. you're capped.

murphaph

The decision was expected by many I think because the reasoning was really based on the technicality that the federal laws on rent control trump any state level laws. The German states are not allowed to "overwrite" federal law in the way Berlin tried to do here.

The federal laws were introduced in 2015 but they didn't go far enough for the Berlin senate (left leaning).

Fian

Claw Hammer wrote: »

If you are capped. you're capped.

The difference is that here you are capped based on a rent you have agreed to - a limit on the extent to which an existing rent can be increased. This cap was based on a maximum price per sq/m in various areas of the city. it involved agreed rents being reduced and the reduced rent being imposed on landlords.

Rents in Berlin are low compared to here.

It is not wise to draw a direct inference from German constitutional law decisions to the irish situation.

Claw Hammer

Fian wrote: »

The difference is that here you are capped based on a rent you have agreed to - a limit on the extent to which an existing rent can be increased. This cap was based on a maximum price per sq/m in various areas of the city. it involved agreed rents being reduced and the reduced rent being imposed on landlords.

Rents in Berlin are low compared to here.

It is not wise to draw a direct inference from German constitutional law decisions to the irish situation.

You can be capped to a rent someone else agreed to. You can be capped to a rent which could vary wildly from that of a virtually identical property

Yellow_Fern

Yurt! wrote: »

Interesting decision.


Interesting also, is the CDU spokesperson who decries 'ideology' and then says 'only a sufficient supply of housing can secure affordable rents.' That in and of itself is an ideological statement, one blind to itself, and frighteningly prominent despite buckets of evidence that supply is only one part of the problem. Supply alone does not produce affordability.

Well the CDU statement is ideological but it is ideology based on academic evidence. Historically it reducing demand, unemployment and new housing that reduces housing crises. Berlin is a victim of its own success. The cost of construction in Germany is just to high to return Berlin to the low rents of the 1990s. But encouraging new builds will slow the increases

murphaph

All of Berlin is still in the German equivalent of an RPZ and rents are controlled by federal law (most major cities in Germany have declared themselves RPZs under that legislation) which means a Berlin landlord has to stay within the official average rent span (span because adding a built in kitchen or fitted wardrobes gets a few extra "points") per m² for his street/district + a max of 10%. He can exceed this max rent only in a few exceptional circumstances:
-New build, first let
-Major renovation costing at least a third what a new build would cost
-Previous rent already exceeded the threshold has "grandfather rights" and doesn't have to be reduced but can't be increased either
-Holiday homes
-Furnished properties (rare) are not officially excluded from the legislation but a "premium" is allowed for furniture, the calculation of which is not defined in law. Sometimes used as a loophole but German landlords shy away from furnished lettings

The Berlin laws that were thrown out went further than the above and attempted to force rent reductions down to the average rent and also attempted to freeze rents for 5 years.

Caquas

Claw Hammer wrote: »

Irish landlords are too mean to challenge the rent caps here.

Nonsense, and it seems people have forgotten that landlords got the Supreme Court to strike down our rent control laws forty years ago. The Oireachtas tried to get around that judgement immediately with a new law but the Supreme Court held that law too was unconstitutional and for the same reason.

This Court has already held that the pre-existing rent control constituted an unjust attack upon property rights. In such circumstances, to impose different but no less unjust deprivations upon landlords cannot but be unjust having regard to the provisions of the Constitution.

http://www.supremecourt.ie/supremecourt/sclibrary3.nsf/(WebFiles)/7FC625DAD10A956C802575F3002D6B7E/$FILE/Housing_%5B1983%5D%20IR%20181.htm

We have never since tried to control rent levels. The current system only limits the amount of rent increases in certain cases and is probably safe from legal attack.

Claw Hammer

Caquas wrote: »

Nonsense, and it seems people have forgotten that landlords got the Supreme Court to strike down our rent control laws forty years ago. The Oireachtas tried to get around that judgement immediately with a new law but the Supreme Court held that law too was unconstitutional and for the same reason.


http://www.supremecourt.ie/supremecourt/sclibrary3.nsf/(WebFiles)/7FC625DAD10A956C802575F3002D6B7E/$FILE/Housing_%5B1983%5D%20IR%20181.htm

We have never since tried to control rent levels. The current system only limits the amount of rent increases in certain cases and is probably safe from legal attack.

The attack 40 years ago was taken by an indicidual. Since then various associations have been set up. There has been a rent cap since 2004. The rent can't be more than the market rent. This is in addition to limits on the frequency of rent reviews. This is all before the RPZs came into being. There has been no challenge to any of this, despite its irrationality.

