An issue that many commenters here are missing is that the problem with rent control will manifest more sharply in the future.
Sure, the impact today seems relatively equitable: a windfall for people that rent today coupled with a small drop in supply.
But fast forward 10 or 20 years and the situation looks far worse: everyone who got a windfall today is still living in the same apartment, whereas anyone trying to enter the rental market is utterly SOL. The people that are really getting screwed are 10 years old today: when they try to move out of Mom and Dad's they will enter a market with vastly reduced supply since nobody has any incentive to move.
This is why if you're 19 you can't afford to live in Manhattan: you're either old (and lucky) or rich.
A counterexample is Vienna, which utilizes a well balanced system of rent-control and social housing to have incredibly low rents and still a stable supply of flats. One tweak they apply is that rent-control does not apply to new developments, so creating new flats is more lucrative than turning old buildings into luxury developments. The city also acts as a competitor, driving prices down by offering cheap flats. There are definitively problems with rent-control if applied bluntly, but the it's a tool that can be useful.
I experienced exactly this in the early 1980's. In Berkeley, CA. Apartments were scarce because of rent control. I had a coworker that lived in his apartment from late 70's until late 90's. He paid less than $300/mo. It was great for him. He saved a ton of money and bought a house in Berkeley in the late 90's. But, as a student I had to live in Oakland and was never able to find an apartment. Every time I went to look at one there were another 99 people there. It was so frustrating.
The beauty of it is it doesn't matter to the bureaucrats: since the 19 years old can't live in the city he also can't vote in the municipal elections!
It also has bad impact on the type of buildings that get built. If you have to build some rent-controlled housing as part of your development project, and some jurisdictions will force developers to do that, it pushes you to build the rest of your building to be as upscale as possible to attract higher paying customers (better margins).
And it also removes the incentives of ever upgrading the rent-controlled buildings more than the minimal legal maintenance. Because any dollar is better spent on the upscale offerings.
There is plenty of scientific denialism on the right.
Along with anti nuclear, the belief that rent control is a remotely good idea is an example of scientific denialism on the left. There are some decent arguments to be made against nuclear but rent control has always always caused more harm than good everywhere it's been tried.
I live in Berlin. What you're describing in "10 or 20 years" is already the case. That's why these actions are being taken now.
I waited 6 months for an apartment here when I first moved. Pretty much everyone who doesn't want to spend insane prices on a unit has to.
And even then, I'm still paying 500-600 more than I should be. It's insanity.
The main problem is that there are immigrants (primarily from one country in particular, but that's less important) coming in and buying up all of the "houses" here (note that "House" in Berlin means a large apartment-complex-like house, not a single American Style, white picket fence house) and then increasing the prices slightly.
I'm not anti-immigration, clearly, but there are still concrete economic effects that haven't been solved yet. I don't think anyone knows what these measures will lead to, but at least it's something.
I live in Berlin, and my neighbours are in their 70's. Should they be forced to find a new flat way outside the city because the rent triples over the course of a few years so young tech workers relocating from London can have a place in the cool part of town?
The rental market is different in Germany than it is in other countries: less people own their homes, and getting a housing contract feels a lot more like a permanent thing than when I was living in the US. You pay 3 months rent up front as the security deposit, and most flats don't come with a fitted kitchen so you have to take care of it yourself.
>This is why if you're 19 you can't afford to live in Manhattan: you're either old (and lucky) or rich.
Or a real estate broker who knows building owners willing to rent out the stabilized units (50 pct are stabilized, 50 free market more or less). Or you paid a broker fee to this broker. Or you sublet from a rent stabilized tenant who charges market rent..
No one talks about how easy corruption happens in these situations. The bifurcated market in NYC sucks - it should be all stabilized or all free market.
Either a cheap apartment is hard to find and afterwards it's even harder to move somewhere else.
The alternative - as in other cities - is that it's still hard to find an apartment that has a normal price. Of course this also attracts scammers.
The apartment situation in dense areas is bad, no matter if it's Berlin or not. At least the local government is working on a solution to not end up like Manhattan, both price- and concrete-wise. If they find a sustainable solution, then this would be a game-changer and other cities might adopt that.
not just in 10 or 20 years, more like in 9 months!
The supreme court will probably rule that the Mietendeckel is unconstitutional in November, which will lead to a nasty situation for many renters with old contracts. If the tenants are lucky the landlord will just ask for the money "saved" to be paid back, but the unlucky ones will be evicted, as being in arrears of more than one month is grounds for termination regardless if you pay it back the the debt or not.
