It's a tough situation for everyone who came here in the last couple of years. What I also find interesting is how often people against building new flats are the ones who have ancient contracts. A big problem is also the subletting of these old contracts.
Great catch plus lot of insights, thanks for this piece.
I only have one concern, it's using 'average' as benchmark on an extremely distorted market. Average (and deviation from it) sounds very convincing in some context, but I seriously doubt your myth-debunk attempt, when you write "...it is simply untrue that on average rents put a larger burden on households now than they did twenty years ago."
My experience (coming here in 2020) is that regardless of whether you rent an altbau or neubau place the rent eats up most of your salary. Mine is just at the median, according to another IT/startup substacker (can't recall their name, OMG), and the (hefty, but not overpriced) rent (for a 130m2, 3 bedroom appt in Pankow) takes roughly 55%. And I hear the same ratios from all dimensions of my network.
'Averages' are distorted by lot of factors, e.g. by some extreme high-earners. Don't you think?
Rents are a big deal to me as someone who is looking to move to Stuttgart from the US later this year. Been tracking prices and it’s crazy how expensive the rents can be. Im guessing it’s supply vs demand but you don’t see any new apartments going up. Hopefully someone starts talking about this before the election. Thanks for the great article.
I was surprised to read that apartments in Berlin cost €800–1200 per month. Recently, I looked at 3–4-bedroom apartments and houses in the Frankfurt area where rents were much higher—between €2500 and €4000.
Surely supply can be increased by 5 large tower apartment buildings dotted across the city, then see if that has a positive effect on prices. If so then add more large tower buildings. If not then you haven't blighted anything and have some new apartments.
The Kappungsgrenze and price controls exacerbate the problem, as you mentioned. But if there isn't enough political will to abolish them, supply is the only answer. For example I know a person who controls 3 separate price controlled apartments in Vienna and will definitely not give them up! 2 sit empty and are falsely kept in family members' names. Those who enjoy low rents, whether they need them or not, are not likely to relinquish the benefit.
Increase the supply. Maybe not paving over greenspace in Berlin, but by creating attractive, affordable housing in non-sensitive outlying areas. As much as I disliked living in Texas, for example, almost everyone can own a cheap home there. Or we bought a large home in an industrial town in semi-rural Austria because that was our budget. If we had stayed in Salzburg we could demand rent control and hope to get something, but that can only work for so many people. Actually the Communist Party of Austria wants to BAN new developments to punish the "greedy" developers and make the existing rents go down. You can't make this stuff up.
Half of Chemnitz sits empty, just off the top of my head. It's a pretty interesting place. If I lived in Berlin and needed cheap rent, I'd just move to Chemnitz if possible. If I really had to stay in Berlin and couldn't afford rent, maybe I'll get lucky through government intervention, but that just makes it worse for everyone else.
there is overall an excellent video with Dr. Andreas Beck concerning this theme. Available on youtube, this link: https://www.youtube.com/watch?v=Q8jikII3PAQ at timeindex 14, here start the very interesting things, but is it also worth, to see the video completely. The content is a wonderful supplement to this article.
Thanks for the great analysis! Likewise to the previous commentor, I came in 2020, and have seen both sides of it. I like that landlords (at least private ones) want at minimum a two year, preferably three or longer year lease, since it gives you protection from Kaltmiete increases for that entire time period (although obviously Nebenkosten can and do rise). I have seen that while many private landlords do have the option after three years to raise their rent up to the 20% cap, in practice they don't tend to do that - a good tenant who doesn't cause problems, gets on with the neighbours, and pays their rent on time is quite an asset.
For the other side of it - most financial planners and economists say that if housing costs more than 30% of Brutto / gross income, people are under financial stress and should not do it. There are definitely people under rental stress if they are low earners.
The article summary doesn't really cover the fact that much that is getting built is high end expensive apartments, which skew the average.
A simple "average" is a great way to obscure the truth with statistics. If it's a bimodal distribution, or skewed left or right is much more important ...
