In 2020, the city of Berlin adopted a radical policy to deal with soaring prices in the rental market: a rent freeze. This measure, meaning a cap to the rents that landlords were allowed to charge, was not as successful as had been hoped. As well as being declared unconstitutional thirteen months later, it has had negative economic and social consequences, as shown by economists Anja Hahn, Konstantin Kholodilin, Sofie Waltl and Marco Fongoni.
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In the space of ten years, the rent paid in Berlin by its four million inhabitants has doubled. As density has increased, the gap between supply and demand of rental units has widened, leading to a housing shortage. It is becoming increasingly difficult to find accommodation: for a one-bedroom flat in the city centre, expect to pay between €800 and €1,200. Rising rents are a real challenge for Europe's major cities. The question of which strategies to adopt is the subject of much government discussion. This is precisely why Berlin's new measure was so popular when it was announced in February 2020. This is a special case study, as the City Council had brought back a policy that had fallen into disuse: rent freeze. When it was announced, all eyes were fixed on this measure, which was as bold as it was short-lived. No sooner had it been enacted than it was immediately suspected of being unconstitutional. In the thirteen months of its existence, it had a significant impact on the Berlin rental market, as economists Anja Hahn, Konstantin Kholodilin, Sofie Waltl and Marco Fongoni have shown in a recent pioneering article on the subject.
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Dialogues économiques is a digital magazine published by the Aix-Marseille School of Economics (AMU, CNRS, EHESS, Centrale Méditerranée) A bridge between academic research and society, Dialogues économiques provides all citizens with the keys to economic reasoning. Articles are published every two weeks.
Rent madness
Although rents are more affordable than in Paris or London, the state of Berlin's rental market has deteriorated over the last decade. This is a major problem in a capital where 80% of the population rent. What is more, the cost of housing accounts for an ever-increasing proportion of household expenditure, sometimes as much as 50%.
Demographic pressure, gentrification and the lack of vacant accommodation led more than 25,000 Berliners to demonstrate at the beginning of April 2019 to fight against property speculation and this "rent madness". At the same time, a petition which collected more than 77,000 signatures was circulated to denounce the monopoly of large property groups that own more than 3,000 homes.
Article originally published in Dialogues Économiques, January 31, 2024.
Reference : Hahn A. M., Kholodilin K. A., Waltl S.R., Fongoni M., "Forward to the Past: Short-Term Effects of the Rent Freeze in Berlin". Management Science.
Header photo by Jonas Tebbe on Unsplash.
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