
Berlin approves 5-year rent freeze - ciceryadam
https://www.reuters.com/article/germany-housing-rent-cap/berlin-approves-5-year-rent-freeze-in-german-capital-idUSS8N20O06F
======
2T1Qka0rEiPr
As much as I can sympathise with the predicament, this decision, and the
Berlin housing market in general, absolutely baffles me.

When I moved here I was warned of 100 people turning up to a flat viewing, and
laughed it off as some hyperbole. Only later did I find out that it _actually
happens_ , albeit the maximum viewing I went to was around a meagre 50. Having
come from the UK, I found the situation in Berlin to be absolutely ridiculous.
There are _already_ strict rental price limitations in place (based on
location, size of the property etc.), and although these can be skirted, in
general they're clearly very effective.

Again, I sympathise with city housing being very expensive, and don't believe
that purely gentrified city centres are likely to be a good thing. Still,
economics 101 seems to suggest that merely putting rental freezes in doesn't
fix the problem. It just (as is already the case in Berlin), leads to excess
demand. The solution is to _build houses_ , but what kind of investor is going
to throw their money at Berlin, where their opportunity to make a return on
their investment is severely hampered? I just don't understand this stance at
all.

~~~
max_hoffmann
Freezing rents is not meant to be a solution for a lack of housing. It’s a
solution to the explosive increase of rents of existing ones.

There are lots of people where the rents of their current apartment have
increased so much, that they had to move out. This solution is trying to fix
that.

Also freezing rents doesn’t mean Berlin will stop building new houses. If
there is big demand for housing in a city one needs both:

1\. make sure people currently living in the city are able to do so in the
future

2\. make sure new people coming to the city have available space

Freezing rents is aimed at problem one. These solutions are not exclusive.

~~~
zanny
Pretty much every western nation has systemically failed to recognize or
support the insanely high demand for high density living in the 21st century.
That is where the future of economics is, where the future of humanity in
general pretty much is, and every democracy is consistently demonstrating the
total inability for legislatures to sacrifice the advantage of those lucky
enough to inhabit cities as they exist now for the benefit of all those who
would grow the economy and future in the cities tomorrow. Largely because
those in the cities have the money and influence to buy the politicians.

~~~
jimmaswell
I don't buy any of this. Growing up everyone around me saw the city as
somewhere you begrudgingly went out of necessity and only lived there if you
had no choice, and I'm inclined to agree. In virtually every aspect I find
more countryside-ish living much more pleasant.

Consider virtual reality and remote work. I imagine much of the workforce will
move to virtual offices in the near to medium-far future when corporations
finally come around to realizing they don't have to waste so much money on
rent. There's no need for programmers, graphic designers, reporters, and
employees of lots of other professions to work in a physical office. So
really, as cities become less of a necessity to certain jobs, I expect a
moderate exodus to nicer areas, halting growth or even decreasing population
in urban centers.

~~~
pantalaimon
That's odd because it it's pretty much the polar opposite of what I've
experienced.

Everyone wants to move to the big cities, especially Berlin, as they provide
culture and a sense of freedom. You are able to meet like-minded people and
are able to experience culture and infrastructure that simply does not exist
in rural areas.

This of course makes makes the situation for the villages worse as many young
people move away. Who's left are old people and those who are not qualified to
find work or education elsewhere.

The population decline in those regions also means a decline in
infrastructure, economy and cultural events, which makes those regions even
more unattractive, perpetuating the cycle.

There is a slight trend of dropouts creating alternative living communities in
those areas as abandoned houses & property can be had for very cheap. But
their isolated nature means that often they will not last as their inhabitants
move back to the city were their original peer group is.

~~~
tomohawk
The problem with cities is that they have really bad failure modes. Consider
Baltimore. The city has been run by a single political party for decades, and
run right into the ground. Notice the trend in these population stats:

[https://www.biggestuscities.com/city/baltimore-
maryland](https://www.biggestuscities.com/city/baltimore-maryland)

This is a city right next to DC, in an essentially recession proof area with
lots of jobs.

I've known a number of people who were big proponents of living in cities
until either (a) they were robbed, or (b) they had kids and realized there was
no decent school there, and (c) they had no chance of impacting the government
in any way to affect change. They all ended up moving to the burbs.

~~~
jakecopp
Are robberies less common in the suburbs?

Are schools in the suburbs better than those in the city?

Why is it easier to affect government in suburbs?

