Here’s an idea: Landlords can only raise rents for new leases by 10 percent above the neighborhood average.
RENT control is a solution. Consider that thousands of new residents are moving in every year. Office buildings are springing up everywhere. Construction of new homes is not keeping pace, and rental prices climb ever higher, even in not-so-hot neighborhoods.
You’re probably thinking that I’m talking about Seattle, right? I’m not. I’m talking about my home city, Berlin.
Germany’s capital has become so hip since reunification that it has struggled to provide affordable housing. First, it was the bubbly, creative scenes and cultural offerings that made it so attractive. Now it’s the startup tech community that’s a magnet.
Berlin’s Amazon is Zalando, Europe’s leading e-commerce fashion retailer. Founded in 2008, it reported $2.2 billion in sales last year. It has 9,100 employees and keeps on recruiting. Now, younger startups are moving into the orbit of companies like Zalando that have made it.
Within five years, Berlin’s population is expected to grow by 200,000 residents. According to projections, there will be a lack of 55,000 apartments at the end of the decade. Prices already have increased by about 45 percent within the last 10 years.
When it comes to housing, Berlin is taking some positive steps — ideas that could help Seattle deal with its own affordability problem:
• Vacation-rental rules: Tourists flock to Berlin. From January to June, nearly 14 million “guest nights” were registered in the city — in Europe, only Paris and London attracted more visitors. A year ago, a law was passed making it illegal to transform housing into vacation flats, offices or medical practices in central locations. People are asked to report offenders to the authorities, and they do.
• Renovation rules: A new law forbids owners in 23 popular neighborhoods to renovate their flats in a luxurious way. Merging two flats into one big one or installing a second bathroom can be a problem in the central districts. Further, no one is allowed to convert a house of rental apartments into individual condominiums without permission from the government. Buying and renovating buildings to split them into expensive apartments had been common practice by investment companies. Now, for seven years from the day investors bought a building, only the current tenants may buy a flat.
• Price-increase rules: Berlin enforced the “rent price brake” rule on June 1. Landlords can only raise rents for new leases by 10 percent compared to the neighborhood average defined by city statistics. This law preserves the current high rental rates and still allows owners to make a profit if they sell the property.
This is a point opponents of the law have highly criticized — claiming that fewer rental apartments would be available if less profit could be made from them. But owning houses and apartments remains one of the best ways to invest money. People especially buy them as a provision for their old age — tenants help them to pay their debts.
Recent surveys conducted by a German real-estate website state that construction of new houses has not decreased, whereas the rent increases seem to have slowed. For the first time since 2009, the website reported “significant decrease in new rental contracts.” While rents stayed constant in Munich and Frankfurt — cities with similar problems but without rent-control mechanisms — Berlin’s rental rates dropped 3.1 percent within a month of the law being imposed.
In other words, fewer people are being driven out of their homes.
Research shows that at least 17,000 illegal vacation homes still exist. Imagine how many people can find a home when all these apartments come back on the rental market.
That’s what I did. After searching for an apartment for about two years, my boyfriend and I finally moved into a beautiful flat in Berlin that had previously served as a vacation apartment.
My suggestion to Seattle: Consider these measures as you debate how to help people stay in their homes. You might dislike this kind of intervention in the market, as this is America, I know — you believe the free market will adjust itself.
But sometimes it doesn’t — just look to Berlin.