German high Court overturns Berlin rent control law

[lfromnj]

Based ?
https://www.theguardian.com/world/2021/apr/15/germany-highest-court-rules-berlin-rent-cap-illegal

[Okay, maybe Mike Johnson is a competent parliamentarian.]

The reverse-federalism/reverse-subsidiarity basis for the ruling is certainly, uh, interesting.

[Tintrlvr]

The reverse-federalism/reverse-subsidiarity basis for the ruling is certainly, uh, interesting.

It's just preemption by another name.

[Geoffrey Howe]

The Economist a few weeks ago said this was likely to happen.

[Omega21]

Based ?
https://www.theguardian.com/world/2021/apr/15/germany-highest-court-rules-berlin-rent-cap-illegal

Thinking rent freezes/caps will work is ridiculous.

They should simply abandon the newer energy efficiency rules, it has raised building costs drastically while basically making no difference on the global scale.

[Hnv1]

Any link to the decision (in German if no translation is necessary)

[Omega21]

Any link to the decision (in German if no translation is necessary)

https://www.zdf.de/nachrichten/politik/mietendeckel-berlin-bundesverfassungsgericht-100.html

[Tender Branson]

Very bad for low-income folks.

I support such a Mietdeckel, or a Vienna-style way to keep rents very affordable, so that reckless Immo-Haie (wealthy immo sharks) are not buying up empty property for investment projects.

The rents are already too damn high, see Munich. Locals cannot afford them anymore and move out of the City or become homeless.

[Frozen Sky Ever Why]

Disgusting. The wealthy's plunder of humanity continues.

[palandio]

It has to be emphasized that the court didn't rule a rent cap per se illegal, but that introducing a law like this is a federal issue and not a Land issue. In fact a federal law to slow down rent increases in heated markets was introduced some years ago.

Having introduced a law like this with the full knowledge that it's not your business is a sign of either ideologically motivated incompetence or of shameless populism on the backs of thousands of renters who will now have to refund last year's rents.

I also think that a rent cap like the one introduced is bad politics. How do low rents help you if you can't find housing at all? Ah yes, there is one solution: Buy an appartment from a landlord that has decided to kick out his old tenants. In fact during the last year the percentage of appartments inhabitated by their owners has gone up by several points. Is this what the Berlin government went for?

Social housing or public incentives for construction of new housing could be part of the solution. But guess what? During the last years and decades Berlin has sold large parts of its social housing. Culprits are the SPD-Left government with its Senator of Finance Thilo Sarrazin (now an idol of the political Right) and the corrupt Diepgen-Landowsky CDU.

[Okay, maybe Mike Johnson is a competent parliamentarian.]

As for the substantive issue, I have the same issue with anti-rent control arguments that I have with anti-union arguments, namely that they tend to be advanced by people whose ideologies don't lend themselves to seeing affordable housing as a moral imperative at all. Unlike with unions, though, I'm not emotionally wedded to the idea of rent control and would be happy to reconsider or even abandon my support for it if a clear, non-vague, politically actionable (i.e. not "just abolish zoning regulations and development firms will throw up tons of cheap housing on their own!") alternative were articulated to me.

[President Johnson]

Always had mixed feelings on this statewide rent control law. It's well intended of course but had both positive and negative impacts. At the same time, the federal rent control law is too weak.

Generally speaking, the only real solution to Germany's massive housing problems is construction, construction and more construction of house units. Lower or eliminate the land value tax, simplify the construction code, increase more public housing and create more incentives for the private sector to build affordable units. Anything else is not effectively. There's not enough living space as demanded available at this point which is why costs for rent and property are at insane levels.

[Pick Up the Phone]

It has to be emphasized that the court didn't rule a rent cap per se illegal, but that introducing a law like this is a federal issue and not a Land issue. In fact a federal law to slow down rent increases in heated markets was introduced some years ago.

Having introduced a law like this with the full knowledge that it's not your business is a sign of either ideologically motivated incompetence or of shameless populism on the backs of thousands of renters who will now have to refund last year's rents.

Absolutely correct. This case was about federalism and not about material aspects of the law.

And it was 'shameless populism' - indeed. It was pretty clear how the Constitutional Court would rule but passing the law made sense nonetheless. Especially for the LINKE which can now feign surprise and simply blame the Court. Voters won't really care why the decision was made.