I'm not sure if you're discussing Baltimore in particular or if you are making
these points generally. I'm not sure on robberies, but I live in Sydney and I
don't think there is a big gap between school quality and government
participation in suburbs vs cities.

~~~
matt-attack
My experience has been yes to all three of those. I’ve lived for decades in
both Orange County (suburbs) and Los Angeles (city).

------
hokus
Its really simple. We should tax property AND rent to the point where it
becomes unprofitable to hoard it for purposes of unproductive wealth
extraction. Then change all rent contracts into lease-buy contracts.

You would accumulate a good percentage of madly overpriced rentals that no one
wants then they go bankrupt one by one. You get those delicious market
dynamics we [apparently] crave more than any social convention. Buildings
should be hot potatoes that you don't want to hold for to long. With this much
demand it wont even affect housing prices but even if it did, who cares?

Gradually, (in stead of rent) people pay tax at market rates. We can keep the
large scale wealth extraction and continue to force people into productivity
only it would be the government doing it.

The same logic applies as with the teachers, taxi drivers, cleaners, garbage
men, restaurant employees etc: If you don't like it you can just leave the
city. Get some of that delicious mobility going and gtfo. They can just leave
for the sake of efficiency and availability. Its that simple: Just go away.

If you have to chose between [say] 1) a corner store OR 2) a land lord it
should be obvious which one to get rid of.

If they are contributing to quality of life by selling food and employing
people we should consider giving the store a tax cut. One could also extend
the tax cut to the people working there and have cheap stores.

Its hilariously unproductive to have a usury scheme of greedy unproductive
rent seekers extracting wealth from every transaction that is some how
remotely related to real estate.

I just want to pay for the ice cream, pay the people involved in making the
ice cream happen. Why would I pay 80% to someone who doesn't do anything I
need?

~~~
Pyxl101
Can you clarify what problem you are trying to solve with this proposal?

No one is obligated to rent a property from someone else. You rent if you
believe it's in your interest to rent, instead of buy. Why stop two consenting
people from entering into rental agreements, both of whom believe it's in
their interest?

Some people prefer to rent: they don't want to be obligated to live somewhere
for 10 to 30 years. They prefer to be free of commitments and loans (and/or
don't have enough cash to buy). I wanted to live somewhere for a medium period
of time (a few years) with no significant commitment or risk, then move on. I
had just moved to the city and wasn't sure where I would ultimately want to
live long-term. Landlords can also rent properties to people who have far
worse credit and far fewer assets than would be required to buy the same
property. I was able to rent a property much nicer than I could have afforded
to buy at the time, since I had income but little wealth and credit. (The
landlord in that case is taking on unsecured risk that I will default on our
contract.)

Landlords also provide useful services to their tenants: they are responsible
for all upkeep associated with the property. When I rented, I was glad not to
have to deal with any of that. Landlord takes care of all the yard, or common
spaces in an apartment, and if something breaks I just call the landlord. If
you own appliances and real estate yourself, then you are potentially on the
hook for significant costs if something breaks. Maybe the refrigerator breaks
and you need to buy a new one: the landlord needs to budget or purchase
insurance for that, while a renter does not. Landlords also assume liability
for their property: if e.g. asbestos is found on the land, they may be
responsible for paying for the cleanup.

Property owners are forced to tie up their assets in the real estate. Renters
don't have to. Let's say that I have $1 million in cash, and I want to live
somewhere. I don't necessarily want to _have_ to invest all of my cash in real
estate - not even a down payment on a mortgage. Renting might be a preferable
alternative so that I can use my cash for other higher-value investments or to
fund a business.

Lastly, landlords assume risk. If they can't find a tenant for their property,
then it sits idle and they take a loss. When you own property, you can lose a
significant amount of money if the property depreciates, as happened during
the last recession. When you're renting, your risk is capped - you owe the
rent but that's it.

Renting isn't wealth extraction. Like staying in a hotel, it's commerce, an
exchange of money (rent) for services (temporary right to occupy a property).
If you want to buy a property from its current owner, instead of renting it
from them in a landlord-tenant relationship, then make them an offer, and if
you both agree then you can do that instead.

~~~
Xylakant
> No one is obligated to rent a property from someone else. You rent if you
> believe it's in your interest to rent, instead of buy.

Ok, how does this work. In germany, you usually need to pay 20-30% of the full
price from your own saved funds when buying property. 100% financing is rare
and usually only available for people that have sufficient assets. So people
that have a low income basically never have a chance to buy. They don’t choose
to rent. Their only alternative is living in the street.

Rents in Berlin have been rising substantially faster than wages for the last
decade or so, turning this into a vicious circle that even the middle class
cannot escape from.

------
pure_ambition
I think most people with an understanding of economics would agree that more
supply is needed. The problem is, zoning laws are made by the cities
themselves, which means they are ultimately made by the people who already
live there. People who already live there don't want their neighborhoods
bulldozed for luxury high rises, which is what happens when zoning is
abolished.

Then, there is the problem of the suburbs. A lot of people suggest moving to
the suburbs and embracing a longer commute as the solution. The problem is,
suburbs also control their own zoning laws, just like cities, and surprise -
they also don't want their neighborhoods bulldozed for luxury apartments.

So the problem is essentially a power issue - who holds the power? Without the
political power to make zoning changes, little new housing will be built. I
don't see a solution here. So it seems that the local people embrace rent
control as the best possible solution among alternatives. Viewed from that
perspective, it's not so bad after all. The city's residents will feel the
impacts, and if it's not working out, they will eventually repeal the law. Big
deal.

~~~
jlawson
I wish someone with a deeper understanding would go to Japan and study how
they got this so right. Their zoning laws don't separate uses, only nuisance
levels, so you often see residential in commercial areas and small shops in
residential neighborhoods. It's amazingly effective at reducing how far you
need to go to get places, and gives the whole city a much more organic feel.
Plus, there is actually housing if there's demand for it.

