ZEW Economist Siegloch and Experts of the University of Regensburg Call for Reform of Rent Regulation
On 24 November 2021, the SPD, FDP and Greens published their coalition agreement setting the political course for the next federal government. In terms of construction and housing, the coalition agreement promises more tenant protection by lowering the cap to eleven per cent, extending rent control until 2029 and building 400,000 new flats, a quarter of which are to be publicly funded. Three experts from ZEW Mannheim, the University of Mannheim and the University of Regensburg criticise the measures for lack of ambition.
Professor Sebastian Siegloch, ZEW research department head and professor at the University of Mannheim, ZEW Research Associate Professor Steffen Sebastian from the University of Regensburg, and Professor Jürgen Kühling from the University of Regensburg and the German Monopolies Commission criticise: The current instruments to regulate the market – local reference rent, capping limit and rent control – aren’t socially just, as they benefit not only those in need, but also current tenants and luxury flats. The real problem isn’t housing shortage, but the heterogeneous development of demand: a high vacancy rate in rural areas contrasts with a lack of affordable housing in metropolitan areas. It is particularly difficult to find affordable housing in metropolitan areas because current tenants have no incentive to move out of their current, sometimes very spacious and cheap publicly subsidised flats.
To ensure access to affordable housing for all population groups, Kühling, Siegloch and Sebastian suggest the following measures: Reforming the local reference rent, raising rents for current tenants to the market price level and higher taxation of landlords. The additional tax revenue can then benefit those who are really in need, including medium-income households.