[Geoffrey Howe]

On a slightly separate note, I have read that housing - for ownership at least - in the UK has not really become less affordable (or more unaffordable) in the past few decades. Although prices have risen above inflation/wages, what matters is not the lump cost, but, clearly, monthly mortgage outgoings. These, apparently, are relatively no higher in general than before, because mortgages have become significantly cheaper as a result of low interest rates, and a price war in the high-street lending sector. Also, the reason many cannot afford deposits is because of a regulation introduced in the aftermath of the crash forcing lenders to 'stress test' people's income; it is only after this increase that many cannot afford the deposit. (Obviously whether that regulation is desirable is a different question.)
Perhaps those more knowledgeable could evaluate this claim.

[Hnv1]

It has to be emphasized that the court didn't rule a rent cap per se illegal, but that introducing a law like this is a federal issue and not a Land issue. In fact a federal law to slow down rent increases in heated markets was introduced some years ago.

Having introduced a law like this with the full knowledge that it's not your business is a sign of either ideologically motivated incompetence or of shameless populism on the backs of thousands of renters who will now have to refund last year's rents.

I also think that a rent cap like the one introduced is bad politics. How do low rents help you if you can't find housing at all? Ah yes, there is one solution: Buy an appartment from a landlord that has decided to kick out his old tenants. In fact during the last year the percentage of appartments inhabitated by their owners has gone up by several points. Is this what the Berlin government went for?

Social housing or public incentives for construction of new housing could be part of the solution. But guess what? During the last years and decades Berlin has sold large parts of its social housing. Culprits are the SPD-Left government with its Senator of Finance Thilo Sarrazin (now an idol of the political Right) and the corrupt Diepgen-Landowsky CDU.

I read a part of the ruling, I get the analysis of Article 72 and 74, but wouldn’t this incentivise Federal legislation to the degree that will have only skeletal competence to the Länder? It will essentially mean article 72(2) will be constantly used by the federal legislature to take more power on economic matters in 74(1)(7).

[parochial boy]

As for the substantive issue, I have the same issue with anti-rent control arguments that I have with anti-union arguments, namely that they tend to be advanced by people whose ideologies don't lend themselves to seeing affordable housing as a moral imperative at all. Unlike with unions, though, I'm not emotionally wedded to the idea of rent control and would be happy to reconsider or even abandon my support for it if a clear, non-vague, politically actionable (i.e. not "just abolish zoning regulations and development firms will throw up tons of cheap housing on their own!") alternative were articulated to me.

I mean, there's rent control and there's rent control isn't there? There is a huge plethora of policies that could and can be described as rent control and not all of them have the same outcomes on the housing market. One of the problems is that blanket criticism of all rent control is often advanced by people who believe that the solution is a complete liberalisation of the housing market. And that is also a road to complete and utter disaster where it has been tried.

(I mean, the most obvious, succesful policy is widespread social housing - but the government owning things isn't so popular these days...)

On a slightly separate note, I have read that housing - for ownership at least - in the UK has not really become less affordable (or more unaffordable) in the past few decades. Although prices have risen above inflation/wages, what matters is not the lump cost, but, clearly, monthly mortgage outgoings. These, apparently, are relatively no higher in general than before, because mortgages have become significantly cheaper as a result of low interest rates, and a price war in the high-street lending sector. Also, the reason many cannot afford deposits is because of a regulation introduced in the aftermath of the crash forcing lenders to 'stress test' people's income; it is only after this increase that many cannot afford the deposit. (Obviously whether that regulation is desirable is a different question.)
Perhaps those more knowledgeable could evaluate this claim.

Even if more affordable, the problem is accessibility. The decoupling of house prices and wages has made home ownership increasingly inaccessible when you can only borrow 'x' multiple of your income. That has the double impact of not only exclusing the young/low income owners from the property market, but also means leaves renters - ie those on lower incomes - with higher housing costs and ultimately exacerbates the redistribution of wealth from the have-nots to the haves.