Is it just Japanese cultural collectivism that made this work? How did they
make this happen when we failed so badly? I have no idea.

~~~
claudeganon
It’s actually pretty simple: housing isn’t an investment vehicle like it is in
many parts of the West. The social and historical reasons why this is so in
Japan are complicated, but the overall circumstances are not.

You can either have affordable housing that’s not an appreciating asset or let
finance/real estate Capital run roughshod over everything in speculative
flurries, leading to the insane state of affairs in many western cities today.
You can’t have both.

~~~
diet_mtn_dew
I read today that Fortress Investments purchased over 100,000 affordable units
from the Japanese government for 60bn JPY in 2017 and plans to spend about as
much on renovation. [1] Apparently firms like this usually expect an 18%
return on these kinds of investments.

[1] [https://www.wsj.com/articles/fortress-becomes-japans-
biggest...](https://www.wsj.com/articles/fortress-becomes-japans-biggest-
private-apartment-landlord-with-1-billion-bet-11560855602)

~~~
claudeganon
Yes and if all of its housing tilts this way, Japan too will spiral into
unaffordability. But most families still live in single family homes that
depreciate in value over time.

------
oezi
There are a lot of factors at play here:

1.) Supply is inelastic because construction work and building approvals are
limited by current capacity. It is not feasible to expect the market to react
as quickly as 600,000 new inhabitants over 10 years required.

2.) A lot of policy is still considering this to be a fad before cities become
less popular again. Berlin's plans had for instance foreseen falling demand
for schools due to demographic change and now rising birthrates (good economic
situation) and influx of young people into cities are causing a trend change
(for how long?).

3.) Current ECB rates are causing a housing bubble in Germany where many
people are buying property for the first time. Because these properties are
mostly rented when purchased but renters can't be terminated in Germany, the
only way to evict is by raising rent until renters give up. Putting a rent
freeze into place makes sense to prevent this and the rampant luxury
renovations which don't create more supply.

4.) Berlin at its peak (1944) had still more than half a million more people
and is surrounded by mostly empty countryside. It could easily grow to 10m as
Paris or London.

~~~
odiroot
> Berlin at its peak (1944) had still more than half a million more people.

Yes, with 2 - 3 times more flats per every floor in a building. And with whole
multi-generational families living in every one of them. Don't forget sharing
one bathroom between all this families and sometimes toilets just being wooden
huts outside.

Try visiting Mitte Museum in Gesundbrunnen, you'd see how miserable pre-war
housing was, yes even in the very centre. The area around Ackerstr. was much
more dangerous than Alex or Kotti is today.

~~~
jotm
Sounds like Britain. Today.

~~~
dang
Would you please stop posting unsubstantive comments to HN? We ban accounts
that keep doing this, and have already had to ask you more than once.

[https://news.ycombinator.com/newsguidelines.html](https://news.ycombinator.com/newsguidelines.html)

------
usefulcat
Symptom: rents are too high

Cause: insufficient housing supply

Solution: disincentivize new construction?

~~~
tmalsburg2
Nope. New buildings are exempt.

~~~
andy_ppp
So living in new buildings becomes undesirable even further because they are
more expensive to live in than the rest of the city!

~~~
iagooar
No, new buildings are desirable because they're new and will always find
buyers, especially if built in a nice neighborhood.

~~~
andy_ppp
Let's just thing this through:

I have the option to buy a rental property in Berlin, I can either buy an old
rental property and not be allowed to increase rents for 5 years. Or I can buy
a new build rental property (which already sell for above market value in most
places), and can charge more rent but I will be less able to find renters as
they are looking to lock in 5 years worth of zero rent increase.

I really don't get how either situation encourages me to become a landlord.

~~~
iagooar
Berlin doesn't need landlords. It needs homes for people.

~~~
username444
This.

Cities don't want or need more landlords. It needs more landOWNER residents.

~~~
max_hoffmann
What’s so good about owning? Renting is way better, if it’s affordable:

\- I can move out when my life circumstances change.

\- I can move out when the district changes.

\- I don’t need to take a credit just for living somewhere.

\- I don’t need to worry about people renting my apartments.

\- I don’t need to worry about maintenance.

If you have the money to buy fine, but for most people renting is way better.

~~~
username444
It's a completely separate argument than what I was responding to.

I personally agree with you, but thats my specific lifestyle, and I put my
money into other investments. But generally, owning a house is a good place to
park your assets if you live a "typical" life.

One of the biggest reasons I want more landOWNER residents? So that my
neighbours actually care what's happening in the neighborhood+condo, and do
something about.

I'm renting from a Chinese investor. He doesn't speak English and doesn't have
a clue what's going on around here, and doesn't care to get involved with
helping things run better.

I can communicate my issues with the real estate agent who handles the unit
for him, but he's just going to shoot off a short email and move on with his
day.

Over 50% of this building is this way. The board of directors has a huge
accountability issue because of this, and residents and owners are suffering
for it.

If you rent, you care what happens locally, but you have no say.

