Berlin seeks to keep rents down on commercial properties to save small shops

Rents in Berlin are not only rising excessively for private apartments – but also in commercial properties. Here’s how the local government wants to take action.

Berlin seeks to keep rents down on commercial properties to save small shops
Costume and magic shop Zauberkonig in its former location in Hermannstraße, Berlin. Photo: DPA

When it comes to the debate about rising rental prices in large cities, one area is often overlooked: shops and businesses. 

While there are already regulations limiting rents for apartments in large German cities, such as the Mietpreisbremse (rental price brake), there are no comparable laws for commercial premises. 

But prices are undoubtedly increasing. In so-called “1-B locations” in Berlin, rents on large retail spaces went up by more than 260 percent between 2009 and 2018. For smaller spaces the increase was 200 percent.

In prime sites (so-called I-A locations), rents have risen by around 50 percent.

The Berlin Senate wants to limit this, and on Tuesday it is launching an initiative in the German Bundesrat, the upper house of parliament, for regulation of commercial rents.

The aim of the application, which was seen by the Süddeutsche Zeitung, is to “introduce a brake on commercial rental prices in strained commercial-space markets”.

Markets are deemed to be strained if “there is a particular risk that small and medium-sized companies will no longer find commercial leases with reasonable terms’.

The senate states that commercial rents have “exploded” and that “exorbitant price increases” have led to small and medium-sized businesses being pushed out, or no longer being able to gain a foothold in some locations.

For this reason, Berlin authorities say laws should be introduced to make it possible “to limit the permissible rent at the start of the lease”.

READ ALSO: What Germany is doing to keep rents down

Save neighbourhood shops

Berlin senator of justice Dirk Behrendt, of the Greens, said the focus was on saving small neighbourhood shops and stop them being displaced by large chain firms.

“Traditional shops, family-run butchers and bookstores” are being replaced by large chains, he said. “We want to stop this negative trend with our commercial rental price brake.”

Dirk Behrendt at a packaging free supermarket in Berlin.

At this stage the proposal states that the Bundesrat should ask the government “to examine the introduction of a commercial rent brake in tense commercial space markets”.

In October 2018, the Bundesrat had already pointed out in a resolution “with concern” that “against the backdrop of considerable increases in commercial rents, a structural change is emerging in inner-city locations in recent years that is also characterized by the displacement of small owner-managed commercial enterprises and social facilities”. 

At the time, however, the Bundesrat did not call for the introduction of a brake on commercial rental prices. It just asked the government to “examine measures in commercial tenancy law, economic development and urban development law”.

READ ALSO: Berlin opts to freeze rental prices for five years

However, the federal government has so far shown no great interest in bringing in a brake on commercial rental prices.

In an answer to a question from Green MPs, the government said introducing protections for commercial properties similar to private housing regulations did “not appear to be advisable”.

In their question, the Greens said that due to high commercial and residential rents, there was a development towards inner cities serving “as a backdrop for tourists and their needs” and becoming “one-sidedly inhabited by wealthy households”.

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INTERVIEW: International students ‘vulnerable’ to Swedish housing shortages

People moving to Malmö to study now have to wait as long as a year to receive accommodation, Milena Milosavljević, the president of the Student Union in the city, has told The Local. The situation, she says, is "urgent and acute".

INTERVIEW: International students 'vulnerable' to Swedish housing shortages

The Sofa Project, run by the Student Union Malmö, received 80 applications this year from students who wanted to rent short-term accommodation, showing just how acute the current housing shortage is.

These 80 applicants were vying for one of seven spots, ranging from a spare room to a sofa bed – from hosts who sign up to offer their spaces to new arrivals.  As the programme only had seven hosts registered this year, the project had to close its application page to others, otherwise the number would have surpassed 80.

“They are ready to come to Malmö and sleep on a sofa bed at a stranger’s house before they find accommodation,” Milosavljević told The Local. 

Malmö recently received a red designation from the Swedish National Union of Students, which publishes an annual report assessing the housing situation in university towns and cities across Sweden. A red designation means that finding suitable accommodation as a student takes more than one semester. The report found that 61 percent of students live in a city that has been designated a red ranking.

READ ALSO: Sweden’s student union warns that housing shortages are back this semester

“The reality of Malmö and the reason why it became red is that to find suitable accommodation you have to wait up to a year,” Milosavljević said.

Some individuals, she said might have to wait up to three years to find their own accommodation, making do with second-hand contracts, long commutes, and living with family members in the meantime. For newly-arrived international students, who lack personal numbers when they move here and so cannot join Swedish housing queues, looking for suitable housing becomes a complex task.

“International students are more vulnerable because they don’t have a personal number to enter the system before they come to Sweden,” Milosavljević explained.

Milosavljević herself moved to Malmö as an international, fee-paying student. Because she paid tuition, she was offered housing by Malmö University. Based in part on her own experience, Milosavljević explained that the housing issue cannot be reduced to a shortage in the number of flats and rooms. There is also a shortage of appropriate housing options for different needs.

“They offered me accommodation in a student building,” she said. “Not an apartment, but a room – and I came with my husband. The room was not enough for two of us.”

Student accommodation must accommodate the different needs of different members of the student body, Milosavljević said, including those who move with partners or spouses, or even with their children.

In the past year, one new student apartment building was built in Malmö, with 94 new spaces for the city’s student body. This is inadequate, Milosavljević said. While Malmö is growing, and there is residential construction being carried out around the city, it is unclear how many of those new buildings will prioritise the city’s student population.

The city’s student population, too, is growing. As the pandemic era ended in Sweden, students returned to campus. And new students joined them. While student ranks grew, housing options remained stagnant.

“From our perspective from the Student Union, we have talked about, in the previous years, how the situation after the pandemic is going to get even worse for the students,” Milosavljević said. “There’s an increase of students coming back, new students, and already not even enough housing.”

Milosavljević has fielded calls and emails from students who say that they cannot move to Malmö because they cannot find housing.

“They are already working on it,” Milosavljević told The Local of the university’s response.

There are plans to create more housing for international students, but these proposals focus mainly on students from European Union, leaving other international students out. All international students should be given priority for student accommodation, Milosavljević said, because none of them have access to the Swedish housing market.

“I do believe strongly that the City of Malmö and Malmö University need to have urgent negotiations and start building straight away,” she said.

Because Malmö University is a public university, it must follow the lead of the Ministry of Education and Research. Milosavljević acknowledged that in the aftermath of Sweden’s recent elections, which put the right-bloc in power, student housing shortages might not rank highly on a list of national priorities.

“The Student Union Malmö considers this situation quite urgent and acute,” Milosavljević said. “We are more than prepared to sit down and talk so we can actually do something, instead of just having meetings. The students will continue to suffer if the living conditions and the bostad [housing] situation in Malmö is not improved.”