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Rent control: a success across Northern Europe

Wednesday, 6 June, 2012 - 14:49

The French government intends to introduce rent control. Cécile Duflot, the newly appointed Minister of Territorial Equality and Housing in the Ayrault Cabinet, wants to draw on the German rent control system.

To break away with Sarkozy's presidency, the French Left first appeared reluctant to find inspiration from German politics. Nevertheless, it seems like French leaders keep looking across the border for good anti-crisis policies. The latest example is the rent control proposal made by Cécile Duflot in an interview with French left wing newspaper Libération published on June 4th.

The Minister of Territorial Equality and Housing wants to submit a decree to the Council of State later this month to limit severe rent increase in the most wanted neighborhoods where housing costs are the highest. The decree should take effect in September.

The German model

In Germany, rents have been regulated according to a complex policy called « Mietspiegel » (rent index) since 1973. It was first introduced in Cologne, before spreading to other German metropolitan areas. It provides a comprenhensive price range of house rental costs in every city.

Updated every year, the German rent index takes several criteria into account : surface, the age of the building, the quality of the facilities as well as the neighboorhood's attractivity. The tenant is allowed to take legal action if the landlord requests a rent 20% higher to the index.

Rents increase slower in Germany

This rather basic system has proved successful in Germany. With a 100,000 annual decrease in population since 2005 and a rent-oriented real estate market, German people easily find a house or a flat to rent.

Therefore, only 43% of German people own their house (the lowest in Europe). In France, this proportion amounts to 58% of the population.

Rents have increased by less than 5 % since 2000 while they have doubled in price in France.

However, with the on-going crisis, the situation has become slightly harder for tenants.

In the current economic turmoil, a growing number of Germans is investing in real estate. This new trend should have repercussions on rent index in the near future. Yet, the "Mietspiegel" should prevent any dangerous speculation or drastic rent increase.

Rent control is also taking place in the Netherlands, Switzerland and Sweden. It happens to be a success as demonstrates local representative René Dultrey from EELV (the Green Party) in his report entitled "Rent control: which solutions" (original title: "Contrôle de loyers: quelles solutions").

The Dutch points-system

To control rents in the Netherlands, the Dutch government has introduced a maximum limit for rents. Every square metre, comfort and all the facilities in the apartment score points, and the total number of points equates to a certain maximum rent. After moving in, the tenant has six months to contact the independent organisation which values the apartment and determines if the rent is abusive.

Private apartments rented to tenants represent 10% of primary residence while this figure amounts to 35% in public housing. ,

This way of protecting tenants has led to a fall in private rental-housing which suffers from a growing disaffection from landlords"

explains René Dutrey.

In Amsterdam, the rental value of a square meter is 16,19€. It is even cheaper in Rotterdam with 12,20€ per square meter.

Switzerland keeps a close eye on rents

In Switzerland, every time a landlord wants to increase the rent of his property, he must prove that he faces additional expenses such as renovation costs – therefore adding more value to the good.

Tenants who feel abused can take the case to court. Despite higher prices than in the Netherlands, the Swiss rent control system has proved efficient. In Geneva, the rental value of a square meter is 19,59€.

The Swedish rent control system judged illegal by Brussels

In Sweden, landlords are not allowed choose how much they charge their tenants. The rent happens to be determined by the local housing council. This NGO fixes the rent according to the market rental value of public goods. Rents cannot exceed 5% of the rental price of public housing.

Yet in 2005, following two complaints lodged by the European Property Federation, the European Commission judged that the Swedish rent control policy harmed competition in real estate.

This policy can only work if there is enough public rental housing available"

says Karima Delli, vice-president of the Urban Intergroup at the European Parliament.

Nevertheless, rents in Stockholm have remained fairly low. The rental value of a square meter in the city is 16,67€ although "the market is extremely tense and the city faces a real housing crisis" says Delli.

Translated by Simon Benoit-Guyod