------
Y_Y
At best you'll produce consumer surplus for lucky renters, and you'll produce
sad outsiders who'd be willing to to pay even more but can't get in. Everyone
knows this is an issue with insufficient supply (of housing or of nice
alternative places to live) but it is popular to put a ban on symptoms.

~~~
blub
Yeah, not everyone has to live in Berlin. Better that the current citizens
have reasonable living conditions than everyone paying through their nose.

Everyone knows about supply and demand, few know what the situation's like in
Berlin or even care to find out before supplying us with economic platitudes
for which there is little if any demand at all.

~~~
cperciva
_Better that the current citizens have reasonable living conditions..._

What makes _current_ citizens more deserving than the people who _want_ to
live in Berlin but won't be able to due to policies which reduce the supply of
housing?

~~~
blub
Assuming they have a home in Berlin, the fact that they already live there
makes them deserving. A home is unlike any other material good and the basis
of securing a livelihood, it should not be allowed to exploit tenants for
profit.

AirBnB'ers and other speculators are of course not deserving at all.

~~~
oh_sigh
People who own and live in their home in Berlin aren't affected by a rent
freeze though. It is only renters, who by definition do not own where they
live.

~~~
blub
I used "home" in the metaphorical sense in my former comment. A roof over
one's head, place where one lives, etc. One of the pillars of our lives, even
in times such as these, where people move around much more.

------
caseysoftware
While rent may freeze, what are the unintended consequences?

\- Will enough of the "right people" be able to move in to fulfill the right
jobs? Keeping a barber seems great until you realize that there aren't enough
doctors.

\- Will "rent" be shifted to other, less trackable metrics? Will there be
large application fees to apply? Does Berlin have something similar to condo
associations or HOAs that will increase?

There are consequences to every action.. are the first order ones acceptable
here?

------
Roritharr
I think the main reason why this makes me so angry is because it's Berlin,
again, doing something fiscally irresponsible that the rest of the country is
going to have to finance in the long run.

How I imagine it to go down would be like this:

Today the politicians pat themselves on the back for their progressive stance
on this topic.

In year 2 of the rent freeze most of the property investment will have seized,
new construction is going to be mainly be occuring by entities that are forced
to construct in this market, which are mostly government backed.

In year 3 the pressure on the city council will be so high that some emergency
funding will be requested by the city to support the government backed
property developers (degewo, GESOBAU, GEWOBAG, HOWOGE, WOGEHE, WBM) in their
quest to buy expensive property from "evil" speculators to build more housing,
as obviously the private markets have failed to do so.

In year 5 after two years of campaigning the funding is granted by a then
black/green coalition in the Bundestag.

~~~
blub
What do you call the chicanery that companies like Vonovia are doing except
evil speculation?

Yes, heavy demand with slower increasing supply will result in higher prices,
but we're talking about homes here, not iPhones. People can't afford a home
any more, it's inhuman to just let them be bled dry or get kicked out in the
name of real-estate profit.

Your critique's puzzling especially because this law only applies to existing
buildings

~~~
Roritharr
>What do you call the chicanery that companies like Vonovia are doing except
evil speculation?

What these companies are doing is despicable, but how do you imagine this
rent-freeze will change their behavior? They will go looking for their margins
via other means if the market is the way it is right now.

>Your critique's puzzling especially because this law only applies to existing
buildings

Do you really think that people will Invest in a real estate market that has
legislature that is this investor hostile and face the risk of being outright
disowned, as also has been proposed in the run-up to this?

I wouldn't touch the Berlin real estate market with a ten-foot pole after
this.

~~~
blub
1\. It will take away one of the ways they abuse people. Who knows, if they
keep it up, maybe they'll be expropriated next :)

2\. Investors touching the Berlin real estate market right now are anyways
demanding exorbitant rates just because they can. Normally, this would at some
point reach an equilibrium, but so far it's going up and up with no end in
sight, pricing out most people.

And I bet not all of them will scurry away. Any economic measure will not have
a perfect effect, there will always be those that break ranks.

~~~
Roritharr
So you hope for expropriation and irrationally behaving financial investors.

I wanted to say I have a bridge to sell to you, but you already got the
Airport... it just hurts that I'm paying for the punchline.

~~~
blub
I'm not hoping for anything, but if a bad actor is playing with people's
lives, I also don't have a problem that they get punished for it.

Now the _only_ issue with expropriation would be the panic it cause in the
markets, because otherwise who cares whether residential property company
#201f exists or not. Setting some rules around renting, like the government
has been and is doing, to prevent abuse and speculation is more palatable, but
still has too many people running around screaming, based on a simplistic
presentation of supply and demand without keeping into account that there are
other factors that would and should trump the raw economic aspects.

It's not like the government has just instituted rent control and that's it.
It's a temporary measure, restricted to existing stock. They will try to build
more.

In the end it's not clear at all that leaving the situation spiral even more
out of control would result in a better outcome than even just rent controls
without other measures. Why is it so hard to get an apartment in Berlin that
people resort to bribing the landlords? Why does one have to "compete" against
dozens of other people, with _zero_ ability to negotiate and having to
sacrifice their financial privacy?