Funny to read this just as I published this yesterday:
https://handpickedberlin.com/which-tricks-do-landlords-use-in-berlin/
It's a tough situation for everyone who came here in the last couple of years. What I also find interesting is how often people against building new flats are the ones who have ancient contracts. A big problem is also the subletting of these old contracts.
Great catch plus lot of insights, thanks for this piece.
I only have one concern, it's using 'average' as benchmark on an extremely distorted market. Average (and deviation from it) sounds very convincing in some context, but I seriously doubt your myth-debunk attempt, when you write "...it is simply untrue that on average rents put a larger burden on households now than they did twenty years ago."
My experience (coming here in 2020) is that regardless of whether you rent an altbau or neubau place the rent eats up most of your salary. Mine is just at the median, according to another IT/startup substacker (can't recall their name, OMG), and the (hefty, but not overpriced) rent (for a 130m2, 3 bedroom appt in Pankow) takes roughly 55%. And I hear the same ratios from all dimensions of my network.
'Averages' are distorted by lot of factors, e.g. by some extreme high-earners. Don't you think?
Don‘t forget that the finanzamt will punish you if you rent your property far below the average rent.
Rents are a big deal to me as someone who is looking to move to Stuttgart from the US later this year. Been tracking prices and it’s crazy how expensive the rents can be. Im guessing it’s supply vs demand but you don’t see any new apartments going up. Hopefully someone starts talking about this before the election. Thanks for the great article.
I was surprised to read that apartments in Berlin cost €800–1200 per month. Recently, I looked at 3–4-bedroom apartments and houses in the Frankfurt area where rents were much higher—between €2500 and €4000.
Surely supply can be increased by 5 large tower apartment buildings dotted across the city, then see if that has a positive effect on prices. If so then add more large tower buildings. If not then you haven't blighted anything and have some new apartments.
The Kappungsgrenze and price controls exacerbate the problem, as you mentioned. But if there isn't enough political will to abolish them, supply is the only answer. For example I know a person who controls 3 separate price controlled apartments in Vienna and will definitely not give them up! 2 sit empty and are falsely kept in family members' names. Those who enjoy low rents, whether they need them or not, are not likely to relinquish the benefit.
Increase the supply. Maybe not paving over greenspace in Berlin, but by creating attractive, affordable housing in non-sensitive outlying areas. As much as I disliked living in Texas, for example, almost everyone can own a cheap home there. Or we bought a large home in an industrial town in semi-rural Austria because that was our budget. If we had stayed in Salzburg we could demand rent control and hope to get something, but that can only work for so many people. Actually the Communist Party of Austria wants to BAN new developments to punish the "greedy" developers and make the existing rents go down. You can't make this stuff up.
Half of Chemnitz sits empty, just off the top of my head. It's a pretty interesting place. If I lived in Berlin and needed cheap rent, I'd just move to Chemnitz if possible. If I really had to stay in Berlin and couldn't afford rent, maybe I'll get lucky through government intervention, but that just makes it worse for everyone else.
Thanks for bringing attention to this issue!
there is overall an excellent video with Dr. Andreas Beck concerning this theme. Available on youtube, this link: https://www.youtube.com/watch?v=Q8jikII3PAQ at timeindex 14, here start the very interesting things, but is it also worth, to see the video completely. The content is a wonderful supplement to this article.
Thanks for the great analysis! Likewise to the previous commentor, I came in 2020, and have seen both sides of it. I like that landlords (at least private ones) want at minimum a two year, preferably three or longer year lease, since it gives you protection from Kaltmiete increases for that entire time period (although obviously Nebenkosten can and do rise). I have seen that while many private landlords do have the option after three years to raise their rent up to the 20% cap, in practice they don't tend to do that - a good tenant who doesn't cause problems, gets on with the neighbours, and pays their rent on time is quite an asset.
For the other side of it - most financial planners and economists say that if housing costs more than 30% of Brutto / gross income, people are under financial stress and should not do it. There are definitely people under rental stress if they are low earners.
The article summary doesn't really cover the fact that much that is getting built is high end expensive apartments, which skew the average.
A simple "average" is a great way to obscure the truth with statistics. If it's a bimodal distribution, or skewed left or right is much more important ...