Kicking people out of their homes doesn't solve the supply problem, because it doesn't create new housing. It just shuffles around who lives in existing houses.
If you have a housing problem, and you want to solve it, you need to do two things.
1. Not kick people out of housing that they have. (Because it is incredibly disruptive to people's lives.)
2. Build new housing, until demand is met.
Rent control accomplishes #1, proper city planning accomplishes #2. If you're not doing #2, complaining about #1 isn't going to solve the problem.
I think you're missing a larger point: why should people be forced to move? There's no natural law that says people should be ceaselessly pushed around by market forces.
Where would that person in that rent controlled apartment be otherwise? Chances are, on the street. Moving requires upfront capital. It requires promise of a job at the other end. If you are in a high cost of living area like NYC or CA, you might have to quit your job if you want to find a more affordable apartment; there might be absolutely nothing affordable within a three hour drive of your job of cleaning up a downtown office or working a bar, and there may be absolutely no jobs in areas that are affordable. Throw in multiple earners, as is the case of many working poor in overcrowded rent controlled apartments, and you've complicated the problem further and make it even more difficult to wind down your life in one location and wind up in another.
And let's be reasonable here, rent control is not some handout. It's not a subsidy or a tax. The price you pay on your first year in a rent controlled apartment is market rate. Rent control simply says rents cannot go up say, beyond 4% a year. Perfectly reasonable in a world where wages for the working poor rarely go up beyond 4% a year. If landlords want to make more rental income per year, they should instead lobby their city council members to allow them to build more units per parcel, rather than lobby to artificially constrain housing supply with zoning and/or red tape in effort to raise real estate values.
> everyone... is still living in the same apartment
I don't think this is a function of rent control. The people who were renting 10-20 years ago will still need somewhere to live.
If there isn't sufficient new housing available, then this increases competition for existing housing, but kicking people out of their homes doesn't seem like a good solution either.
If people could move en masse out of cramped expensive rent controlled housing in manhattan, they would. Moving requires upfront capital that a lot of people don't have. Banning rent control doesn't move these working people into more space in some suburb on the outskirts of town, it moves them into a tent under an overpass.
Manhattan has been unchanged for 100 years. You’re either rich or poor to live there. It’s kinda bizarre that you see the ability of people to live in their home for 20 years as a problem.
Frankly it goes to show the hypocrisy of many of the cheerleaders for higher density housing, pushing for a future where as an individual you get discarded and banished to the hinterlands when your value declines.
But politicians need votes within 4-5 years. So who really cares. At least the young people getting apartments now are getting a good deal. Who cares about the future??
"Price changes in the regulated market dropped relative to those in the 13 other cities. That’s because real estate loses value if its future cash flows to landlords are capped. There was also an acceleration of apartments going up for sale, as landlords tried to cash out of their now less profitable investments." & "And whenever somebody does move out — when moving to another city, for example — the landlord tends to sell the unit rather than re-let it."
Sounds like it is a massive success? Those units don't magically disappear, they are bought - by homeowners. It seems like the landlords were artificially driving up the housing market while not adding any value.
The only problem here is that they limited it to pre-2014 apartments. Maybe they should just extend it to all apartments instead.
The situation in Berlin before the policy change was that the city government had made it very hard to build apartments at all. Each time a project it developed, the developer is blackmailed into supporting various unrelated policies, being it parking space related, maximum stories, etc., and sometimes capriciously denied permission to build. This is how my green-leaning, government-trusting architect friends describe the situation.
This happened all the while time Berlin changed from being viewed as a forgotten backyard in Germany with few companies and high unemployment to the capital city of the dominant and richest country in Europe. Especially the great financial crisis accelerated this change of perception.
Consequently, many people moved to Berlin. For many years 100k people per year moved into a city of 4m. Stated in terms of economics, supply of apartments was very steady, and demand jumped up.
The sound response of a market is to signal that through price hikes. That should encourage investment in residential building. When this is being suppressed nothing can even get better. Only longtime renters are favored. People with already cheap and large apartments benefit. Losers are those young couples expecting a baby.
A solution that could potentially work would be to accept temporary pains from high prices, remove regulatory obstacles from new construction and let the industry find a new balance. Maybe accelerate the process by governmental subsidies, if you like that sort of policy.
