The Federal Constitutional Court has ruled that the Berlin rent cap (Mietendeckel) is unconstitutional. The rent cap was introduced in an attempt to combat the rising house prices in the German capital.

Berlin rent cap ruled unconstitutional

On Thursday, the Federal Constitutional Court ruled that Berlin’s controversial rent control law, or Mietendeckel, was unlawful, stating that the rent cap “violated the Basic Law and is thus ruled void.” Berlin’s rent cap was passed by the Senate back in January 2020 and aimed to combat the disproportionate cost of living in the German capital.

The rent cap is considered the flagship policy of Berlin’s governing coalition, which is made up of the Social Democrats, the Greens and The Left parties. The law froze rents in the capital until 2025, after which rent increases would be limited to 1,3 percent annually, in line with inflation. Pending the court’s ruling, some rents were even slashed temporarily and any landlords that refused to adhere to the new rules could face fines of up to 500.000 euros.

According to Berlin’s urban development and housing department, the rent cap law would have affected more than 1,5 million apartments in Berlin. Social housing and apartments built after 2014 were exempt.

Rent cap falls under federal jurisdiction

In response to the controversial rent cap, 284 parliamentary members petitioned for a judicial review of the law, several private landlords also appealed to the court in Karlsruhe. The Constitutional Court agreed with their argument that rent policy falls under federal, and not state, jurisdiction.

The rent cap has faced fierce criticism since its inception, particularly from the property sector and housing experts. They have argued that the rent cap would discourage developers from working in Berlin and make it harder for people to move into the city. The Chamber of Commerce has also previously warned that the rent cap would be a “catastrophe for Berlin.”

Berlin residents facing rent hikes and back payments

This ruling is a particularly tough blow towards the residents of Berlin, who have seen housing costs double over the past ten years, as people flock to the city in search of work. Tenants will now be required to pay off any back rent that accumulated over the past year as a result of the rent cap and many are now facing immediate rent increases.

Some landlords have announced that they will not ask for backdated rents from tenants, but will charge higher rent following the court's decision. Several housing companies, including Deutsche Wonen and Vonovia, have also announced they would not be asking tenants to pay backdated rent and have committed to helping tenants from suffering financial problems as a result of the ruling.

The vast majority of Berlin residents are renters, with only 18,4 percent of the 3,6 million people in the city actually owning their own property. It has been estimated that the residents of Berlin spend around one-quarter of their income on housing costs.