On March 22, 2013, in the German Federal Council or “Bundesrat,” a federal cap on new rental contracts was suggested, among other things. In this regard, Marc Stilke, CEO of ImmobilienScout24 said: “Supply and demand of housing are spread out extremely unevenly in Germany. If you want to help apartment-seekers in urban centres, greater availability needs to be provided there. Fixing the problem by adjusting tenancy law is too short-sighted.”
His thoughts in full: “It is good to see that the problem of rising rents in urban areas is now at the top of the political agenda as no-one wants to see Parisian circumstances in Germany’s big cities. Solving the problem by restricting the number of new rental contracts is too short-sighted. In sought-after areas, a lot of apartment-seekers compete for very few properties. In a situation like this, landlords generally choose the most-solvent candidate. If rents are capped, a few above-average earners will be able to look forward to having to pay lower rents. The large majority of apartment-seekers, however, is not helped at all.
Those who really want to lift the burden of weighed-down residential markets need to provide new buildings where it is required. En masse, this will only work with private investors. But they are scared off by maximum rent caps decreed by the state. In addition, it cannot be foreseen how landlords will react to rent caps. Nor can it be ruled out that certain properties will disappear from the market as some landlords may perhaps prefer to wait for the rent index to be updated and thus for a higher local comparable rent before renting out to new tenants.
Our data shows that supply and demand for housing in Germany is spread out extremely unevenly. While long lines form outside viewings in Berlin, Hamburg and Munich, properties in Duisburg, Cottbus and Leipzig often remain vacant for months. As such, the politicians need to take action on site. Adjusting the federal tenancy law will simply not deal with the multifaceted nature of the problem. We need intelligent, communal solutions. Solutions which make those areas which are less popular among apartment-seekers more attractive, perhaps through improvements to the infrastructure; solutions which provide more affordable housing in those areas which are high in demand.
One way to achieve this is for cities to allocate more land to building. Furthermore, public land cannot simply be sold to the highest bidder without restriction as the best-case-scenario for this would merely result in the construction of luxury apartments. The Berlin Liegenschaftsfonds provides a good example. Public land is no longer sold to the highest bidder. Instead, those who provide the best concept from an urban development point of view will be awarded the contract. Licensing policies for new construction projects which work on quotas for affordable housing help to keep the cultural mix of the cities intact. It is counterproductive to attempt to remedy the symptoms by making adjustments to tenancy law. The government needs to create the right regulatory framework so that new construction projects make sense to investors, thus providing affordable housing.”