But the current policy can't work in theory, it doesn't work in practice. And it only benefits old established interests who are privileged already.
I have mixed feelings about this policy as a berliner.
But the article is definitely skewed towards the landowners and huge renting companies.
Some facts for you:
Rate of home ownership among Berliners, Londoners, Parisans:
- Berlin: 17.5%
- London: 52%
- Paris: ~60%
The main problems is huge home-renting corporations.
The article refers to a separate discussion about breaking up huge companies that own more than 3,000 apartments. As far as I know this criteria meets only a couple of huge companies such as Deutsche Wohnen that over the past couple of years have artificially created a sense of scarcity and caused the rent to increase without a proportionally increase to wages(Not only blue collar but also High Tech wages)
It is very ironic that companies such as Deutsche Wohnen were able to grab so many apartments when Berlin wall fell with dirt cheap prices. You can argue rushed privatisation caused this problem and something needs to be done if Berlin wants to avoid becoming SF.
>In a food shortage, for example, regulating the price of bread only trades one expression of scarcity (high prices) for another (empty shelves).
Well sure. But the total amount of people who have some bread is now greater, versus a select few wealthy people getting all the bread they want, as the wretched masses stare longingly. You can either increase total happiness, or concentrate it to the powerful. It's pretty clear by the tone of this article which side the writer lands on.
I moved to Berlin with partner in late 2019. We were looking for 3 rooms for < 1800 in East (Pberg/Xberg/Friedrichshain).
After long, tiring search of 20+ places with 100+ people at each, through a friend of friend we got a place for 1400 because we were the only ones that looked at it. Then rent control happens and now we pay 1000.
And we would have paid 2000+...
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If you find something you like, it doesn't matter because there would be 20 other people applying. Landlords want to rent for a long time, so they prefer Germans over foreigners/expats, and people with long-term stable jobs (government, teachers, etc.) instead of startup people, so we were at the back of the queue.
When we found a place we liked, we would have been prepared to pay way more than the asking rent, and put down multiple years of rent in advance just to get it - like happens in NYC for example. But no landlord/agent is interested in this in Berlin. I guess this is an example how well-paid tech ppl are driving rents up. Even though "well-paid tech" in Berlin is not that much.
Only at rent levels of 2200+ do you start to find places you really like in good areas, but there are lots of places advertised at ~1500 that were even more ideal but unattainable due to demand, which is frustrating.
I really don't know how anyone can get an apartment in Berlin now after rent-control.
When we move out, we will most certainly find a friend to hand over to.
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Re: Rent control
Before it was impossible to find a place, now it must be insane. For existing tenants though, it's like an unexpected yearly bonus - but for us, completely unnecessary. It's like a middle-class handout.
There is no reason why housing cannot be much much cheaper than it is now -- so cheap that it is nearly free. Larry Page, in an interview in 2014 discussed how. "Rather than exceeding $1m, there’s no reason why the median home in Palo Alto, in the heart of Silicon Valley, shouldn’t cost $50,000" [1] and attributed this entirely to a policy problem.
The answer is continuously increasing supply in a manner that outpaces population growth dramatically.
If we reorganized the market such that there were incentives to massively build new housing, this would be a solved problem. The price of housing could effectively be the marginal cost of construction as opposed to the market power driven pricing derived from scarcity.
Couple that with remote work and efficient high speed transit both within cities, to the suburbs, and to other cities, and we should be able to enable the demand to spread out (enabling more diverse supply to compete) and to add significantly more supply everywhere.
It is infuriating that a simple problem of supply and demand has not been able to be solved by developed governments. I recognize that it isn't as simple of a market problem as say a true commodity because location matters -- causing heterogeneity in the goods. But that location difference is alleviated by the increasing supply in high demand areas and by empowering more competition across areas through transit and remote work.
American and European urbanites need to become comfortable with Chinese and Japanese style mega cities or their urban areas will always be unaffordable. Chinese and Japanese cities are affordable for everyone because they build! They build as much as they need to in order to fit everyone into the city. We don't do that here so cities are for rich people.
uh Chinese apartments are super expensive and you dont even get to own the land. Japan was super expensive but is now affordable since the bubble popped and the population started shrinking.
Berlin's population is growing quickly so doesn't have much to do with Japan.
