Some 26.2 million people live in municipalities with a rent cap, equivalent to almost one third of the population. According to a recent analysis by the Federal Institute for Research on Building, Urban Affairs and Spatial Development (BBSR), the instrument currently applies in 415 municipalities in Germany. The population figures are based on the 2022 census.
Rent cap: where does it apply?
Broken down by federal state, Bavaria has the most municipalities with a rent cap (208), followed by Baden-Württemberg (89 municipalities) and Hesse (49 municipalities). According to the BBSR, 44 of the 82 large cities (with at least 100,000 inhabitants) have a rent cap. It also applies in 24 medium-sized cities (50,000 to fewer than 100,000 inhabitants), 106 smaller medium-sized towns (20,000 to fewer than 50,000 inhabitants), 173 small towns (5,000 to fewer than 20,000 inhabitants) and 68 municipalities with fewer than 5,000 inhabitants.
In areas with a rent cap, the rent charged when an existing flat is re-let may be no more than ten per cent above the customary local comparative rent. Flats first occupied and let after 1 October 2014 are exempt under the new-build exception. Further exceptions apply, for example, to certain modernisation measures and, under certain conditions, where the previous rent was higher.
With one exception, the city of Trier, municipalities with a rent cap also have a reduced limit on rent increases. Landlords may therefore raise rents under existing tenancy agreements by no more than 15 per cent within three years. In municipalities without the reduced limit, by contrast, these rents may rise by up to 20 per cent, subject to the customary local comparative rent. Some 87 municipalities fall within the scope of a reduced limit on rent increases but do not have a rent cap.
“The rent cap is an important instrument”
“More than half of Germany’s households are tenant households. The rent cap is an important instrument for limiting increases in rents under new tenancy agreements,” says Matthias Waltersbacher, Head of the Housing and Property Markets Division at the BBSR. “The bill adopted by the Federal Cabinet to extend the rent cap is therefore welcome. It is now the turn of the Bundestag and Bundesrat. Otherwise, the situation for tenants in tight housing markets would deteriorate further. Tenants also need to look carefully at new contracts and check whether the rent cap is being observed,” Waltersbacher continues.
By now, 98 per cent of cities with more than 50,000 inhabitants have a rent index, and 63 per cent have a qualified rent index, meaning one prepared according to scientific principles. The law requires municipalities to adjust a qualified rent index to market developments every two years and prepare a new one after four years.