[Geoffrey Howe]

On a slightly separate note, I have read that housing - for ownership at least - in the UK has not really become less affordable (or more unaffordable) in the past few decades. Although prices have risen above inflation/wages, what matters is not the lump cost, but, clearly, monthly mortgage outgoings. These, apparently, are relatively no higher in general than before, because mortgages have become significantly cheaper as a result of low interest rates, and a price war in the high-street lending sector. Also, the reason many cannot afford deposits is because of a regulation introduced in the aftermath of the crash forcing lenders to 'stress test' people's income; it is only after this increase that many cannot afford the deposit. (Obviously whether that regulation is desirable is a different question.)
Perhaps those more knowledgeable could evaluate this claim.

Even if more affordable, the problem is accessibility. The decoupling of house prices and wages has made home ownership increasingly inaccessible when you can only borrow 'x' multiple of your income. That has the double impact of not only exclusing the young/low income owners from the property market, but also means leaves renters - ie those on lower incomes - with higher housing costs and ultimately exacerbates the redistribution of wealth from the have-nots to the haves.

Plus it's more expensive to spread the borrowing over a longer period of time (and hence borrow more relative to income) I believe.

Also, the cause of the price war and lower costs was in fact greater regulation of what retail banks can do/where they can invest. (I'm not an expert here, this is what I have heard.)

[CumbrianLefty]

As for the substantive issue, I have the same issue with anti-rent control arguments that I have with anti-union arguments, namely that they tend to be advanced by people whose ideologies don't lend themselves to seeing affordable housing as a moral imperative at all. Unlike with unions, though, I'm not emotionally wedded to the idea of rent control and would be happy to reconsider or even abandon my support for it if a clear, non-vague, politically actionable (i.e. not "just abolish zoning regulations and development firms will throw up tons of cheap housing on their own!") alternative were articulated to me.

Yes, agree with this. People generally don't think rent controls are a panacea, they are being proposed now because the supposed "supply side solutions" have clearly failed.

[Omega21]

As for the substantive issue, I have the same issue with anti-rent control arguments that I have with anti-union arguments, namely that they tend to be advanced by people whose ideologies don't lend themselves to seeing affordable housing as a moral imperative at all. Unlike with unions, though, I'm not emotionally wedded to the idea of rent control and would be happy to reconsider or even abandon my support for it if a clear, non-vague, politically actionable (i.e. not "just abolish zoning regulations and development firms will throw up tons of cheap housing on their own!") alternative were articulated to me.

Yes, agree with this. People generally don't think rent controls are a panacea, they are being proposed now because the supposed "supply side solutions" have clearly failed.

Ah yes, instituting insane energy efficiency requirements will surely make housing more cheaper, and therefore more abundant, certainly a great "supply-side solution".

If Berlin wants to do something, they can look at Vienna. Newer properties have no rent caps, and the only reason housing is relatively cheap is the massive stock of 220,000 govt owned flats that serve multiple purposes.

The govt owned flats have very high-income caps, which is intentional in order to mix higher and middle-class people with the working class, thereby not forming non-desireable areas and lowering the crime rates while allowing for better upward mobility for the working class in the area.

But seeing as the unnoficial motto of Berlin is "poor but sexy", they could only dream of affording something like that.

[palandio]

It has to be emphasized that the court didn't rule a rent cap per se illegal, but that introducing a law like this is a federal issue and not a Land issue. In fact a federal law to slow down rent increases in heated markets was introduced some years ago.

Having introduced a law like this with the full knowledge that it's not your business is a sign of either ideologically motivated incompetence or of shameless populism on the backs of thousands of renters who will now have to refund last year's rents.

I also think that a rent cap like the one introduced is bad politics. How do low rents help you if you can't find housing at all? Ah yes, there is one solution: Buy an appartment from a landlord that has decided to kick out his old tenants. In fact during the last year the percentage of appartments inhabitated by their owners has gone up by several points. Is this what the Berlin government went for?

Social housing or public incentives for construction of new housing could be part of the solution. But guess what? During the last years and decades Berlin has sold large parts of its social housing. Culprits are the SPD-Left government with its Senator of Finance Thilo Sarrazin (now an idol of the political Right) and the corrupt Diepgen-Landowsky CDU.

I read a part of the ruling, I get the analysis of Article 72 and 74, but wouldn’t this incentivise Federal legislation to the degree that will have only skeletal competence to the Länder? It will essentially mean article 72(2) will be constantly used by the federal legislature to take more power on economic matters in 74(1)(7).

The ruling is based on 72(1) and 74(1)(1), since rent law is a part of civil law (Bürgerliches Recht).