I expected to agree with that article, but honestly the tradeoff seems reasonable. Given just the data presented there, is it actually worse if rent controlled apartments are hard to get if lots of people are also paying much less rent? I'd really want to see some data about lots of people wanting to move to or within Berlin who are not able to due to lack of supply. That data may well exist but isn't presented here.
It remains to be seen whether they are just paying less rent, or there are other disadvantages. Beside the obvious maintenance issue (will landlords invest more than legally mandated?), a german-specific issue is that it is quite common in Germany that renters who want to end their lease search for their own successors. The reason is that apartments often come without kitchens, low-end apartments even without flooring. The renter needs to take care of that, and if you end your lease, your investment is lost. Unless you find a successor who is willing to pay for it, which is quite easy if you live in a desired, low-rent apartment. Where I live (outside Berlin), people pay several thousand euros "for kitchen and floors" to the previous tenant to get a city-owned, low-rent apartment. Often they pay more than the kitchen and floors are actually worth, even though legally they are not even required to pay for this. But it's the price to be chosen as successor among many applicants. Landlords usually play along, as it's less work for them and this process will ensure that they get only the most affluent renters. I expect that renters in Berlin will be willing to pay even more to get one of the regulated apartments, as they are even cheaper.
Is it worse if now there is a special class of people who happened to be in the right buildings at the right time when this law passed who will now forever get discounted rent, leaving everybody else to pay full price?
You also need to look at how many formerly rent controlled apartments have been sold and taken off the market. The charts don't really show that, but the articles suggests that is happening
> I'd really want to see some data about lots of people wanting to move to ... Berlin who are not able to due to lack of supply.
Even if there were those lots of people unable to move, would that actually be a problem in various cases? Unlike many other European countries, where the countryside has emptied out and brain-drained as its young people move to the big city, Germany has managed to keep many of its small towns viable places to live and work.
Whether or not this succeeds or is a disaster a) depends on what wants the outcome to be like, and b) when this is settled in court. As of now house owners (and remember: we talk mostly investment companies, not individual persons) are encouraged to speculate that the court overrules rent controls and (somewhat illegally) hold back appartments from the market. Once this is settled one way or the other these flats will be available on the market again, and if rent control survives, at somewhat acceptables prices.
Remember that rents did increase ~300% or so over the last 15 years, but income maybe only 10 or 20%.
Lots of points missing in this article, clearly written by someone looking from the outside and not someone actually familiar with the rental market in Berlin.
Even without these specific rent controls, most rental contracts have either "staffelmiete" or "indexmiete", that is, fixed points at which the rent will increase or an index against which rent is pegged. There are very strong laws supporting renters.
I live in a somewhat newer apartment, so it's not subject to the discussed changes. My rent increases were agreed with the landlord when we moved in, they are fixed in my contract, and after the built in increases are done, the rent won't go up anymore.
The issue with housing and prices is Berlin is not the same as other places in the world. For years Berlin was an economic wasteland. Just now it's become desirable to live here, and there are jobs and an economy to support it. The rent in Berlin is, despite increasing 5-10% per year every year for the past decade, still less than that in Munich or Hamburg. This isn't a case of a speculative bubble or outlier system, just a historically depressed economy returning to the mean, and fast.
Yes, it's unfortunate, that people cannot afford to live in Berlin as they did in 1996. But Berlin is not the city it was in 1996. To alleviate this price pressure, more housing needs to be built than demanded, and that has not been the case for a long time now; place is limited.
> as demand from new arrivals far outstripped supply
This is mischaracterizing what is going on. There is rampant speculation by multinationals buying up old housing stock and attempting to do the New York City model of hyperluxury renovations at the expense of existing residents.
I think this article is getting the interpretation of the facts all wrong.
They point to the predictable drop in supply in the regulated market as if it was a bad thing, but they ignore where that supply is coming from. Those are not newly-built apartments, because the price controls don't apply for new construction.
When an old apartment becomes available, it's because the previous occupant moved out, e.g. because they could no longer make rent. So making rents more affordable leads to fewer people having to move for financial reasons, which I think is a good thing.
Disclaimer: I live in a regulated apartment and don't intend to move, so it's probably not surprising that I like this policy.
This is a good point. You can't ignore the overall real estate investment climate. If you think the city is going to tighten the screws on builders and landlords, why bother? Find a city that's more friendly to people building new housing.
I don't know... maybe because you need an apartment for yourself, and you now can afford to actually buy the lot because you do not have to compete with investors expecting a dividend of 20% on their investment?
