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Berlin Becomes First German City To Make Rent Cap A Reality

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“We don’t want a situation like in London or Paris!"

Berlin has become the first city in Germany in which rent-control legislation has come into force in a bid to put the breaks on some of the fastest rising rents in Europe.

From Monday, landlords in the capital will be barred from increasing rents by more than 10% above the local average. Such controls were already in place for existing tenants but have now been extended to new contracts.

“The rent ceiling is very important for Berlin because the difference between the rent paid in existing contracts and new contracts is so high,” said Reiner Wild, managing director of the Berlin Tenants’ Association. “The other problem is that we have 40,000 more inhabitants per year. Because of this situation the housing market is very strong.”

Capital pioneers law prohibiting landlords from charging new tenants more than 10% above local average

Guardian article here...

Edited by tyres

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Berlin has become the first city in Germany in which rent-control legislation has come into force in a bid to put the breaks on some of the fastest rising rents in Europe.

Say what? The Guardian falling short of any kind of standard, as usual.

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First point: Poor journalism. There are other cities in Europe which have had rent controls for years . . . or at least rent-controlled areas, like in Holland.

Second point: Sadly, it's too late . . . and meaningless . . . like saying London house prices can only rise 10%.

Maybe this would have helped a little 5 years ago . . . but more like 10 to keep Berlin a liveable city rather than a property developers free-for-all.

One thing about the old DDR: housing was plentiful and cheap. Throughout the old East, the Germans have been demolishing the old plattenbau to keep supply down and prices up.

Sum up: naive article, empty gesture.

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Why The Big Government Land Deed Program Creates Growth-Destroying Distortions or 'How uncompensated property rights welfare is form of rent control anyway'.

"One of the biggest government programs in the US is the land deed welfare program. Under this program, the government gives people the privilege to use the police to violently exclude everyone else from specific pieces of land denominated on pieces of paper called deeds. Through the operation of this guaranteed police violence, deed-holders are afforded a private and infinite right to the value that flows from the deeded land. They are also promised that the rent they must pay for this flow will forever be capped at $0/year.

As with most rent control regimes, the land deed welfare program is susceptible to severe growth-destroying distortions. Because the annual rent of the land is capped at $0, the deed holders are not required to employ any of the value of the land to “make rent” (if you will). The net effect of this is that land is often under-utilized.

A deed holder may simply let the land lie dormant, perhaps speculating that its rental value will go up over time, allowing them to make easy money by selling off the rental stream that the state gives them for free. A deed holder might also under-build on the land, for instance by maintaining their single family home on it rather than putting a multi-unit apartment complex on it. Since they do not have to pay out the economic costs of such under-utilization (because of the free rent they are given by the government welfare program), there is nothing that would force them to do otherwise.

To be sure, when gaps between potential land utilization and actual land utilization open up, bidders might come knocking to try to convince the deed holder to sell away the deed, thereby calling off the police violence that prevents the would-be developers from coming in and utilizing the land. This sort of arrangement can be highly lucrative to the deed holder, but that doesn’t necessarily mean that they will go for it. In family homes, for instance, the deed holders seem often to want to stay on the under-utilized land, perhaps passing it along to family members in death or only selling it many years down the line when they are ready.

For every year that they continue to occupy that rent-free under-utilized land, the economy suffers. Buildings that should be built aren’t. Capital investment is lower. And overall utility is not maximized. As the Land Value Tax advocates point out, the only way to solve this ongoing economic catastrophe is to blow up at least certain substantive provisions of the land deed welfare program. After such a reform, “owners” (if that is still an apt term) would be required to pay land rent every year rather than having their rent controlled at $0. By internalizing the cost of under-utilization on the “owners,” this will ensure a more efficient allocation of resources, more investment, and more growth.

It’s time to get big government out of the way and to end the land deed welfare program."

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