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Despite Rent Controls, Berlin Rents Jump 70% as New York Tries Freeze Again

Debate over housing rent controls is heating up in political circles across major countries. A series of policies have followed, backed by the political justification of easing the burden of soaring prices and housing costs. But warnings are emerging in the market that rents for housing not covered by the rules are surging, and that over the long term the measures lead to a contraction in housing supply and a decline in quality, carrying significant side effects.

According to the Financial Times (FT), 23 of the 38 member countries of the Organisation for Economic Co-operation and Development (OECD) are enforcing rent controls. Some countries and local governments are pursuing freeze measures that forcibly block rent increases, or introducing various mechanisms such as setting a cap on the rate of increase.

A recent move by New York City in the United States is a prime example. New York Mayor Zohran Mamdani, who describes himself as a democratic socialist, has made stabilizing housing costs his top pledge and is strongly pushing for a rent freeze. Earlier, New York City’s Rent Guidelines Board voted to freeze rents for 1 million rent-stabilized apartments. A rent-stabilized apartment refers to a multi-unit dwelling above a certain age designated by New York City to protect tenants. Under the measure, rents on one-year and two-year lease agreements signed after October 1 will be frozen. But landlords are strongly opposing the move, filing lawsuits to nullify the decision.

Germany, too, has seen ongoing controversy over rent controls. Germany has an unusually high proportion of tenants even among developed nations, making the rent issue a key topic in political circles. In the capital, Berlin, the “Mietpreisbremse” (rent brake) applies, preventing rents from exceeding the local standard rent by more than 10% when new or renewal contracts are signed. Alongside it, the “Kappungsgrenze” caps the rent increase limit on existing contracts at 15% over three years.

In the United Kingdom, Scotland is preparing a new model. The Scottish National Party (SNP), which leads the Edinburgh devolved government, plans to introduce more refined rent controls starting in 2027. Scotland fully froze rents for six months from September 2022, then implemented a measure limiting the annual increase rate to 3%. After various controversies intensified, it supplemented the system by limiting the rent increase rate for both new and existing contracts to “the rate of increase in the Consumer Price Index (CPI) plus 1%,” while capping it at no more than 6%. Some properties, such as new builds, are excluded from application. Experts see this system as a test bed for gauging whether it could be expanded across the U.K. in the future.

Rent control policies clearly have short-term effects, analysis shows. The FT noted that “a 2024 review paper analyzing dozens of studies published between 1967 and 2023 found that rent controls were partly effective in curbing rent increases.”

But criticism is also emerging that the side effects are considerable. Landlords, unable to raise rents in time, find it hard to cover building management costs and have diminished capacity to raise funds, critics point out. Developers, too, are assessed to have lost the incentive to build new housing. Ann Korchak, president of the Small Property Owners of New York, pointed out, “You can’t put $100,000 into repairing an apartment when the monthly rent increase is only $178.” Stuart Boesky, CEO of Pembrook Capital Management, a private equity manager specializing in housing, explained, “Knowing it’s hard to recover the investment once a tenant leaves, you have no choice but to repair the unit or leave the home empty altogether.”

There is also an assessment that exemption clauses and blind spots undermine the effectiveness of the controls. According to a German federal government survey, despite the various regulations, rents in Berlin have surged by about 70% over the past 10 years. Konstantin Kholodilin, a researcher at the German Institute for Economic Research (DIW), pointed out, “Over the long term, various side effects follow, such as reduced housing supply, declining quality, and fewer opportunities for relocation,” adding, “It is questionable whether rent controls are truly a desirable policy.” Some tenants even exploit the controlled, cheap rents to sublet to third parties for a premium, a practice that is rampant.

The FT noted that “while the prevailing view in economics is that rent controls do more harm than good over the long term, civic groups and progressive-leaning policymakers counter that they can protect tenants and minimize market distortions,” adding that “proponents of rent controls argue that lessons should be drawn from countries’ successes and failures, while opponents are responding out of concern over market distortions.”

Source: https://en.sedaily.com/international/2026/07/31/despite-rent-controls-berlin-rents-jump-70-percent-as-new

Author: Lee Wan-ki