I live in Berlin. I've found a regulated appartment for rent last year.
The author clearly exposes his sentiment in their choice of words. There's lots of buzzwords thrown around and not much reporting from here. Was the author even in Berlin before writing?
Anyways, in Berlin it will now get even "worse" as an initiative is now starting to collect signatures to disown "Deutsche Wohnen" of hundrets of thousands of flats they own.
I can see that the market is "bad" from that article. My experience with renting a flat was different:
The law allowed me to reduce my rent to a price I indeed find reasonable. It's roughly 100€ less. I'm happy with that. And in case our supreme court overthrows the Berlin ruling, I've gotten read and saved the "shadow rent".
> The right answer to that shortage would be to increase supply — for instance, by cutting red tape in zoning and construction
Hmm but didn't they indeed provide incentives for increasing supply, by exempting new construction from rent regulation? In fact the later argument saying that prices started going up in the unregulated market would support the notion that the policy is indeed providing a powerful incentive to new buildings. Sure, the article also laments that there still isn't enough supply, but can one argue that giving more rent money to owners of old properties would help fix this?
How did new construction change in Berlin? What about homelessness? I don't know but find it shady that the numbers aren't shown.
One thing I've always wondered is why we as a society even let real estate be a thing that people can buy a lot of. Why does an individual get to buy, say, 10 buildings and rent them? The title "land lord" even seems like a holdover from some feudal time.
Not that I think you completely outlaw the practice, but why not start taxing after, I don't know, you own 20 units or something. Just figure out some sort of scheme that disincentivizes people from hoarding a resource required for life. I'd much rather rent from someone that lived in the building and actually cared for the place than some random LLC in Florida I mail checks to that can't be bothered with anything.
Rent seeking is hard to eliminate, there has to be some way for lazy aristocrats to feel safe in their complacency. Try to remove it and the sleeping dragon gets very angry.
[+] [-] el_nahual|5 years ago|reply
Sure, the impact today seems relatively equitable: a windfall for people that rent today coupled with a small drop in supply.
But fast forward 10 or 20 years and the situation looks far worse: everyone who got a windfall today is still living in the same apartment, whereas anyone trying to enter the rental market is utterly SOL. The people that are really getting screwed are 10 years old today: when they try to move out of Mom and Dad's they will enter a market with vastly reduced supply since nobody has any incentive to move.
This is why if you're 19 you can't afford to live in Manhattan: you're either old (and lucky) or rich.
[+] [-] Xylakant|5 years ago|reply
[1] https://www.immobilienwirtschaft.tu-berlin.de/fileadmin/fg28...
[+] [-] e40|5 years ago|reply
[+] [-] 908B64B197|5 years ago|reply
It also has bad impact on the type of buildings that get built. If you have to build some rent-controlled housing as part of your development project, and some jurisdictions will force developers to do that, it pushes you to build the rest of your building to be as upscale as possible to attract higher paying customers (better margins).
And it also removes the incentives of ever upgrading the rent-controlled buildings more than the minimal legal maintenance. Because any dollar is better spent on the upscale offerings.
[+] [-] JPKab|5 years ago|reply
Along with anti nuclear, the belief that rent control is a remotely good idea is an example of scientific denialism on the left. There are some decent arguments to be made against nuclear but rent control has always always caused more harm than good everywhere it's been tried.
[+] [-] junon|5 years ago|reply
I waited 6 months for an apartment here when I first moved. Pretty much everyone who doesn't want to spend insane prices on a unit has to.
And even then, I'm still paying 500-600 more than I should be. It's insanity.
The main problem is that there are immigrants (primarily from one country in particular, but that's less important) coming in and buying up all of the "houses" here (note that "House" in Berlin means a large apartment-complex-like house, not a single American Style, white picket fence house) and then increasing the prices slightly.
I'm not anti-immigration, clearly, but there are still concrete economic effects that haven't been solved yet. I don't think anyone knows what these measures will lead to, but at least it's something.
[+] [-] skohan|5 years ago|reply
I live in Berlin, and my neighbours are in their 70's. Should they be forced to find a new flat way outside the city because the rent triples over the course of a few years so young tech workers relocating from London can have a place in the cool part of town?
The rental market is different in Germany than it is in other countries: less people own their homes, and getting a housing contract feels a lot more like a permanent thing than when I was living in the US. You pay 3 months rent up front as the security deposit, and most flats don't come with a fitted kitchen so you have to take care of it yourself.
