Copy Germany’s 3-Year Rental Freeze, Greens Say

The Reichstag building (R), which houses Germany's Bundestag lower house of parliament, and the Jakob-Kaiser-Haus parliamentary complex (L) are reflected in the river Spree in Berlin on Jan. 20, 2023. (John MacDougall/AFP via Getty Images)

Greens Senator Max Chandler-Mather is continuing his dogged push for a rental freeze in Australia, calling on the federal government to look to Germany’s three-year trial on rent controls.

The announcement from the German government comes amid a cost of living crisis which has seen record rent increases for almost 60 percent of the population, according to the governing alliance of the Social Democrats (SPD), Greens, and Free Democrats (FDP).

Senator Chandler-Mather said Prime Minister Anthony Albanese should take note of the approach.

“This latest German announcement is a reminder that Australia is increasingly an international pariah when it comes to its treatment of renters and its commitment to unlimited rent increases,” he said in a statement.

“Germany is freezing rents for three years, and all the Greens are asking for is a two-year freeze on rent increases and ongoing caps to give renters a breather from some of the biggest rent increases in Australia’s history.

“With eight of the nine seats at National Cabinet held by the Labor Party, the Prime Minister must drop his support for unlimited rent increases and finally coordinate a freeze and cap on rent increases.”

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The Greens cite a research paper (pdf) that demonstrated Australian renters are facing some of the worst tenancy conditions in the OECD.

“We know Australian renters are about to be smashed by a rent increase tsunami of at least $4.9 billion, and the reality is the only ones with the power to stop it are the Labor Party.”

Berlin Housing Crisis Not Solved By Rent Freeze

The decision by the German government to consider freezing rents across the country follows a failed attempt by the Berlin state authorities to implement a rental freeze in 2020 at the start of the pandemic.

The Berlin legislation, known as the Mietendeckel, sought to freeze rents for 90 percent of apartment holders in the city in June 2019 for five years, with existing rents also reduced.

However, the law was challenged by politicians and landlords who said it was unconstitutional on the grounds that the Berlin government had no right to interfere in housing policy, which is the responsibility of the Bundestag—the German federal government.

The German Constitution Court in Karlsruhe agreed, repealing the legislation in 2021.

Critics of the Berlin legislation argued that the rent cap distorted the market and ultimately had a detrimental effect on renters because it discouraged building companies from constructing new homes in Berlin, which exacerbated the existing housing shortage.

Data during the time does show that during the period the cap was implemented, there were 60 percent fewer advertised flats and that it sped up the conversion of rentals into private residences.

This trend has been mentioned by at least eight economic studies including in 1946 by Milton Friedman and George J. Stigler, 1997 by Edward L. Glaeser and Erzo F.P. Luttmer, 2011 by David P. Sims, 2012 Jeremy Bulow and Paul Klemperer, and 2019 by Rebecca Diamond, Tim McQuade and Franklin Qian, based on a study in San Francisco.

Rental Growth to Slow In Australia: CoreLogic

However, the call for the federal government to act on rents by the Greens may be premature after research released on Aug. 29 by CoreLogic noted that “monthly rent growth has eased over the past four months.”

CoreLogic Head of Research Eliza Owen said that while rental rates are still high—with an expected falling cash rate and slower income growth—preferences for housing could change.

“Rent value growth is likely to slow because of base effects alone, but renters also tend to be on lower incomes, which means there could be a ceiling on how high rents can go before tenants adjust their housing preferences,” Ms. Owen said.

Additionally, she said that there were signs the rental market was reaching peak affordability, and they were seeing the potential for there to be movement into more affordable areas, and this means there will be a limit to how high growth can go.

“Most rental markets are now seeing growth flatten out or moving lower. Canberra rents are firmly in decline, and Hobart house rents look as though they will soon follow.

“Rent values also fell in the 12 months to July across a handful of SA4 markets, including the South East of Tasmania (down 4.5 percent), the Southern Highlands and Shoalhaven (down 3.8 percent), and the Capital Region of NSW (down 1.3 percent).”