Price cap extended: What the traffic light government still wants to do for tenants

Anyone who moves into a popular residential area in the next four years can probably continue to rely on rent controls. This regulation prevents landlords from overcharging new contracts. In some areas it threatened to expire in mid-2025, but Justice Minister Marco Buschmann (FDP) is now introducing an extension until the end of 2028.

This doesn’t make everyone happy in the traffic light coalition – because in the coalition agreement, the SPD, Greens and FDP had agreed on an extension “until 2029”. The Green Party’s construction politicians, Christina-Johanne Schröder and Julia Verlinden, directly insisted on compliance with the contract. But there isn’t much time left to fight for changes in the Bundestag. And other coalition promises to protect tenants are still open.

What rent control is

It has been in effect since 2015 and limits rental prices for new contracts. In areas with tight housing markets, landlords are generally allowed to charge a maximum of ten percent more than the local comparative rent. The respective state government decides which areas these are.

However, there are some exceptions and loopholes, as the German Tenants’ Association repeatedly criticizes. The regulation does not apply to apartments that were only used and rented for the first time after October 1, 2014. As time goes on, more and more new buildings fall under the exception. The first rental after comprehensive modernization is also excluded. If the previous tenant had to pay more than allowed according to the brake, the landlord can demand the same amount from the new tenant. The brake generally applies to furnished apartments, but landlords can charge a surcharge.

What the brake brings

According to the Ministry of Justice, the limitation has “at least moderately slowed” the increase in rents in the affected areas. A study presented at the beginning of 2019 by the German Institute for Economic Research (DIW) on behalf of the ministry confirms that the rent cap has a measurable effect. However, the effect is only two to four percent. In numbers this means: Anyone who pays 1,000 euros in rent today would have to shell out 1,020 to 1,040 euros per month without a rent cap. However, not all landlords adhered to the price cap at the time – and tenants did not necessarily complain.

What should change now

Buschmann wants to set higher hurdles: If the rent cap is to take effect repeatedly in a certain area, new requirements should apply for the justification. The country should then explain, for example, what it has done to ease the rental market in the area. This should ensure that the extension can withstand constitutional review, the Ministry of Justice said.

What else the coalition wants to do for tenants

The extension of the rent control will come much later than some people had imagined at the traffic lights. At first it took Buschmann a long time before he tackled the topic. He then accused the SPD of delaying the extension with additional demands.

The Social Democrats would have liked to tighten the brakes even further. SPD parliamentary group deputy Dirk Wiese announced: “In the parliamentary process we will now push for the loopholes in furnished and temporary living to be closed.” The exception for new buildings must be adjusted in time. This is not provided for in the ministry’s draft.

The coalition agreement actually also includes stricter rules for existing rental agreements, which benefit tenants who have been living in their apartment for a long time. Verlinden emphasized that rent increases of over eleven percent should be prohibited if living space is scarce. Wiese also warned Buschmann to implement the points agreed in the coalition agreement.

However, the FDP is slowing down: Since the coalition agreement was concluded, the general conditions for the construction and real estate industry have deteriorated drastically, according to Buschmann’s ministry. “Further tightening of social tenancy law would possibly make the construction of new apartments even less attractive.” It must therefore be critically examined whether the measures provided for in the coalition agreement still make sense.

What the government has politically linked to the rent control

The breakthrough in rent control was only possible within Ampel because of a parallel agreement on a completely different topic: the long-controversial handling of communication data for investigative purposes. Buschmann also launched a draft for this, which was first reported by the “Süddeutsche Zeitung”. No data retention is planned, but rather the so-called “quick freeze process”. Connection data such as IP addresses and telephone numbers involved in calls are only saved if there is suspicion of a crime of significant importance – such as murder or manslaughter.