If politicians of whatever hue in the UK want inspiration as to what to do next with the housing market, they might take a look at Berlin.
Here, the city is poised to impose a five-year freeze on rents starting in 2020.
It is due to become law in January and will apply to about 1.4m properties. It will not apply to either social housing or new-builds.
It is also set to be backdated to June 18 to stop landlords pushing up rents ahead of the freeze.
Rents in Berlin have been rising – doubling in the last decade – with the average for a furnished flat now about £983.
This is cheap by London standards: a typical two-bedroom flat in Southwark costs £1,573 a month.
The Berlin plan has been approved by the city’s Senate, but the Berlin regional parliament has yet to vote on it.
Tellingly, however, German finance minister Olaf Scholz has voiced his support for the freeze, saying that it is necessary to stop Berlin ending up “like London”.
He said: “If we don’t want to end up like London, where even lawyers and doctors have to live with flatmates because they can’t afford their own apartment, then we have to do something about it.”
Other cities in Germany could follow Berlin’s example.
Chancellor Angela Merkel is said to agree that there is a squeeze on affordable housing, but that the solution is to build more homes.
Critics of the plan say that landlords would stop improving, and investing in, properties.
According to UK room share platform Ideal Flatmate, a five-year freeze on rents could save tenants across London an average of £7,620, and across England as a whole £5,274.
In some cities – Cambridge, Bristol, Manchester, Oxford and Newcastle – the saving would run into five figures. For example, in Oxford a rent freeze would save tenants an average of £17,746 over the next five years.
The projections are based on rental growth over the last five years.
Tom Gatzen, co-founder of Ideal Flatmate, said that the saving could go some way towards a mortgage deposit.
He added: “Any pro-tenant initiative can, of course, be viewed as a positive, but the mere suggestion of a rental rate freeze in Berlin seems to have sent the property market into meltdown.
“There is every chance that the same could happen here as a recent string of government changes to the buy-to-let sector have already diminished landlord confidence levels.”
Indeed, it is worth noting that shares in Germany property firms have plummeted.
But could it really happen here?
Comments (13)
Fantastic idea. We could do with a 5 year rent freeze right across the UK.
Surprised no one has mentioned our saviours and defenders of the industry to come and save the day. Surely the full bite of ARLA Propertymark will prevent this from happening, with their intense lobbying, national press coverage and true passion to protect what is quickly becoming a market with more customers evacuating than the titanic…….errrrr, maybe not….were doomed.
Do they not understand that the rental market is controlled by income and affordability anyway? Landlords can’t push prices too high otherwise tenants won’t be able to afford them and the property won’t let! We are seeing a slight correction in rental prices around London and other areas already due to affordability. The rental market (like many others) controls and corrects itself! Well, I suppose It’s not like Landlords have enough costs and regulations to think about!
PropertyNerd, put simply no they do not understand. Education is a wonderful thing as is wisdom obtained during the course of a lifetime.
Yes an excellent idea, while we are at it lets freeze the selling price of properties for 10 years and by then more people will be able to afford one. Unfortunately nobody will be selling bit like the rental market no one will be letting their property.
Sadly, the sign that the pressures put upon a major demand area for property, i.e. London, will see legislation brought in affecting our small provincial city where rent increases over 5 years are miniscule.
“Doesnt apply to social housing or new builds” Sounds exactly like the sort of policy the Tory government would introduce
Yes – a very astute observation. Because I am sure that the plan here is to try to drive small landlords out of business and replace them with corporate build-to-rent landlords. Looking at the ill-informed stupid comment by James Wilson above, it seems that the small private landlord is now the bête noir of the world – even beating estate agents!
I truly feel sorry/sympathy with the small time landlord who owns 1 or 2 properties merely as a way of giving themselves a more affordable time when retirement comes round. These people are not there to screw tenants over, they are there to give themselves a hope of surviving when their working life ends as a result of many wrong doers regarding pensions.
As with most things government are to blame for the situation but rather than look hard at long term (10-30 years) policy it is easier to shift the blame to someone else in the hope of winning votes.
How the hell does a rent cap work, when the base rate moves up and landlords finds the rent isnt covering their mortgage?
Completely agree, and would add that circa 25 years ago government were all for buy-to-let, encouraging us all to invest and to see this as a way to provide for retirement, whilst at the same time helping to provide much needed rental homes.
What went wrong?
MF I think it is the “something for nothing brigade” and faux housing charities getting the ears of incompetent politicians who want to provide housing at no cost to them. Easy steal them from those who have worked hard throughout their lives to better themselves.
Only a matter of time before we get the same policy in London. Rent controls have also been increased a lot in New York recently. People just don’t accept that one tiny proportion of society are making so much money out of everyone else.
…it’s exactly that sort of Ill-informed and generalised commentary that will send this country’s housing sector back to the ‘dark ages’…
Of course Landlords are born, with properties that have absolutely no costs associated with them (other than mortgages, maintenance costs, service charges, arrears, ground rent, legal compliance, taxation etc.) …
Those damned cognac swilling, cigar smoking “fat cat” Landlords- carpeting their palatial mansions with the skins of the dead and employing babies as butlers, whilst the elderly are in the driveway polishing their Bentleys, and being roundly beaten for “missing a spot” … how dare they provide housing for those who need it!