Berlin Mietendeckel or Berlin new rent control 2020 - What does it really mean?

In February 2020 the new Berlin rental guidelines came into effect and they are pretty tough. Not only do you need a PHD in astrophysics to figure out what rent you can actually charge for your apartment, you also may need to LOWER your rent...yes lower.

Berlin's parliament passed a law to freeze rent prices in the rapidly gentrifying city-state for five years. The new law places a cap on residential rental prices, where the cost of rent has doubled in the last 10 years.

The cap went into effect mid-February and essentially freeze rent prices at the rate that they were rented for on June 18, 2019, until 2025. Following that, the law limits increases to 1.3% per year in line with inflation. The policy affects about 1.4 million homes for the next five years, which is of course good news for renters, and not so good news for landlords. First we look at how this affects your rent, and then we look at a few furnished apartment options that will still ensure you can potentially generate above-market rents. As a Berlin furnished apartment management, we see both sides of this market, and can analyze the effects better.

So, as an investor landlord what are your options? Option 1 is to Airbnb your apartment, which you can do perfectly legally for 90 days of the year. What do you do with your flat the other 9 months of the year? The best option is to rent it out as a longer term furnished rentals - at Airbusybee we can help with both. This mixture of short and medium term rental (ie one month or longer rentals) is quickly becoming the main sustainable strategy to follow in most cities that are putting Airbnb rules in place.

The new law excludes newly constructed buildings, which were built ready for occupancy in 2014. From 2022 onwards, rents will not be allowed to exceed levels of inflation by more than 1.3 percent annually. In the event of violations of the Rental Cover Act, landlords will face up to a €500,000 ($542,000) fine.

The new rent is based on a set 'rent table' and it can be increased by 1 €/m² if the flat is 'modernized' which means if it has one of a set of 'modern' features like a full kitchen. As an example, if you have an 'Altbau' apartment (meaning old building) that is 100 sq meters (or roughly 1,000 sq ft), you can charge € 8.83 / m² rent which is € 883 per month, if you rent it un-furnished.

If you were to furnish and rent this same apartment long term, the rent you can expect is between €1200 and €2000 per month - that is, if you follow a mix of legal short-term and legal mid-term rental strategy.

We think the net net effect will be that certain owners may just sell their Berlin flats as the unfurnished rent will not make financial viable sense to hold on to their investment. This will likely slow down the real estate price increase in the city. Other owners, who may have a tenant who is moving out soon, will likely think about their next rental option. This group will most likely choose to go the route of mid-term fully furnished apartment or a mix of Airbnb and mid-term rentals.



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