Regarding the connection of 72(2) and 74(1)(7) [or did you mean 74(1)(11)?] it seems to me that 74(1)(7) and 74(1)(11) are relatively clear:

74(1)(7): public welfare (except for the law on social care homes)
74(1)(11): the law relating to economic matters (mining, industry, energy, crafts, trades, commerce, banking, stock exchanges and private insurance), except for the law on shop closing hours, restaurants, amusement arcades, display of persons, trade fairs, exhibitions and markets

The weasle paragraph is 72(2):
72(2): The Federation shall have the right to legislate on matters falling within items 4, 7, 11, 13, 15, 19a, 20, 22, 25 and 26 of paragraph (1) of Article 74, if and to the extent that the establishment of equivalent living conditions throughout the federal territory or the maintenance of legal or economic unity renders federal regulation necessary in the national interest.

I think that federal legislation has to motivate the fulfillment of at least one of the conditions in 72(2) for every new law on matters falling within the mentioned items. I don't know how exactly 72(2) is interpreted by the courts, but I don't think that they would allow it to become a license for unlimited federal legislation. Particularly the "maintainance of legal unity" seems to be quite extensive as a goal, but I don't know enough about the matter to know if this is really the case. The next question is whether federal legislators even wanted to regulate everything they can, but that's another debate.

[Hnv1]

It has to be emphasized that the court didn't rule a rent cap per se illegal, but that introducing a law like this is a federal issue and not a Land issue. In fact a federal law to slow down rent increases in heated markets was introduced some years ago.

Having introduced a law like this with the full knowledge that it's not your business is a sign of either ideologically motivated incompetence or of shameless populism on the backs of thousands of renters who will now have to refund last year's rents.

I also think that a rent cap like the one introduced is bad politics. How do low rents help you if you can't find housing at all? Ah yes, there is one solution: Buy an appartment from a landlord that has decided to kick out his old tenants. In fact during the last year the percentage of appartments inhabitated by their owners has gone up by several points. Is this what the Berlin government went for?

Social housing or public incentives for construction of new housing could be part of the solution. But guess what? During the last years and decades Berlin has sold large parts of its social housing. Culprits are the SPD-Left government with its Senator of Finance Thilo Sarrazin (now an idol of the political Right) and the corrupt Diepgen-Landowsky CDU.

I read a part of the ruling, I get the analysis of Article 72 and 74, but wouldn’t this incentivise Federal legislation to the degree that will have only skeletal competence to the Länder? It will essentially mean article 72(2) will be constantly used by the federal legislature to take more power on economic matters in 74(1)(7).

The ruling is based on 72(1) and 74(1)(1), since rent law is a part of civil law (Bürgerliches Recht).

Regarding the connection of 72(2) and 74(1)(7) [or did you mean 74(1)(11)?] it seems to me that 74(1)(7) and 74(1)(11) are relatively clear:

74(1)(7): public welfare (except for the law on social care homes)
74(1)(11): the law relating to economic matters (mining, industry, energy, crafts, trades, commerce, banking, stock exchanges and private insurance), except for the law on shop closing hours, restaurants, amusement arcades, display of persons, trade fairs, exhibitions and markets

The weasle paragraph is 72(2):
72(2): The Federation shall have the right to legislate on matters falling within items 4, 7, 11, 13, 15, 19a, 20, 22, 25 and 26 of paragraph (1) of Article 74, if and to the extent that the establishment of equivalent living conditions throughout the federal territory or the maintenance of legal or economic unity renders federal regulation necessary in the national interest.

I think that federal legislation has to motivate the fulfillment of at least one of the conditions in 72(2) for every new law on matters falling within the mentioned items. I don't know how exactly 72(2) is interpreted by the courts, but I don't think that they would allow it to become a license for unlimited federal legislation. Particularly the "maintainance of legal unity" seems to be quite extensive as a goal, but I don't know enough about the matter to know if this is really the case. The next question is whether federal legislators even wanted to regulate everything they can, but that's another debate.

aye 74(1)(11), and the claim the BGB enacted during the Empire exhausts the competence of the Laender. There something both very conservative but judicially activistic about over-ruling co-competence on issues. As long as the Land legislation doesn't outright violate\overturn federal laws\Orders one would assume you would allow a normative pyramid to form. I'm not sure why legislation is prima facie mutually exhaustive but the ruling starts with this strong wording:

"Doppelzuständigkeiten sind den Kompetenznormen fremd und wären mit ihrer Abgrenzungsfunktion unvereinbar." (para. 1)

The court says articles 556-561 of the BGB cover that matter exhaustively. I'm not sure of that, or whether the Berlin law could be in part a lex specialis to the general BGB. But that requires a firmer grasp of German law

[palandio]

It has to be emphasized that the court didn't rule a rent cap per se illegal, but that introducing a law like this is a federal issue and not a Land issue. In fact a federal law to slow down rent increases in heated markets was introduced some years ago.

