German rent control locks sitting tenants in and prices newcomers out

A doctoral dissertation at the University of Regensburg has measured what a decade of German rent control has produced across 107 cities: sitting tenants pay on average 20 to 25 percent less than newcomers signing a lease today, and in major metropolitan areas the gap reaches 50 percent.

The study, "Housing Markets Between Regional Heterogeneity and Political Intervention" by Lars Jagemann, examines the Mietpreisbremse — the "rent brake" introduced in 2015 and tightened several times since — together with the Kappungsgrenze, the cap on rent increases for sitting tenants, which has also been made more restrictive. The gap between protected and unprotected rents is not closing. It is growing wider.

The mechanism is what the dissertation calls a lock-in effect. Tenants on inexpensive, legally protected contracts avoid moving even when their homes no longer suit their circumstances, because re-entering the market means paying the unregulated asking price. The market splits into insiders, who keep stable cheap rents regardless of need, and outsiders — young families, people starting careers — who compete for a shrunken pool of vacant flats at whatever the market asks.

The dissertation's conclusion is that regulations working against basic economic incentives provoke avoidance strategies that place additional burdens on vulnerable groups. Sustainable housing policy, it argues, means creating incentives instead of prohibitions, expanding supply instead of capping prices, and establishing transparent long-term rules instead of constantly changing them. Jagemann himself makes no direct policy recommendation.

The political momentum runs the other way. In Spain, hundreds of thousands have demonstrated for stricter housing regulation. In Berlin, the far-left party DIE LINKE has just won an election fought partly on a demand to nationalise large housing companies.