Caquas

Claw Hammer wrote: »

The attack 40 years ago was taken by an indicidual. Since then various associations have been set up. There has been a rent cap since 2004. The rent can't be more than the market rent. This is in addition to limits on the frequency of rent reviews. This is all before the RPZs came into being. There has been no challenge to any of this, despite its irrationality.

I see nothing irrational in a legal sense and there has been no challenge, whether by an individual or a group of landlords, because the current rules, while onerous, do not deprive them unjustly of their property as happened under the old system i.e. the landlord lost control of their property without adequate compensation because rents were not keeping pace with inflation and were effectively reduced to peppercorn rents.

The 2004 probibition on rents exceeding the market rate seems redundant. Has anyone had their rent reduced because they showed that the rent was above the market rate? I suppose if there was a sudden drop in market rents a sitting tenant might seek a reduction but that will be the day!

The laws are ineffective or even countreproductive in the sense that rents are scandalously high but imagine the chaos if our courts could quash legislation for being ineffective!

L1011

Caquas wrote: »

Has anyone had their rent reduced because they showed that the rent was above the market rate?

On this forum, in 2009-11, yes, quite a few actually.

Caquas

L1011 wrote: »

On this forum, in 2009-11, yes, quite a few actually.

Great - and I look forward to rents falling soon again but I won't hold my breath because everyone with power in this country will work to prevent it.

Strange, in all the discussion about our financial crisis, I never here anyone talking about the great social boon that was reduced rents.

Fkall

Dublin rents fell circa 35% in the period 2009 to 2012.

Claw Hammer

Caquas wrote: »

I see nothing irrational in a legal sense and there has been no challenge, whether by an individual or a group of landlords, because the current rules, while onerous, do not deprive them unjustly of their property as happened under the old system i.e. the landlord lost control of their property without adequate compensation because rents were not keeping pace with inflation and were effectively reduced to peppercorn rents.

Just because you see nothing irrational doesn't mean that there is nothing irrational. many landlords are not allowed charge market rent, which is itself a deprivation of property. Particularly where a virtually identical property can be let for market rent.

Caquas wrote: »

The 2004 probibition on rents exceeding the market rate seems redundant. Has anyone had their rent reduced because they showed that the rent was above the market rate? I suppose if there was a sudden drop in market rents a sitting tenant might seek a reduction but that will be the day!

There have been numerous cases where landlords were refused increases on the basis that the proposed new rent was in excess of market rent. Nothing redundant about that.What is more, when a rent increase is refused for that reason the RTB will not substitute its own rent level thus leaving the landlord at the existing rent level.

Caquas wrote: »

The laws are ineffective or even countreproductive in the sense that rents are scandalously high but imagine the chaos if our courts could quash legislation for being ineffective!

Laws have been quashed for being unconstitutional many times. Chaos has never ensued.

rightmove

Caquas wrote: »

I see nothing irrational in a legal sense and there has been no challenge, whether by an individual or a group of landlords, because the current rules, while onerous, do not deprive them unjustly of their property as happened under the old system i.e. the landlord lost control of their property without adequate compensation because rents were not keeping pace with inflation and were effectively reduced to peppercorn rents.

The 2004 probibition on rents exceeding the market rate seems redundant. Has anyone had their rent reduced because they showed that the rent was above the market rate? I suppose if there was a sudden drop in market rents a sitting tenant might seek a reduction but that will be the day!

The laws are ineffective or even countreproductive in the sense that rents are scandalously high but imagine the chaos if our courts could quash legislation for being ineffective!

My rent was 40% below market. i sold and an investor would be put off buying as they could not get market rent so it affected the value of my property. This is surely a large case for being unconstitutional. i dont have the resource or time to take a case...or the money.

JimmyVik

rightmove wrote: »

My rent was 40% below market. i sold and an investor would be put off buying as they could not get market rent so it affected the value of my property. This is surely a large case for being unconstitutional. i dont have the resource or time to take a case...or the money.

Thats the problem.
They have made it so that if anyone takes a case they risk financial ruin.

Jmc25

rightmove wrote: »

My rent was 40% below market. i sold and an investor would be put off buying as they could not get market rent so it affected the value of my property. This is surely a large case for being unconstitutional. i dont have the resource or time to take a case...or the money.

It's been pointed out many times before on this forum but the manner in which the RPZ controls were implemented penalised the wrong landlords. Properties owned by funds/developers always kept pace with the market rents, probably because they don't have any personal relationships with, or loyalty to "good" tenants, so the controls impacted them the least.