Last I read about it these companies had record profits and now you and others
are complaining that they won't build any more because they can't get profits?
How's that work, mate?

~~~
Roritharr
> Why is it so hard to get an apartment in Berlin that people resort to
> bribing the landlords? Why does one have to "compete" against dozens of
> other people, with zero ability to negotiate and having to sacrifice their
> financial privacy?

Low supply. You are not fixing that with a rent-freeze, you are making it
worse.

> Last I read about it these companies had record profits and now you and
> others are complaining that they won't build any more because they can't get
> profits? How's that work, mate?

These companies, especially Vonovia, will continue to make a profit for their
shareholders, even if they take a hit because their assets in Berlin
devaluate. They just will not invest further in Berlin, won't
build/buy&renovate housing.

If I were a shareholder in Vonovia i'd be pretty concerned of them taking such
a risk, I wouldn't want them to invest in Venezuela either.

~~~
blub
Yeah that's what I was hinting at (one has to read the entire paragraph): rent
control or no rent control, the situation already sucks both for existing
tenants and people that are looking for new apartments. Might as well protect
existing tenants, since new tenants are screwed anyway.

------
bronzeage
the only scalable solution is to reduce demand, not increase supply. cities
are already getting pretty saturated, and building more houses isn't going to
solve a thing.

what is really needed is very fast public transportation from outside cities
to the cities themselves, and incentives for workplaces to split into sub-
branches in other nearby locations instead of endlessly expanding within the
same city.

most people would prefer living outside the city for cheaper and higher
quality of housing, the force pulling them back towards the city is the
transportation distance to work. the force pulling workplaces into the cities
is that they want to minimize transportation time for potential employees
(unless the workplace has a location tied to the city), while they still need
to cluster employees who have to work together.

so everything is clustered, and there's nothing to do about it.

only way that this can end, is if you reduce the force pulling everything
together - by reducing transportation distance - while in the same time, you
need to introduce some incentives for workplaces to split to sub branches.

~~~
toper-centage
As someone who rides the S-Bahn for 30 minutes, having an express S-Bahn that
takes me straight to the center would be really nice. But there are only 2
S-Bahn tracks most of the time :/

------
chvid
Good luck finding a flat if you are moving to Berlin ...

~~~
lkqJHA
No problem: Many people sublet their rent-controlled or outright government
subsidized apartments for three times the official rent.

Finding a real apartment where you cannot be kicked out any moment is hard
though. The best way in Berlin to find a decent place is to be low-income for
several years, get on a waiting list and then finally get one of the luxurious
subsidized places.

No chance otherwise.

------
justnotworthit
Paul Krugman, 2000: [https://www.nytimes.com/2000/06/07/opinion/reckonings-a-
rent...](https://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent-
affair.html)

"The analysis of rent control is among the best-understood issues in all of
economics, and -- among economists, anyway -- one of the least controversial."

"So now you know why economists are useless: when they actually do understand
something, people don't want to hear about it."

------
hashberry
If affordable housing is an issue, then perhaps the government should provide
it for its citizens, like building huge high-rises in Berlin.

I used to rent in an expensive city but bought a cheap house in the suburbs
(thankfully I work remotely). Everything is cheaper out here, from gas to
utilities to food. But I did experience classism from my friends and family:
there is status living in a world-class city. And having wealth or a high-
paying job in the city is part of this status. But many people want the status
without having to pay the $$$.

~~~
cyrksoft
> Government should provide it for its citizens

And how do you expect government to pay for that? How do you decide who lives
in these houses? It's not that easy. Government isn't a magic entity.

~~~
zjaffee
One of the biggest costs of new rental construction is financing costs (on a
30 year loan it's often half of the cost). Given that it's cheaper for the
government to borrow money than the private sector you can have the government
simply build market rate housing, but wouldn't need to charge as much in rent.

In this context, the government can essentially be a magic entity.

~~~
cyrksoft
So you'll force tax payers to pay for it? Government doesn't have free money.
Why should people be forced to pay for the construction of such housing?

~~~
zjaffee
Tax payers wouldn't have to pay for anything, the only impact would be
potentially on credit ratings of the government and possibly also certain
interest rates in a minimal way. You can create market rate housing with
government subsidized loans that don't come from tax coffers. Hell, the US
federal reserve is technically the backer of hundreds of billions worth of
mortgages.

~~~
cyrksoft
We know how the mortgage crisis went. Government isn’t a magical solution.

------
cwperkins
I will eagerly wait to see how this unfolds. Count me in the skeptical camp
though.

From an outside perspective it looks like the Overton window in Berlin is
skewed heavily because of the runaway prices. I remember just last month the
huge protests against Deutsche Wohnen and people demanding the nationalization
of apartments. It’s no stranger in New York City that the most inattentive
landlord that had the hardest time getting things done is NYCHA, the city
agency. I’m skeptical of this solution, but the alternative was scarier.

------
TomK32
At the same time german tax office will give you trouble if you don't make
enough profit as a landlord.