[+] [-] mancerayder|5 years ago|reply
Or a real estate broker who knows building owners willing to rent out the stabilized units (50 pct are stabilized, 50 free market more or less). Or you paid a broker fee to this broker. Or you sublet from a rent stabilized tenant who charges market rent..
No one talks about how easy corruption happens in these situations. The bifurcated market in NYC sucks - it should be all stabilized or all free market.
[+] [-] blablabla123|5 years ago|reply
The alternative - as in other cities - is that it's still hard to find an apartment that has a normal price. Of course this also attracts scammers.
The apartment situation in dense areas is bad, no matter if it's Berlin or not. At least the local government is working on a solution to not end up like Manhattan, both price- and concrete-wise. If they find a sustainable solution, then this would be a game-changer and other cities might adopt that.
[+] [-] throwaway85858|5 years ago|reply
The supreme court will probably rule that the Mietendeckel is unconstitutional in November, which will lead to a nasty situation for many renters with old contracts. If the tenants are lucky the landlord will just ask for the money "saved" to be paid back, but the unlucky ones will be evicted, as being in arrears of more than one month is grounds for termination regardless if you pay it back the the debt or not.
[+] [-] vkou|5 years ago|reply
If you have a housing problem, and you want to solve it, you need to do two things.
1. Not kick people out of housing that they have. (Because it is incredibly disruptive to people's lives.)
2. Build new housing, until demand is met.
Rent control accomplishes #1, proper city planning accomplishes #2. If you're not doing #2, complaining about #1 isn't going to solve the problem.
If you are doing #2, then #1 isn't a problem.
[+] [-] tehjoker|5 years ago|reply
[+] [-] cbmuser|5 years ago|reply
> https://www.bbc.com/worklife/article/20160517-this-is-one-ci...
[+] [-] asdff|5 years ago|reply
And let's be reasonable here, rent control is not some handout. It's not a subsidy or a tax. The price you pay on your first year in a rent controlled apartment is market rate. Rent control simply says rents cannot go up say, beyond 4% a year. Perfectly reasonable in a world where wages for the working poor rarely go up beyond 4% a year. If landlords want to make more rental income per year, they should instead lobby their city council members to allow them to build more units per parcel, rather than lobby to artificially constrain housing supply with zoning and/or red tape in effort to raise real estate values.
[+] [-] anothernewdude|5 years ago|reply
[+] [-] statstutor|5 years ago|reply
I don't think this is a function of rent control. The people who were renting 10-20 years ago will still need somewhere to live.
If there isn't sufficient new housing available, then this increases competition for existing housing, but kicking people out of their homes doesn't seem like a good solution either.
[+] [-] asdff|5 years ago|reply
[+] [-] Spooky23|5 years ago|reply
Frankly it goes to show the hypocrisy of many of the cheerleaders for higher density housing, pushing for a future where as an individual you get discarded and banished to the hinterlands when your value declines.
[+] [-] cm2187|5 years ago|reply
[+] [-] jpambrun|5 years ago|reply
[+] [-] unknown|5 years ago|reply
[deleted]
[+] [-] zpeti|5 years ago|reply
[+] [-] crote|5 years ago|reply
Sounds like it is a massive success? Those units don't magically disappear, they are bought - by homeowners. It seems like the landlords were artificially driving up the housing market while not adding any value.
The only problem here is that they limited it to pre-2014 apartments. Maybe they should just extend it to all apartments instead.
[+] [-] febeling|5 years ago|reply
This happened all the while time Berlin changed from being viewed as a forgotten backyard in Germany with few companies and high unemployment to the capital city of the dominant and richest country in Europe. Especially the great financial crisis accelerated this change of perception.
Consequently, many people moved to Berlin. For many years 100k people per year moved into a city of 4m. Stated in terms of economics, supply of apartments was very steady, and demand jumped up.
The sound response of a market is to signal that through price hikes. That should encourage investment in residential building. When this is being suppressed nothing can even get better. Only longtime renters are favored. People with already cheap and large apartments benefit. Losers are those young couples expecting a baby.
A solution that could potentially work would be to accept temporary pains from high prices, remove regulatory obstacles from new construction and let the industry find a new balance. Maybe accelerate the process by governmental subsidies, if you like that sort of policy.
But the current policy can't work in theory, it doesn't work in practice. And it only benefits old established interests who are privileged already.
