The local government in Berlin has agreed to freeze rents in the German capital for five years as the city is battling with skyrocketing housing prices.
The Berlin Senate’s majority, which is composed by the Social Democrats, Greens and the Left party, approved the decision last week after months of discussions.
The plans will be sent to parliament this month, where they are expected to be approved and to take effect in January 2020. They also include measures to cap subletting contracts.
“We’re entering new territory,” said Berlin Mayor Michael Mueller. “Others talk about it, but we’re actually doing it.”
The clamp down on rent rise, one of the most extreme decisions taken by a Western capital in recent times, is being followed with close interest by other world cities.
The plan was initially proposed by the Left party. Katrin Lompscher, the party’s head of urban development and housing, said the intention was to “ease the burden” on tenants after a property boom which saw rents doubling over the last 10 years.
German house-builders’ and property companies’ shares were hit hard on October 21st. Deutsche Wohnen, Berlin’s largest private landowner, saw its shares fall by 4.6%. Shares of Vonovia SE, the largest property company in the country, fell as much as 1.6%.
A separate grass-root initiative attempting to force Berlin’s local government to expropriate over 200,000 properties from large landlords is ongoing.
In August, Forbes.com revealed that Berlin is the city with the highest growth for prices of luxury real estate in the world.
For the second year in a row, the German capital had recorded the strongest price growth rate globally, with a 12% increase year-on-year – according to data from Knight Frank.