The LLs penalised most harshly were not the ones who were driving up the rents in the first place. I've also heard of instances were the value of a property was affected because the owner could essentially only sell to owner-occupiers. In the market for apartments in particular this potentially reduces the price by reducing the pool of potential buyers.

And I say this as someone who has paid through the nose in rents in the past, so my sympathy for LLs in general would be fairly limited.

Caquas

rightmove wrote: »

My rent was 40% below market. i sold and an investor would be put off buying as they could not get market rent so it affected the value of my property. This is surely a large case for being unconstitutional. i dont have the resource or time to take a case...or the money.

I take it that the legal restrictions on rent increases and the sharp increases in market rents have resulted in your long-standing tenant paying 40% below current market rent. Laws which try to tweak the free market invariably have unintended consequences. As others have pointed out, the law tends to penalise landlords who allow tenants to stay long-term while ruthless landlords can churn their tenants to increase rents.

A constitutional challenge is not necessarily ruinous. It is commonplace for courts to award costs to plaintiffs in such cases, even if their claims are rejected, on the grounds that they have raised an issue of public importance.

But I still doubt if you would succeed in such a claim. The rent restrictions Act was not struck down because it favoured tenants to the disadvantage of landlords. The essential problem was that tenants of controlled dwellings were singled out for favourable treatment (both on rent and security of tenure) with no regard for any social or financial need and without regard to the landlords’ capacity to bear the burden. In other words, the system’s effects were arbitrary and did not promote any social or economic policy. I don’t think that can be said of the current system, imperfect as it is.

rightmove

Caquas you seem to think its ok to have laws that make thing worse than better. Years ago that was called making excuses.

as Chris Hadfield would say
“There is no problem so bad that you can't make it worse” -> welcome to the world of irish rent caps and rtb/rpz

Claw Hammer

Caquas wrote: »

I take it that the legal restrictions on rent increases and the sharp increases in market rents have resulted in your long-standing tenant paying 40% below current market rent. Laws which try to tweak the free market invariably have unintended consequences. As others have pointed out, the law tends to penalise landlords who allow tenants to stay long-term while ruthless landlords can churn their tenants to increase rents.

A constitutional challenge is not necessarily ruinous. It is commonplace for courts to award costs to plaintiffs in such cases, even if their claims are rejected, on the grounds that they have raised an issue of public importance.

But I still doubt if you would succeed in such a claim. The rent restrictions Act was not struck down because it favoured tenants to the disadvantage of landlords. The essential problem was that tenants of controlled dwellings were singled out for favourable treatment (both on rent and security of tenure) with no regard for any social or financial need and without regard to the landlords’ capacity to bear the burden. In other words, the system’s effects were arbitrary and did not promote any social or economic policy. I don’t think that can be said of the current system, imperfect as it is.

The rent restrictions act was struck down as being an unjust attack on the landlords property rights, the right to market rent being one of them.
The current system is arbitrary in that 2 virtually identical properties can have different rents because of a deal negotiated years ago which was not negotiated in contemplation of the legislation. There can be 2 houses next door to each other of equal size and specification withy hugely different rents. The only reason for this is that a landlord and tenant who may not be the current tenants entered into a lease at some time past. When the property is re-let the rent capped landlord will choose a tenant who will receive a bonus for no good reason other than that his predecessor had a lease at a particular rent. The landlord will also be sure to pick a tenant who will not be among the disadvantaged classes. It is bonkers.

Caquas

rightmove wrote: »

Caquas you seem to think its ok to have laws that make thing worse than better. ....

For from it! I just don’t think the current rent laws are unconstitutional.

You might think bad laws should be declared contrary to the constitution but I don’t want to turn the Supreme Court into a third Chamber of the Oireachtas.

Caquas

Claw Hammer wrote: »

The rent restrictions act was struck down as being an unjust attack on the landlords property rights, the right to market rent being one of them.
The current system is arbitrary in that 2 virtually identical properties can have different rents because of a deal negotiated years ago which was not negotiated in contemplation of the legislation. There can be 2 houses next door to each other of equal size and specification withy hugely different rents. The only reason for this is that a landlord and tenant who may not be the current tenants entered into a lease at some time past. When the property is re-let the rent capped landlord will choose a tenant who will receive a bonus for no good reason other than that his predecessor had a lease at a particular rent. The landlord will also be sure to pick a tenant who will not be among the disadvantaged classes. It is bonkers.