~~~
looperhacks
Source? Btw, landlords will be able to apply for excemptions, if it is
necessary.

~~~
welterde
Here is an article about such a case from Munich (in German):
[https://www.deutschlandfunk.de/zu-nett-fuer-muenchen-der-
ver...](https://www.deutschlandfunk.de/zu-nett-fuer-muenchen-der-vermieter-
rebell-und-das-finanzamt.862.de.html?dram:article_id=422777)

------
azhenley
I just listened to a very relevant Freakonomics podcast, "Why Rent Control
Doesn’t Work (Ep. 373)". [http://freakonomics.com/podcast/rent-
control/](http://freakonomics.com/podcast/rent-control/)

------
vchernobyl
Very curious about this scenario - what about people who have a rent contract
with "Staffelmiete" (meaning rent goes up by a "small" amount each year)? Does
it mean this annual increase is now seen as invalid?

------
nullwasamistake
Rent control is almost always a disaster. It benefits current residents at the
detriment to everyone else. Look no farther than SF or NYC. I have a friend in
NYC paying 2000 a month to be a roommate to a guy paying 1500 for the whole
place. Yeah he's paying more than this guy's whole rent, because the apartment
is rent controlled.

~~~
gwright
Agree with you about rent control, but I'm assuming that the "guy" must be
breaking the law. If people in rent controlled apartments are free to sublet
at market rates, that seems like a huge loop hole easily exploited.

Regulations like this tend to create incentives for corrupt practices of all
kind.

~~~
nullwasamistake
They're not allowed but it's so hard to evict people from rent controlled
units in NYC, and so lucrative to rent out your place, that it's extremely
common. Maybe more than 50% of units. A lot of times you rent to a friend or
relative so they don't rat you out. It effectively turns rent control into a
$1000+ a month untaxed subsidy. I'm sure there's plenty of people that rent
out more desirable rent controlled units and don't have to work a day in their
lives.

------
xxxpupugo
Seems like only going to create a black market, or funnel the rent in other
ways.

~~~
hobofan
Probably not worse than the one that already exists. There are a lot of people
illegally subletting their apartments for 2-3x their original rent.

------
NikolaeVarius
Well, at the very least, will be an interesting economic experiment.

~~~
motivated_gear
This has been tried before in a number of different flavors. Most leave people
worse off.

[https://www.bloomberg.com/opinion/articles/2018-01-18/yup-
re...](https://www.bloomberg.com/opinion/articles/2018-01-18/yup-rent-control-
does-more-harm-than-good)

~~~
Vinnl
Thanks, I hadn't realised that obviously existing landlords might stop renting
out a place, which would reduce supply of housing - that could be problematic.

It also mentions that apartments got transformed into condos. This might be a
problem with my not being a native speaker, but: if one apartment is turned
into multiple condos, isn't it able to house more people? (Though being "new"
housing, I suppose they'd then be able to ask higher rents again?)

~~~
esarbe
Since there's already some effort to confiscate property that's been empty for
too long, I doubt too many landladies in Berlin will dare to go that route.

I could be wrong.

Relevant article: [https://www.reuters.com/article/us-germany-housing/berlin-
ac...](https://www.reuters.com/article/us-germany-housing/berlin-activists-
march-to-demand-city-seize-housing-from-landlords-idUSKCN1RI0EG)

------
dopamean
Does this mean that five years of natural price increases will just happen all
at once when five years have passed?

~~~
pgeorgi
Price increases in housing are limited in Germany and have been for a _long_
time (and tightened up in the last couple years). This specific Berlin
regulation is on top of that.

------
oytis
People are bringing in the supply-demand curve from their school economy
classes. The problem is it doesn't work that way with housing. There is zero
incentive to build affordable housing when you can build a luxury house. On
the contrary, landlords in Berlin "renovate" all the time, to make normal
apartments into luxury ones.

So without regulation, the supply for affordable housing is diminishing. To
increase the supply and reduce the prices, one needs regulation. Without all
efforts to reduce prices by giving landlords the opportunity to build more
affordable houses will be wasted. They don't want this opportunity, they need
as much money from each square meter as they can get.

I am all for building more where there is space, it just needs to come with
some regulation. That is, a certain quota of social housing in each building,
prohibit meaningless renovations, make it less attractive to use property as
an investment.

Rent freeze does some of this. It lets people stay in their house, preventing
further gentrifying districts (which would lead to further rise in prices in a
kind of a positive feedback loop). And what is important, it makes property in
Berlin much less attractive of an investment, because nobody knows what else
to expect from the senate (even expropriations are discussed).

I don't expect it to solve the problem completely, but it will definitely slow
down its progression.

~~~
fredm-de
Luxury housing, too, does create supply. Prohibiting the construction of
luxury apartments will just end with rich people paying luxury money for
standard apartments thus raising prices and people with less financial means
will be priced out.

~~~
oytis
Or will just move to a city that is willing to provide them living conditions
they want (Munich, Hamburg, whatever).

Also when we consider new houses, luxury house creates less supply than a
normal one by having fewer apartments.