Having introduced a law like this with the full knowledge that it's not your business is a sign of either ideologically motivated incompetence or of shameless populism on the backs of thousands of renters who will now have to refund last year's rents.

I also think that a rent cap like the one introduced is bad politics. How do low rents help you if you can't find housing at all? Ah yes, there is one solution: Buy an appartment from a landlord that has decided to kick out his old tenants. In fact during the last year the percentage of appartments inhabitated by their owners has gone up by several points. Is this what the Berlin government went for?

Social housing or public incentives for construction of new housing could be part of the solution. But guess what? During the last years and decades Berlin has sold large parts of its social housing. Culprits are the SPD-Left government with its Senator of Finance Thilo Sarrazin (now an idol of the political Right) and the corrupt Diepgen-Landowsky CDU.

I read a part of the ruling, I get the analysis of Article 72 and 74, but wouldn’t this incentivise Federal legislation to the degree that will have only skeletal competence to the Länder? It will essentially mean article 72(2) will be constantly used by the federal legislature to take more power on economic matters in 74(1)(7).

The ruling is based on 72(1) and 74(1)(1), since rent law is a part of civil law (Bürgerliches Recht).

Regarding the connection of 72(2) and 74(1)(7) [or did you mean 74(1)(11)?] it seems to me that 74(1)(7) and 74(1)(11) are relatively clear:

74(1)(7): public welfare (except for the law on social care homes)
74(1)(11): the law relating to economic matters (mining, industry, energy, crafts, trades, commerce, banking, stock exchanges and private insurance), except for the law on shop closing hours, restaurants, amusement arcades, display of persons, trade fairs, exhibitions and markets

The weasle paragraph is 72(2):
72(2): The Federation shall have the right to legislate on matters falling within items 4, 7, 11, 13, 15, 19a, 20, 22, 25 and 26 of paragraph (1) of Article 74, if and to the extent that the establishment of equivalent living conditions throughout the federal territory or the maintenance of legal or economic unity renders federal regulation necessary in the national interest.

I think that federal legislation has to motivate the fulfillment of at least one of the conditions in 72(2) for every new law on matters falling within the mentioned items. I don't know how exactly 72(2) is interpreted by the courts, but I don't think that they would allow it to become a license for unlimited federal legislation. Particularly the "maintainance of legal unity" seems to be quite extensive as a goal, but I don't know enough about the matter to know if this is really the case. The next question is whether federal legislators even wanted to regulate everything they can, but that's another debate.

aye 74(1)(11), and the claim the BGB enacted during the Empire exhausts the competence of the Laender. There something both very conservative but judicially activistic about over-ruling co-competence on issues. As long as the Land legislation doesn't outright violate\overturn federal laws\Orders one would assume you would allow a normative pyramid to form. I'm not sure why legislation is prima facie mutually exhaustive but the ruling starts with this strong wording:

"Doppelzuständigkeiten sind den Kompetenznormen fremd und wären mit ihrer Abgrenzungsfunktion unvereinbar." (para. 1)

The court says articles 556-561 of the BGB cover that matter exhaustively. I'm not sure of that, or whether the Berlin law could be in part a lex specialis to the general BGB. But that requires a firmer grasp of German law

According to the court's ruling it is not just that rent law in general is covered in the BGB since the Empire. Instead articles 556-561 were introduced in 2015 by the Mietrechtsnovellierungsgesetz (rent law reform bill) to introduce a Mietpreisbremse (rent "break") for heated housing markets, with several adjustments since then. According to the court the Berlin law is not a lex specialis, but instead would supplant exhaustive recent federal legislation on exactly the same matter (an upper limit for rents outside of social housing).

But you are right that the text of the ruling can be read in a more generalized setting. And then it becomes "interesting".