How Berlin’s ‘unconstitutional’ rent cap could make UK cities more affordable

This month, the government in Karlsruhe, Germany, ruled that the ‘mietendeckel’ — the rent cap — in place in the capital, was unconstitutional. However, UK campaigners say it could provide Britain’s housing system with a much-needed overhaul.

The rent cap was designed to protect tenants from exploitative landlords taking advantage of the amount of tech start-ups coming to the city. The business mogul Elon Musk, who is currently negotiating with the UK government to build a Tesla gigafactory in Somerset, is also trying to build two factories just outside of Berlin.

With the rent cap scrapped, Germans could face a rise in rent, making it more difficult to live in the city. The most a landlord could previously charge in Berlin was €552 per month. The average rent in London is £715 per month.

This spike in international business risks a significant increase in rent for British tenants. There is also wide public support for a rent cap initiative in Britain.

Britain has often been listed as the country with the poorest, and most expensive, housing in Europe. As tenants spend a significant portion of their income on rent, many find it difficult to move higher up on the property ladder, leaving them trapped in overpriced housing for years.

The Bartlett School of Planning, part of the University of London, found that most new housing built in the UK should not have been built due to major design flaws.

The report also found that people in poorer communities were 10 times more likely to be living in a poorly designed home, a gap which could widen if rent prices are not brought under control.

Germany was one of the only countries in Europe to have a rent cap and there was evidence that the initiative worked: Berlin’s economy remained relatively similar to the years prior to the rent cap being introduced, despite the international profile of the city growing quickly.

Although the cap has been scrapped, there’s ample evidence to show that the UK would benefit from having a similar initiative.

London is the 22nd most expensive city in the world to live in, although the city recently dropped in the rankings due to Brexit-related financial damage.

Rent in the city can often be over £1000 a month, despite the living wage in London only being around £2 higher than the rest of the country. Due to this, Londoners face huge inequality, and this isn’t helped by the fact that tenants have far fewer rights than landlords, and not enough money to challenge them legally.

 

But is it possible to implement an effective rent control strategy in the UK? There are legitimate concerns about the initiative. It may cause landlords to decrease the amount of money they’re willing to spend on caring for their properties, or they may subdivide their apartments, meaning tenants can only rent smaller accommodation.

This would be possible under a form of rent control which does not allow landlords to increase it due to wider economic circumstances like inflation. However, according to the housing charity Shelter, it is possible to implement one which allows rent to increase in line with the Retail Price and the Consumer Price Indexes, both of which measure inflation — these would mean if the country is going through a period of economic prosperity, consumers are able to spend more on property rental.

Baroness Alicia Kennedy, a pro-union pressure groups’ director, says: “High rents force people into poverty and make it almost impossible to save towards the future. No one should have to spend more than 30 per cent of their income on rent, yet this is a reality for most Londoners who are stuck in the private rented sector.

“Londoners urgently need bold action to make renting more affordable. Investment in housebuilding is needed to make renting more affordable long-term, but rent controls would offer immediate protection and relief.”

Both indexes increase and decrease depending on whether the country is seeing an economic upturn or downturn; the idea is that the possibility of attaining more money in the future would act as an incentive for landlords to keep their properties in the best condition possible to make them more attractive to subsequent renters.

Although it is evident that, in the end, the UK’s housing market needs to move away from the current model, in which most property is provided and maintained by private landlords, to one which offers more affordable social housing. Since the aim would not be for the government to make a profit in the properties — they would be subsidised by taxed income — it would be easier for consumers to remain in secure housing, and there would be no need for the price to increase with inflation for the same reason.

However, given the political leanings of the current UK government, an economy which prioritises social housing seems like a pipe dream. The only feasible way to mitigate the ever-rising rent costs in the country is to implement a Berlin-style rent cap. Doing so could calm the housing market and help to prevent rogue landlords exploiting their tenants.