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AT HOME: Rental price break, new governmental plans and letters

A tour around the latest housing related political developments in Europe

Brussels, 3 October 2014 | Social, Urban, Economy
Stepping on the rental price break
Stepping on the rental price break

The German government hits the "rental price break", the new Swedish Government highlights housing, while Renzi receives a letter from our member organisation in Italy.


German cabinet decides on “rental price brake”

Although new constructions will be exempt from rental price brakes, millions of existing dwellings will now have to pay for the rental price brake.

On the 1st of October the Federal Cabinet decided on the rental price brake in Germany. From 2015 onwards, when a change in tenants takes place, rents in specific cities and regions are not allowed to go up by more than 10 % in comparison to similar dwellings with the same size and in the same location. GdW, the Federal Association of German Housing and Real Estate Companies, welcomes that the draft bill includes important modifications. Central demands from the housing economy have found their way into the draft bill. Unfortunately, however, the modifications don’t go far enough.

The exception of new constructions

On the one hand investing in new and affordable constructions is made more difficult for landlords, but on the other hand there are no incentives provided for new constructions in agglomerations. That way it will be even harder for tenants to find affordable housing in agglomerations. According to the GdW president, Axel Gedaschko, “new constructions are the only effective way to counteract the high demand in German agglomerations and the rising rents resulting from it”. After a tug-of-war lasting several months, it is now certain that new constructions are exempt from the political housing market instrument. The aim is to counteract the high demand in German agglomerations and the rising rents resulting from it.

“New constructions have after all to be worthwhile for both tenants and landlords” explains Gedaschko. The GdW therefore made an appeal to the Government, the “Länder” and municipalities to specifically subsidize new constructions in agglomerations in order to prevent unacceptably high prices for tenants. This could be done, by making cheap building plots available in sufficient numbers, so says Gedaschko. Moreover, the "Länder" need to implement means for social housing subsidies that are specifically earmarked and regional.

Modernization of existing dwellings in peril

The rental price brake will have repercussions for investments in existing dwellings. The rental price brake envisages that when a change of tenants takes place, the new rent will not be 10% higher than the local rental market. The rental price brake will be limited for 5 years, in order to prevent long-lasting damages to the housing economy.

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However, urgent and necessary modernizations and investments in existing dwellings are again thwarted. The exit from nuclear and fossil-fuel energy (energy transition) in buildings is hereby jeopardized. Property owners have to invest in energy efficiency, age-appropriate conversions and repairs and are unilaterally bearing the costs of these. Already today lots of property owners are not making any profits from renting. The political aim should be to provide incentives for energy efficient renovation. The rental price brake is thereby counter-productive.

Modified empowerment foundations of the Länder

The rental price brake is subject to an “empowerment foundation of the Länder”.

“For constitutional reasons it is necessary to tangibly justify the rental price brake for a city” commented Gedaschko. “It is not enough to list criteria in the draft bill – for example, low vacancy quotas, a higher-than-average rental increase or a higher-than-average rental cost, but not to make them a compulsory requirement for the rental price brake. A “can-identification” is in this case not enough. An undersupply only exists when there is really a shortage in dwellings.  On identifying a tense housing market, the Minister of Justice has again not considered the political will, as was agreed in the coalition contract. Rather, the identification of areas should be bound to an action plan for remedies. Only new constructions remove shortage situations.”

New Swedish Government highlights housing

Following the national elections in September, Sweden now have a minority government consisting of The Swedish Social Democratic Party and the Swedish Green Party. Housing was remarkably high on the agenda when Prime Minister Stefan Löfven declared their work today. Löfven said in the statement for the new government:

“Sweden's competitiveness will be strengthened. A government investment plan will be developed. Investments in infrastructure, housing and climate shift will increase.
Housing policy is a national concern. The housing shortage will be met with increased housing, especially in rental units.

The goal is at least 250 000 new housing units by the year 2020. A dwelling introduces billion to municipalities for increased construction. Lending for new construction strengthens. Million program to be modernized apartment buildings in a socially and environmentally sustainable manner.”

The new “Housing and Urban Development Minster” Mehmet Kaplan, will be part of the Ministry of Enterprise.

Federcasa sends letter to Matteo Renzi

Our Italian member organisation, Federcasa, sent earlier this week a letter to the Italian Prime Minister, Matteo Renzi, in which it presents its positions on the EU energy and climate objectives 2030. Federcasa underlines the multilateral contribution of the affordable housing sector to the above mentioned targets that are going to be discussed on Monday, October 6th during the informal Energy Council and then again during the European Council that will take place in Brussels on October 23rd and 24th. Since Italy holds the presidency of the EU Council, this means that Mr. Renzi is the President of the Council of Ministers.

Federcasa stresses that currently in Italy there are around 400 000 dwellings that need to be refurbished, so that poor families can be supported, but the project be finalized due to lack of funding. Taking into consideration the financial environment, in other words the crisis, and the needs of the sector, the Italian Federation concretely states three main demands:

  1. Access to additional funding for the affordable housing sector
  2. A stable legislative framework that will encourage investments
  3. The promotion of innovative construction techniques that are based on sustainable financial schemes, too, such as Transition Zero.

In its concluding remarks, Emidio Issachini claims that the sector may play a significant role towards the much desired energy transition.


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