------
iso-8859-1
More details on the German Wikipedia article (it can be translated):
[https://de.wikipedia.org/wiki/Mietpreisbindung#Mietpreisbrem...](https://de.wikipedia.org/wiki/Mietpreisbindung#Mietpreisbremse_\(2019\))

Interestingly, legislation like this was in effect from 1945-1988 in West-
Berlin.

~~~
amai
Interesting, this legislation actually was invented by the Nazis:

"On October 17, 1936, the National Socialists imposed a rent freeze and
further rent authorities were established. After the end of National Socialist
rule, this regulation initially continued to apply in both parts of Germany,
which is why home ownership was often considered "unprofitable" as early as
the 1950s, as the costs for maintenance, repairs and administration continued
to rise every year.

Translated with www.DeepL.com/Translator"

------
nickik
The only way to actually solve living prices is increase in living space. Its
as simply as that. Literally nothing else has worked, and the cheapest cities
to live in are those that build a lot of new apparment buildings. Everything
else is political snake oil that usually makes the problem worse not better.
This is the most basic economics that has been shown over and over again for
100+ years.

If you want to do something useful. Do infrastructure building and make more
of the surounding area accessable for large scale building programs.

Make regulations for building easier to handle when building new houses.
Meaning allow to build higher and so on. I bet there are 100s of unnessary
regulations that have accumelated over the last 50 years.

------
08-15
Isn't it amazing how short politicians' memories are?

It's been only 30 years since the GDR (German "Democratic" Republic, aka East
Germany) collapsed. In the GDR, _all_ rent was regulated to a "fair" level.
The result was a universal scarcity of housing, and existing houses were
decaying, because nobody would invest any amount of money into maintenance.
The best housing available in the 1980s were those ugly and uncomfortable
apartment buildings made from mass produced concrete slabs, which everyone
just remembers as socialist architecture. And "available" meant you had to
wait for many years. Still, the alternative was to live in a house built in
1910-1930 and not maintained since 1950.

There is no place in the world that could document this failed policy better
than Berlin: the contrast between East Berlin (ugly ruins) and West Berlin
(nice houses) is striking, even today. But the Berlin senate decides to go
with socialist thinking again. However, that was to be expected after the
Berliners voted the old Socialist Unified Party (renamed twice, but otherwise
unchanged) into the senate.

------
chappagetti
This means that who gets a place to live and who doesn't will be decided by
factors other than willingness or ability to pay. I imagine renter selection
will come down to criteria that are no better and possibly borderline
discriminatory -- how do you choose which renter to go with when you have 100
to choose from all paying the same? Should we make regulation for renter
selection also?

------
nielsole
This will prevent the referendum to expropriate major german housing companies
to gain traction. So in this way this could actually be considered as a pro-
market law when considering the political alternatives.

------
Roritharr
I'm so ashamed of german politics of late. We're becoming the country where
Homeopathy is GAINING popularity, where policy is increasingly symbolic in the
good case, outright ideological in the worst case.

It's really at the point where I don't want my kids growing up here anymore,
problem is, where else?

~~~
llao
> Homeopathy is GAINING popularity

Citation please.

~~~
Roritharr
[1] [https://www.spiegel.de/gesundheit/diagnose/homoeopathie-
in-d...](https://www.spiegel.de/gesundheit/diagnose/homoeopathie-in-
deutschland-absatz-steigt-auf-670-millionen-euro-im-jahr-2018-a-1256101.html)
[2] [https://www.bah-
bonn.de/bah/?type=565&file=redakteur_filesys...](https://www.bah-
bonn.de/bah/?type=565&file=redakteur_filesystem/public/Ergebnisse_Allensbach_deSombre.pdf)

Sorry for the german sources.

~~~
llao
Thanks and yikes! I am positive that the growing critique will lead to an
improvement on that front though.

------
objektif
I think the only solution to high rents and home prices is to build more and
more supply. But strangely there is opposition to this from both sides of the
political spectrum. Left opposes it in the name of “preserving neighborhoods”,
conservative wealthy home owners dont want new inventory to reduce their real
estate valuations, and developers oppose it because it will eat into their
profits.

~~~
mixmastamyk
Agreed except for last part. Devs want to build homes, as that's what they do.

~~~
mantas
Nah. Build too much and your margin gets slimmer and slimmer. Build less and
get same profit with less work while keeping the market hungry for the future.

~~~
mixmastamyk
> Build too much…

Thankfully, that's not a problem anywhere in places with skyrocketing rents.

~~~
objektif
It actually is, otherwise you would have seen Manhattan skyline reach the end
of earth but it does not. Premium condos demand such high prices that
developers dont have incentive to over supply the market.

~~~
mixmastamyk
The housing shortage is real, discussion of niche exceptions is not a great
use of time.

~~~
mantas
The problem is that there's no economic incentive to solve that shortage.
Numbers just don't add up.

Existing city residents wouldn't be that happy if their municipality started
building shitload of public buildings using their tax money. Those money would
be redirected from other issues that are important to current inhabitants,
their real estate value would plummet and they get much densier city that
comes with all the associated problems. On top of that, cheap rents would make
the city more interesting for more people. So rents would start raising again
and we're at step #1... But with more crowded public services.

~~~
mixmastamyk
Doesn't need to be public investment, there are incentives for some but not
others, and yes the situation is complicated.

------
tschellenbach
Why does the national government allow the city of Berlin to implement such
short sighted and destructive policies? There should be some guidelines set by
the national government about what you can and can't do in terms of housing
supply.

~~~
pgeorgi
Because Germany is a federal republic. There's stuff the federal government
just has nothing to say about.