[+] [-] kamyarg|5 years ago|reply
But the article is definitely skewed towards the landowners and huge renting companies.
Some facts for you:
Rate of home ownership among Berliners, Londoners, Parisans:
- Berlin: 17.5%
- London: 52%
- Paris: ~60%
The main problems is huge home-renting corporations. The article refers to a separate discussion about breaking up huge companies that own more than 3,000 apartments. As far as I know this criteria meets only a couple of huge companies such as Deutsche Wohnen that over the past couple of years have artificially created a sense of scarcity and caused the rent to increase without a proportionally increase to wages(Not only blue collar but also High Tech wages)
It is very ironic that companies such as Deutsche Wohnen were able to grab so many apartments when Berlin wall fell with dirt cheap prices. You can argue rushed privatisation caused this problem and something needs to be done if Berlin wants to avoid becoming SF.
- https://guthmann.estate/en/market-report/berlin/
- https://www.trustforlondon.org.uk/data/housing-tenure-over-t....
- https://tradingeconomics.com/france/home-ownership-rate#:~:t....
- https://www.dw.com/en/berlin-social-democrats-reject-expropr...
[+] [-] briffle|5 years ago|reply
The solution, is that now landlords can only increase rent 7% (plus inflation) per year. This year, its something like 9%.
Apparently, someone forgot to figure out what >7% per year for 5 years is..... Its 40%, before the inflation numbers are added in.
[+] [-] aphextron|5 years ago|reply
Well sure. But the total amount of people who have some bread is now greater, versus a select few wealthy people getting all the bread they want, as the wretched masses stare longingly. You can either increase total happiness, or concentrate it to the powerful. It's pretty clear by the tone of this article which side the writer lands on.
[+] [-] throwaway12903|5 years ago|reply
After long, tiring search of 20+ places with 100+ people at each, through a friend of friend we got a place for 1400 because we were the only ones that looked at it. Then rent control happens and now we pay 1000.
And we would have paid 2000+...
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If you find something you like, it doesn't matter because there would be 20 other people applying. Landlords want to rent for a long time, so they prefer Germans over foreigners/expats, and people with long-term stable jobs (government, teachers, etc.) instead of startup people, so we were at the back of the queue.
When we found a place we liked, we would have been prepared to pay way more than the asking rent, and put down multiple years of rent in advance just to get it - like happens in NYC for example. But no landlord/agent is interested in this in Berlin. I guess this is an example how well-paid tech ppl are driving rents up. Even though "well-paid tech" in Berlin is not that much.
Only at rent levels of 2200+ do you start to find places you really like in good areas, but there are lots of places advertised at ~1500 that were even more ideal but unattainable due to demand, which is frustrating.
I really don't know how anyone can get an apartment in Berlin now after rent-control.
When we move out, we will most certainly find a friend to hand over to.
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Re: Rent control
Before it was impossible to find a place, now it must be insane. For existing tenants though, it's like an unexpected yearly bonus - but for us, completely unnecessary. It's like a middle-class handout.
[+] [-] ryan_j_naughton|5 years ago|reply
The answer is continuously increasing supply in a manner that outpaces population growth dramatically.
If we reorganized the market such that there were incentives to massively build new housing, this would be a solved problem. The price of housing could effectively be the marginal cost of construction as opposed to the market power driven pricing derived from scarcity.
Couple that with remote work and efficient high speed transit both within cities, to the suburbs, and to other cities, and we should be able to enable the demand to spread out (enabling more diverse supply to compete) and to add significantly more supply everywhere.
It is infuriating that a simple problem of supply and demand has not been able to be solved by developed governments. I recognize that it isn't as simple of a market problem as say a true commodity because location matters -- causing heterogeneity in the goods. But that location difference is alleviated by the increasing supply in high demand areas and by empowering more competition across areas through transit and remote work.
This honestly doesn't have to be that hard.
[1] https://www.ft.com/content/3173f19e-5fbc-11e4-8c27-00144feab...
[+] [-] ipnon|5 years ago|reply
[+] [-] u678u|5 years ago|reply
uh Chinese apartments are super expensive and you dont even get to own the land. Japan was super expensive but is now affordable since the bubble popped and the population started shrinking.
Berlin's population is growing quickly so doesn't have much to do with Japan.
