The provisions of the German Civil Code (Bürgerliches
Gesetzbuch – BGB) are decided exclusively by the Federal Government.
Rent index: local comparative rent
History
The second Protection Against Dismissal Act (2. WkSchG) from 1974 introduced rent increases up to the local comparative rent. Originally, the regulation was granted to landlords as compensation for the protection against dismissal that had been introduced. On the one hand, it protected the legal position of tenants with regard to termination and rent increases, and on the other hand, it guaranteed rent increases in line with general market developments.
Until 1982, all existing rents were included in the calculation of the comparative rent. The instrument was then restricted so that only rents that had been newly agreed or changed in the last three years were included.
In earlier discussions about this instrument , it was strongly argued that there were good reasons to use the total of all rents, even when market orientation was taken into account: Even existing rents that remain unchanged for years are based on a rational cost-benefit calculation on the part of landlords. This could, for example, consist of satisfaction with the tenants, which results from the length of tenancy and the resulting mutual agreement (cf. Cromm and Koch 2006: 40, FN 47, Sabetia 2005: 103f.).
Current
When calculating a rent index today, only apartments whose rent has been newly agreed or changed in the last 6 years are taken into account. This follows from the definition of the customary local comparative rent (regulated in Section 558 (2) BGB). The standard local comparative rent is therefore a mixture of newly agreed rents and existing rents, provided that the latter have been subject to a rent increase. The local comparative rent is also calculated as the average rent paid for apartments of this highly restricted group in the relevant residential area of a comparable type, size, furnishings and location. Apartments from social housing are also excluded from the comparison. The rent index also does not apply to new builds.
At the earliest 15 months after moving in or after the last rent increase, landlords may raise the rent up to the local comparative rent; the rent increase may be declared after 12 months.
The Berlin rent index is published every two years by the Senate Department for Urban Development. It serves as a justification for rent increases and is drawn up by cities (rarely also by larger municipalities) in cooperation with relevant interest groups (tenants’ and landlords’ associations). The rent index relates geographically to the respective city or municipality.
A qualified rent index in accordance with Section 558d BGB is one that is drawn up every
two years in accordance with scientific principles and is recognized by representatives of landlords’ and tenants’ interests (e.g. local tenants’ associations) and the municipality (Section 558d BGB). As an exception, the qualified rent index may also be adjusted after two years by means of an adjustment using the cost of living index for Germany as a whole, before it must be redrawn after a total of four years. It is formally adopted by the municipal council and published in the official gazettes of the municipalities. In the case of a qualified rent index, it is assumed in civil proceedings that the rent ranges stated therein are correct. This presumption is sometimes contested by the owners.
In the tense situation of a largely deregulated housing market, the rent index has almost always proved to be a price driver.
The local comparative rent is the benchmark for the legality of a rent increase for non-price-controlled housing. It is usually determined by the rent index.
Until 1982, all existing rents were included in the calculation of the comparative rent.
When calculating a rent index today, only apartments whose rent has been newly agreed or changed in the last 6 years are taken into account.
At the earliest 15 months after moving in or after the last rent increase, landlords may raise the rent up to the local comparative rent.
The Berlin rent index is published every two years. It refers geographically to the respective city or municipality.
In the tense situation of a largely deregulated housing market, the rent index
has almost always proved to be a price driver.
Rent control
The rent freeze was introduced in 2015. It only applies to new lettings. According to the rent freeze, in cities with a tight housing market, the rent for re-letting may not be more than ten percent above the local comparative rent (Section 556d (1) BGB). This instrument therefore also relates directly to the rent index. However, numerous exceptions apply. One exception applies, for example, when a property is rented out again for the first time after extensive modernization. According to Section 556e BGB, the rent may then be more than 10 % above the local comparative rent.
In eleven cities, asking rents rose even faster than before with the rent freeze in place, including Düsseldorf, Mainz and Potsdam. Berlin once again saw the biggest jump: asking rents here grew by 44% between 2015 and 2020 – as in the previous five-year period.
The rent cap only applies to new lettings.
According to this, in cities with a tight housing market, the rent for re-letting may not be more than 10% above the local comparative rent.
Cap limit
The possibility of lowering the rent cap for rent increases in areas with a housing shortage was introduced by the Tenancy Law Amendment Act, which has been in force since May 1, 2013. The rent cap applies to existing tenancies. It stipulates that the rent for a rental property may not increase by more than 20 percent within three years in accordance with Section 558 (3) BGB. The federal states can also reduce the rent cap to 15 percent for five years in areas with a housing shortage.
The rent cap for rent increases in Berlin remains at 15 percent over three years. The ordinance declares the whole of Berlin to be an area within the meaning of Section 558 (3) sentence 2 of the German Civil Code (BGB) in which the adequate supply of rental housing at reasonable conditions is particularly at risk. A corresponding ordinance was extended in 2023 by 5 years until 2028.
The rent cap stipulates that the rent for a rental property may not increase by more than 20 % within three years.
The cap on rent increases in Berlin remains at 15% over three years.
Consent requirement
A rent increase in accordance with Section 558 BGB, i.e. raising the rent to the level of the local comparative rent while observing the rent cap and blocking period, only becomes effective if the tenant agrees. If the request for a rent increase is in order – a check is recommended in any case! – the landlord is entitled to consent. If consent is refused, the landlord can sue for it. This means that tenant households need to take action if they receive a request for a rent increase in accordance with Section 558 BGB. Important: A request for a rent increase is already approved by the act of paying the increased rent.
There are cases in which tenants have been able to reach compromises or agree to waive the rent increase with owners as a result of a rent increase letter by describing the hardship caused by the increased rent. Such a procedure can also be discussed in the building community if necessary.
Rents can only be legally increased with the tenant’s written consent.
A request for a rent increase is also already approved by the act of paying the increased rent.