The Constitution does not grant a right to market rent. It guarantees a right to private property but that right is limited by considerations of social justice and the common good.

In your example, it is not enough to say that the two properties are identical. What matters is the relationship of landlord and tenant and there is a clear difference between a sitting tenant and someone in the marketplace looking to rent a property. The State can reasonably argue that a tenant should be protected against excessive rent increases even if it allows rent for properties on the open market to be set by market pressures I.e. a landlord can ask as much as he wants and the market will decide what he gets. Yes, the outcome can be very different between landlords but the law is protected because it seeks to promote social justice between landlord and tenant.

DubCount

Caquas wrote: »

The Constitution does not grant a right to market rent. It guarantees a right to private property but that right is limited by considerations of social justice and the common good.

In your example, it is not enough to say that the two properties are identical. What matters is the relationship of landlord and tenant and there is a clear difference between a sitting tenant and someone in the marketplace looking to rent a property. The State can reasonably argue that a tenant should be protected against excessive rent increases even if it allows rent for properties on the open market to be set by market pressures I.e. a landlord can ask as much as he wants and the market will decide what he gets. Yes, the outcome can be very different between landlords but the law is protected because it seeks to promote social justice between landlord and tenant.

Maybe its just me, but 2 tenants in almost identical properties in the same street having different protection to the level of rent they pay is not my idea of social justice.

Varik

Caquas wrote: »

The Constitution does not grant a right to market rent. It guarantees a right to private property but that right is limited by considerations of social justice and the common good.

In your example, it is not enough to say that the two properties are identical. What matters is the relationship of landlord and tenant and there is a clear difference between a sitting tenant and someone in the marketplace looking to rent a property. The State can reasonably argue that a tenant should be protected against excessive rent increases even if it allows rent for properties on the open market to be set by market pressures I.e. a landlord can ask as much as he wants and the market will decide what he gets. Yes, the outcome can be very different between landlords but the law is protected because it seeks to promote social justice between landlord and tenant.

And here's the problem.

The way you seem to think it works is as per the previous system, and as it still works in non RPZ areas.

Caquas

DubCount wrote: »

Maybe its just me, but 2 tenants in almost identical properties in the same street having different protection to the level of rent they pay is not my idea of social justice.

As I say, the distinction is in the landlord- tenant relationship. The State has a reasonable case, based on social justice, to have laws which result in different rents even for a pair of identical twins each renting identical houses on the same street.

If one twin has been renting a house long-term for 10 years, and the other twin has spent the weekend as an AirBnB tenant in the other house, no one would suggest that justice requires that they pay identical rents.

Admittedly, the law could become unjust if it loses touch with reality in the market but I don’t see that at present. In fact, action is urgently needed to reduce rents, especially in our main cities, but that should be through increasing supply not by restricting rents.

Claw Hammer

Caquas wrote: »

The Constitution does not grant a right to market rent. It guarantees a right to private property but that right is limited by considerations of social justice and the common good.

In your example, it is not enough to say that the two properties are identical. What matters is the relationship of landlord and tenant and there is a clear difference between a sitting tenant and someone in the marketplace looking to rent a property. .

The current rent caps apply to persons hunting for a property. Iy is effectively a lottery win for someone who gets a capped property. Why should the landlord of that property be forced to accept a lower rent than an identical property next door, if both are advertising at the same time?
Right to receive rent at market levels is a property right protected by the constitution. It can be limited like every constitutional righ but the current limits go way too far. The old protected tenants have to pay market rent which is decided by a tribunal

Dav010

Claw Hammer wrote: »

The current rent caps apply to persons hunting for a property. Iy is effectively a lottery win for someone who gets a capped property. Why should the landlord of that property be forced to accept a lower rent than an identical property next door, if both are advertising at the same time?
Right to receive rent at market levels is a property right protected by the constitution. It can be limited like every constitutional righ but the current limits go way too far. The old protected tenants have to pay market rent which is decided by a tribunal

It would certainly be interesting to see the outcome of a High Court challenge/Judicial review of the legislation on RPZs, given the impact it is having, it is surprising why one hasn’t been mounted. I can only think that the institutional investors do not want to draw the ire of the Government considering the huge tax benefits they seem to enjoy.

JimmyVik

Wasnt some landlord group going to take a case a while ago and they got slapped down by the government.
Basically told only an individual could take a case and it was illegal for them to be funded by others and if they lost then it would be costs awarded against them. Bullied out of it. Not to mention the bullying that would come from the press to be concentrated all on one person.