I mean, in case of Berlin, they could help by moving back to Bonn. Lots of
real estate, both office and residential, would free up immediately.

~~~
iso-8859-1
There is fresh federal legislation on this subject: Mietrechtsanpassungsgesetz
(MietAnpG). Here is an overview: [https://www.etl-
rechtsanwaelte.de/aktuelles/mietrechtsanpass...](https://www.etl-
rechtsanwaelte.de/aktuelles/mietrechtsanpassungsgesetz-2019-ein-kurzer-
ueberblick-fuer-eigentuemer-vermieter-und-potentielle-immobilieninvestoren)

~~~
pgeorgi
Contract law (as changed by MietAnpG) is part of the BGB ("civil code"), which
is federal law, while the rent cap is built on top of housing law
("Wohnungsrecht"), which is - mostly - state law (e.g.
[https://www.morgenpost.de/berlin/article226212113/Mietendeck...](https://www.morgenpost.de/berlin/article226212113/Mietendeckel-
in-Berlin-Mieten-duerfen-fuenf-Jahre-nicht-steigen.html)).

The states are rather peculiar about the federal government trying to infringe
on their right to set laws, so even if most other states agree that the rent
cap is a bad idea (not a given), it's uncertain that they would support
anything that uses federal powers (in the Bundesrat, which would be hard to
avoid) to stop it in Berlin.

------
cyrksoft
Can they use Airbnb and the likes to bypass this?

------
jk27277
Berlin will be the Lisbon of the 90ies. Well deserved

~~~
pierrebeaucamp
What happened to Lisbon in the 90s?

~~~
iso-8859-1
Translated from the German Wikipedia article:

In 1947, António de Oliveira Salazar initiated a rent freeze for Lisbon and
Porto, which remained in force for over 40 years and ensured that for some
old-style apartments in the late 1980s, <5 euros/month had to be paid. After
the freeze, rent increases remained limited to inflation until 2006, so that
rents remained very low. Many homeowners let their old apartments become
derelict because the money was missing for renovations. Sanitary facilities
with shower and toilet were missing in many buildings. In the center of
Lisbon, about 20 houses per year collapsed at the end of the 1990s due to poor
condition.

------
durdleturtle
This seems like it could be dangerous as it creates incentives for slumlords.
If the landlords need to raise rent but they can't, then the only way for them
to turn a profit is to cut their expenses.

~~~
MickerNews
Or just sell up and find a more respectable way of making money, increasing
supply in the buyer occupier market, lowering prices.

------
vtail
As a person born and raised in Soviet Union, I strongly believe that whoever
thinks that a proper economic response to raising prices is literally _to
order them to stop raising_ , is a lunatic.

~~~
tmalsburg2
Genuinely curious: what do you think would be a better response?

~~~
vtail
Raising prices = Demand > Supply. You can either try to curb the demand (by
e.g. creating incentives for companies to build offices elsewhere, move
government bureaucracy somewhere else, etc.) or improve the supply by
facilitating new construction, which in most places on earth is limited by,
again, local government restrictions.

edits: grammar

~~~
sdegutis
What's wrong with legally limiting artificial price hikes to prevent people
from abusing Demand > Supply for the sake of their greed?

[Edit] To clarify, they seem to be "artificial" price hikes because they don't
in any way _necessary_ to cover costs. People realize they can charge more and
get more money, _so they simply do._ That's inherently avaricious and
unethical. Sure, maybe prices work themselves out, so that price goes down
when supply goes up, but this seems to _only be because suppliers can no
longer get away with a higher price,_ because their competition is now selling
it at a lower price. So I think it's far more ethical for a government to
limit those kind of price hikes, which mainly just hurt the consumer, than to
allow these abuses to continue in the name of "freedom".

~~~
vtail
You are using emotionally charged words ("artificial", "abuse", "greed"),
which makes a bit hard to have a constructive argument, but let me try :).

One way to think about prices is as a _signal_. When greedy landlords raise
prices, they send two signals: (1) To other landlords and wanna-be-landlords,
saying it's an attractive market which would justify new construction or
cleaning up your spare bedroom and putting it on the market, both increasing
supply, and (2) to current and future renters, making it more economical for
them to move elsewhere and thus save on their rent, thus reducing demand.

~~~
sdegutis
I just edited the comment to clarify what I meant by those words. And they
should be used because they are accurate in this context. Although I did
convert "greed" to "avarice" in my clarification since I think it's more
accurate here.

------
balozi
Why stop at price controls on housing? Why not just go bravely into the full-
blown confiscation and redistribution of private property.

~~~
2ion
It's a running joke that the country and Berlin in particular is turning into
GDR2.0. Which is why there's lots of dissent especially among the former East-
Germans who feel reminded of something.

------
option
the West is being murdered by populists

~~~
dang
Maybe so, but please don't post unsubstantive comments to Hacker News.

------
nickpp
And in other news: “That can’t be graphite on the ground”

------
xmly
This is totally wrong!

The government should never intervene market!

~~~
max_hoffmann
Nope, because the market doesn’t care about you. It doesn’t care if you have a
place to live, if you are healthy, if you are safe…

Not restricting "the market" at all leads to a worse life for humans.

