From London and other overpriced cities, we often look to Berlin as a beacon of progressive housing politics. Renting in the capital, as some 84% of households do, is associated with secure, unlimited, rent-controlled tenancies. Berliners have rallied behind moves to freeze rents and expropriate hundreds of thousands of apartments from corporate landlords. But in the last few years, Berlin’s housing crisis has escalated to unprecedented proportions, with median asking rents across the city rising by 21.2% in 2023 alone. Far from “poor but sexy”, as it was once dubbed by its own mayor, Berlin now has one of the most overheated property markets in the world.
The reasons for Berlin’s housing crisis are complex, yet there is one simple and resolvable mechanism driving the stratospheric rent increases of recent years: the large-scale exploitation by landlords of a strange loophole in German federal law. If apartments are rented out as “temporary” and “furnished”, owners can evade tenancy regulations and charge considerably higher rents.
The German civil code exempts rental agreements for temporary use from rent-control legislation (Mietpreisbremse), which dictates that “cold rent” – basic rent excluding utilities – may not be more than 10% higher than average rents in the local area. In addition, landlords can charge extra fees for “furnishings”, but they do not have to provide a clear justification for or breakdown of these. Temporary listings are also immune from misappropriation laws that are intended to clamp down on Airbnb and retain housing on the long-term market.
This loophole for furnished temporary apartments provides a way for landlords to extract exorbitant rents. The average rent across all flats in Berlin is €7.67 per sq metre. But furnished temporary apartments are routinely listed for more than €30 per sq metre, and sometimes as much as €50. Analysis by real-estate portal ImmoScout24 found that they average €11 per sq metre more than conventional apartments in Germany’s five biggest cities, bringing the average price of these listings to €28.85 per sq metre.
The above exemptions were justified by the idea that cities attracting high numbers of international workers would benefit from a small percentage of short-term furnished apartments. But this type of housing has grown from a small share of the market to more than 50% of all listings in Berlin and other major German cities. In particularly desirable neighbourhoods such as Kreuzberg, furnished temporary lettings dominate, with 70% of listings – three times more than 10 years ago. For “small” apartments under 50 sq metres in Berlin, two-thirds are now listed under this classification. Across the whole of Germany, advertisements for furnished temporary apartments increased by 185% between 2012 and 2022, while advertisements for regular (secure, long-term) rental housing fell by 60%. There are clear incentives for owners of long-term apartments to switch over to this more lucrative option. The loophole also provides an alternative strategy for Airbnb landlords after the tightening of regulations on holiday lets in 2018. This market segment is therefore swelling as property owners of all shapes and sizes cash in.
A whole industry has emerged to facilitate the exploitation of the loophole. Venture capital-funded housing platforms such as Wunderflats and Housing Anywhere have rapidly expanded to provide landlords with tailored services for navigating legalities and listing these properties while themselves pocketing large sums. As stated on the latter’s website: “Many of our landlords find the complexity of laws and regulations in Berlin a nuisance. We’re happy to guide you through the legal maze!” These firms provide an easy way to take advantage of this market, including assuming all management and furnishing responsibilities in exchange for a cut of the rent. In providing a “cost-neutral” service for owners, their business model is predicated on increasing the profits made from these homes, including by implementing the same homogenous hip aesthetic, and skimming the cream off the top for themselves.
The regulation of the broader rental market is mediated by a citywide rent index (Mietpreisspiegel), which determines by how much landlords can increase rents by based on average local prices. As this new type of vastly more expensive housing proliferates, it is pushing this index up, forming a vicious cycle. This is further exacerbated by the poor enforcement of the rent control legislation more generally, including the ability for landlords to maintain rents that violate rent control regulations if the previous tenant does not challenge it. Many of those renting furnished temporary apartments are also expats unaware of their rights as tenants.
Berlin housing activists and tenant organisations are of course mobilising around this issue, pushing for legal changes that target the loophole. The Federal Council has submitted a draft law that would strengthen tenant protections in the case of furnished apartment leases, obliging landlords to be more transparent in the net rent and furnishing charge. But the Free Democratic Party appears to be unsupportive of these efforts, invoking the familiar neoclassical argument that tighter regulations would hamper the investment in apartment construction needed to bring prices down.
The scale of the issue is such that some authorities are taking matters into their own hands. The Charlottenburg-Wilmersdorf district, where some 64% of listings fall under this category, is seeking to crack down on furnished temporary rentals. The proposed legislation means this type of housing would require formal permission for a change in use. The districts of Pankow and Neukölln are also working to establish tighter rules. However, the Bundestag would have to decide on fundamental changes to tenancy law as the state of Berlin has limited control options only in the case of certain protection areas.
skip past newsletter promotion after newsletter promotion
Berlin is fast becoming a city that prioritises the needs of investors and landlords over those of tenants. What was once an affordable haven for alternative culture is becoming inaccessible for those unable to shell out thousands on rent, excluding the low-income groups that made the capital what it is today. Closing the loophole is just one small measure towards removing Berlin’s housing from the grasp of financial actors and re-empowering tenants. In the long run, this will require more fundamental structural changes. As campaign groups gear up for a second referendum on the expropriation and socialisation of 240,000 apartments owned by large companies, hope is not lost. But Berlin’s loophole demonstrates how the role of housing as a source of wealth and income continues to be prioritised over its function as a social necessity, even in a city widely heralded for its progressive housing politics.
Tim White is a researcher and writer studying housing, cities and inequality. He is Alexander von Humboldt research fellow at the Free University of Berlin and visiting fellow at the London School of Economics