Rents in Berlin — Europe’s coolest city? — have risen so rapidly over the past several years, that the German capital passed new legislation in June to rein in the market. In the past month, the mietpreisbremse or “rental price brake” appears to have worked: Rents in the German capital decreased by 3.1 percent.
Rents in Brooklyn — the world’s coolest city — have similarly soared. New Yorkers in general are keeping an eye on Berlin’s experiment, wondering: Could the mietpreisbremse become a model for New York? For Brooklyn?
Brooklyn-born Etsy also has a location in Berlin, shown above. Photo by Etsy
Brooklyn and Berlin aren’t as dissimilar as you might think. Berlin is the fifth largest city in Europe. Brooklyn is the fourth largest city in the U.S. (when considered separatly from NYC). Both cities have a majority of renters over home owners — at least 64 percent of Berliners rent, as do 71 percent of Brooklynites. Both are increasingly wealthy. Both are hip.
And both Berlin and Brooklyn are struggling to find the right way to increase home values and rents without entirely pricing out middle income residents.
Reiner Wild, managing director of the Berlin Tenants’ Association, was quoted by “The Guardian” as saying, “We don’t want a situation like in London or Paris… that people with low income have to live in the further-out districts of the city.”
Between 2013 and 2014, average rents in Berlin rose by 9 percent, encouraging lower-income residents to move outside of high-demand neighborhoods. The rent brake was instituted, in part, to help combat this migration.
Mietpreisbremse works by limiting the rent that landlords can charge in new leases. The rent can be no more than 10 percent above the median rent-per-square-meter of its district. Basically, the law is a rent cap determined on a neighborhood-by-neighborhood basis.
A district’s rent-per-square-foot is based on census data assessed by an oversight board. New construction is excluded from the 10 percent limit.
In Brooklyn, if an apartment is not rent regulated, a landlord can charge whatever a tenant agrees to pay. As of 2011, about 44 percent of Brooklyn apartments were rent stabilized (meaning that rent increases for those apartments are controlled by the Rent Guidelines Board).
In a historic move in late June, the RGB froze rents on one-year leases throughout the city’s stabilized rental stock.
However, the freeze doesn’t take neighborhood differences into account, and leaves rents for the other half of the housing stock relatively unregulated. A Berlin-esque rent brake could limit the rapid rent increases that are pricing medium and lower-income residents out of certain Brooklyn neighborhoods.
Check out Berlin’s innovative new rent control laws & encouraging Twitter response from hot-market cities worldwide. https://t.co/7LOgPpGJEQ
— Brad Lander (@bradlander) July 10, 2015
But not everyone is so keen on the mietpreisbremse. In April, The Economist warned that Berlin’s rent brake is likely to deter renovations, new construction, and potentially give rise to a black market.
If you’re interested in reading more on these topics, check out:
Rent Regulation Coverage [Brownstoner]
Brad Lander Coverage [Brownstoner]
Did Berlin Just Crack the Code to Keeping Rents Affordable? [Brick Underground]
Berlin’s New Rent Control Laws Are Already Working [CityLab]
Images via Wikimedia