It’s not just us – rent controls aren’t working in Germany either

In Germany there are no sanctions on landlords who ignore the rules

For The Economist the “fatal flaw” of the German rent controls is the fact that landlords are not obliged to disclose a property’s previous rent. Photograph: Getty Images

For The Economist the “fatal flaw” of the German rent controls is the fact that landlords are not obliged to disclose a property’s previous rent. Photograph: Getty Images

 

We all know that rent controls are having little impact on tapering the escalation in rents; recent figures from the Residential Tenancies Board, which track actual rents as opposed to asking rents, shows that the cost of renting a property in Dublin jumped by more than 7 per cent in the first quarter of this year alone. And this despite the fact that rents are supposed to be limited to annual hikes of 2 per cent.

But Ireland is not the only country which has failed to put an adequate brake on soaring rent hikes. Germany, long seen as a bastion of the welfare state and a utopia for long-term renters, is also struggling to curb rocketing rents despite the introduction of similar rent controls.

Back in 2015, Germany’s then justice minister Heiko Maas introduced new controls in areas like Berlin, Hamburg and Munich known as the “rent price brake”. These aimed to put a brake on rent rises of as much as 30 or 40 per cent.

“Renting has to remain affordable for those on average incomes,” he said at the time. The rules meant that landlords were only able to raise rents by up to 10 per cent above market rates when taking on new tenants – significantly more generous than our 4 per cent limit.

Yet it seems the seeds of the regime’s inability to effectively curb rental inflation were planted at the outset. As the Economist recently pointed out, landlords in Germany have been able to circumvent the rules too easily; as in Ireland there are loopholes for newly renovated properties and those being rented out for the first time.

But it’s not just these exemptions that are allowing rents to keep on jumping. In Germany, as in Ireland, there are no sanctions on landlords who ignore the rules.

For the Economist, however, the “fatal flaw” of the controls is the fact that landlords are not obliged to disclose a property’s previous rent. Rather, prospective tenants must ask the landlord for the previous rental price – and depend on their honesty to disclose it.

This is against a background there, as here, where the supply/demand dynamic means “many renters wary of jeopardising their chances of striking a deal end up keeping mum”. So landlords get to hike up rents unabated.

Work is afoot in Ireland on the next generation of rent controls; a new rental register will post average rents in particular areas, while fines of up to €15,000 on landlords not complying with the controls have been proposed.

But if the Germans can’t even make such caps work, what makes us think that we can?