Regulation of Rental Increases : An Instrument for Stimulating Affordable Housing?
Alexandra Weitkamp & Isabelle Klein
In Germany, the social structure has changed dramatically and the housing market did as well in recent decades. However, the development is not spatially homogeneous. Particularly major cities report rising population numbers in contrast to many rural areas. Housing, particularly affordable rental housing and small flats, are a scarce resource in some German cities and the rents are rising rapidly. Therefore, the introduction of a so-called Mietpreisbremsee is currently being discussed, which is intended to reduce the rental price jumps in cities with pressure on housing markets. This Mietpreisbremsee shall come into force in April 2015. Idea is, among others, to cap the rent increase to 10% in cases of tenant change. While this instruments has a lot of advantages, criticism arises on investment barrier, because of reduced yields and reduced incentives for new construction. Regulating rental prices have the advantage, that they can be introduced quickly and without major costs for public budgets. They also demonstrate the ability to act with respect to major groups of voters who fear a "rental price spiral". However, the private construction can be shifted into condominiums in consequence. Examples show (e.g. England, France) that the trend is accompanied by a decline in quality of living in rented housing to the property. Costs for renovation and modernization cannot be allocated and possibility cannot quickly and completely be refinanced on rents. Owners may invest less accordingly. Socially disadvantaged are particularly affected.
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