[+] [-] sparsely|5 years ago|reply
[+] [-] tjansen|5 years ago|reply
[+] [-] fallingknife|5 years ago|reply
[+] [-] steviedotboston|5 years ago|reply
[+] [-] Mediterraneo10|5 years ago|reply
Even if there were those lots of people unable to move, would that actually be a problem in various cases? Unlike many other European countries, where the countryside has emptied out and brain-drained as its young people move to the big city, Germany has managed to keep many of its small towns viable places to live and work.
[+] [-] robertlagrant|5 years ago|reply
[+] [-] radiospiel|5 years ago|reply
Remember that rents did increase ~300% or so over the last 15 years, but income maybe only 10 or 20%.
[+] [-] yc-kraln|5 years ago|reply
Even without these specific rent controls, most rental contracts have either "staffelmiete" or "indexmiete", that is, fixed points at which the rent will increase or an index against which rent is pegged. There are very strong laws supporting renters.
I live in a somewhat newer apartment, so it's not subject to the discussed changes. My rent increases were agreed with the landlord when we moved in, they are fixed in my contract, and after the built in increases are done, the rent won't go up anymore.
The issue with housing and prices is Berlin is not the same as other places in the world. For years Berlin was an economic wasteland. Just now it's become desirable to live here, and there are jobs and an economy to support it. The rent in Berlin is, despite increasing 5-10% per year every year for the past decade, still less than that in Munich or Hamburg. This isn't a case of a speculative bubble or outlier system, just a historically depressed economy returning to the mean, and fast.
Yes, it's unfortunate, that people cannot afford to live in Berlin as they did in 1996. But Berlin is not the city it was in 1996. To alleviate this price pressure, more housing needs to be built than demanded, and that has not been the case for a long time now; place is limited.
[+] [-] beerbajay|5 years ago|reply
This is mischaracterizing what is going on. There is rampant speculation by multinationals buying up old housing stock and attempting to do the New York City model of hyperluxury renovations at the expense of existing residents.
[+] [-] robertlagrant|5 years ago|reply
This is the key statement to refute if you want to argue for rent control.
[+] [-] yorwba|5 years ago|reply
They point to the predictable drop in supply in the regulated market as if it was a bad thing, but they ignore where that supply is coming from. Those are not newly-built apartments, because the price controls don't apply for new construction.
When an old apartment becomes available, it's because the previous occupant moved out, e.g. because they could no longer make rent. So making rents more affordable leads to fewer people having to move for financial reasons, which I think is a good thing.
Disclaimer: I live in a regulated apartment and don't intend to move, so it's probably not surprising that I like this policy.
[+] [-] ahoy|5 years ago|reply
[+] [-] drpgq|5 years ago|reply
[+] [-] refurb|5 years ago|reply
[+] [-] yokaze|5 years ago|reply
[+] [-] timdaub|5 years ago|reply
The author clearly exposes his sentiment in their choice of words. There's lots of buzzwords thrown around and not much reporting from here. Was the author even in Berlin before writing?
Anyways, in Berlin it will now get even "worse" as an initiative is now starting to collect signatures to disown "Deutsche Wohnen" of hundrets of thousands of flats they own.
I can see that the market is "bad" from that article. My experience with renting a flat was different:
The law allowed me to reduce my rent to a price I indeed find reasonable. It's roughly 100€ less. I'm happy with that. And in case our supreme court overthrows the Berlin ruling, I've gotten read and saved the "shadow rent".
[+] [-] ridaj|5 years ago|reply
Hmm but didn't they indeed provide incentives for increasing supply, by exempting new construction from rent regulation? In fact the later argument saying that prices started going up in the unregulated market would support the notion that the policy is indeed providing a powerful incentive to new buildings. Sure, the article also laments that there still isn't enough supply, but can one argue that giving more rent money to owners of old properties would help fix this?
How did new construction change in Berlin? What about homelessness? I don't know but find it shady that the numbers aren't shown.
[+] [-] islandlordingok|5 years ago|reply
Not that I think you completely outlaw the practice, but why not start taxing after, I don't know, you own 20 units or something. Just figure out some sort of scheme that disincentivizes people from hoarding a resource required for life. I'd much rather rent from someone that lived in the building and actually cared for the place than some random LLC in Florida I mail checks to that can't be bothered with anything.
[+] [-] openfuture|5 years ago|reply
Rent seeking is hard to eliminate, there has to be some way for lazy aristocrats to feel safe in their complacency. Try to remove it and the sleeping dragon gets very angry.