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RENTING

Over a million German households spend half of their income on rent

Over 15 percent of people in the country are spending at least 40 percent of their income on rent, according to the federal statistics agency.

housing germany
New housing being built in Gelsenkirchen. Photo: picture alliance/dpa | Fabian Strauch

Rent is taking up an increasing share of the average German paycheck, according to the Federal Statistics Office (Destatis).

The agency found that 3.1 million households in the country are spending at least 40 percent of their pay on rent, with about 1.5 million spending more than half their pay on cold rents. Cold rents in Germany typical don’t include utilities like heat and electricity, so total housing costs are even higher.

The average gross rent per square metre in Germany sat at €8.70 as of the end of 2022, although it is much higher in places like Berlin, Frankfurt – and especially Munich.

The increasing rent burden is particularly high on single-person households, people in larger German cities and people who moved into their current apartments after 2019. 

People living in smaller German cities are still paying, on average, much less than people in larger cities for rent. Inhabitants of cities of 20,000 people or less are spending around 26 percent of their income on rent, compared to the 27 to 29 percent seen in cities of over 100,000 people.

The burden on single people is particularly clear. They spend around a full third of their incomes on cold rents, as a nationwide average. That’s compared to couples or two-person households, whose rent equates to about a quarter of their income. 

For those who have newer rental contracts, the news is a bit more dire still – no matter where you live in the country.

Those who signed in 2019 or later are paying an average of €1.10 per square metre more than those who signed before. In larger cities, that difference is up to €1.40 per square metre, with people who moved in after 2019 in those cities paying an average of €11.00 per square metre on cold rent.

READ ALSO: Why Germany wants families to move to the countryside

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BERLIN

Why are Berlin rents soaring by 20 percent when there’s a rent brake?

The Berlin Tenants' Association says rents rose by 21 percent last year, and a recent report confirms a similar increase. Germany's rent price brake put in place in 2015 was intended to hold rents steady, so why are they continuing to soar?

Why are Berlin rents soaring by 20 percent when there's a rent brake?

A report released Wednesday by two leading real-estate firms found that asking rents in Berlin rose by 18.3 percent to €13.60 per square metre despite the rent brake that’s meant to control the increase. 

The report was compiled by real estate financier Berlin Hyp and the global real estate service provider CBRE.

The report also notes that the number of rental apartments offered in Berlin shrank drastically.

In the real estate market however, prices have come down somewhat. The report suggests asking prices for apartment buildings fell by 11.7 percent, and asking prices for condominiums fell slightly by 1.4 percent.

These findings are based on evaluations of 23,300 rental offers, around 28,400 purchase price offers for condominiums and apartment buildings as well as 220 new construction projects with around 34,900 apartments in Berlin for 2023.

Where are rents the highest and the lowest in Berlin?

According to the report, Berlin’s rental prices top out in Charlottenburg and Friedrichshain – at rates up to €26 per sq/m.

Marzahn was the kiez or neighbourhood that had the lowest rents, at €16.03 per sq/m at the most. Spandau and Reinickendorf were the next cheapest neighbourhoods. 

The range of rent prices was wide across every neighbourhood in Berlin. Across the capital city, rents on the bottom end were as low as €6 per sq/m – amounting to a difference of nearly €20 per sq/m between rents in the upper and lower market segments.

READ ALSO: Is there any hope for Berlin’s strained rental market?

While Berlin’s rapidly increasing rents combined with its severe housing shortage makes moving to or within the city notoriously frustrating, it does not have the highest rent prices in Germany.

According to Statista, Munich has the highest rent prices by far, at a rate of €19.23 per sq/m in 2023. Frankfurt am Main had the next highest rent on average, at €14.80 per sq/m.

Close behind, Stuttgart has held the third highest rents in Germany in recent years, but as of 2023 it looks like Berlin has caught up.

Hamburg, Düsseldorf and Cologne all had rent prices between €12 and €13 per sq/m on average.

Is the rent price brake failing?

In an attempt to slow the rapid rise of rents in competitive housing markets, the German government introduced a rental price brake (Mietpreisbremse) in 2015, which was recently extended until 2029.

But it appears that the rent brake has done little to slow the rise of rents in Germany’s most competitive markets.

The Berlin Tenants’ Association (BMV) welcomes the extension of the rent brake, but says that it needs urgent tightening and strengthening to adequately keep rents affordable.

Mieten runter "rents down"

The words “Rents down” are graffitied on the wall of a rental building. About 75% of Berlin rents are set illegally high, a legal expert told The Local. Photo: picture alliance/dpa | Monika Skolimowska

The rent brake is intended to prevent landlords from asking for rents more than 10 percent above local comparative rates. But with no significant consequences for violating the rent brake rule, the BMV says landlords regularly raise rents well above the legal limit.

According to the BMV, rents were excessive in 98 percent of the cases that it reviewed in 2023.

“Many landlords ignore the requirement, and try to circumvent the rent brake and demand excessive rents,” says Managing Director of the Berlin Tenants’ Association,  Ulrike Hamann-Onnertz.

“At the same time, the enforcement of the rent brake is associated with a great deal of effort and legal risk for tenants.”

Renters in Germany’s high-demand rental markets can invoke the rent brake to reduce their rent, if they find that their ‘cold rent’ (the base rent without additional costs) is set more than 10 percent above the average rate for a comparable unit in the same neighbourhood. Average rates are recorded local indexes, called Mietspiegel. Here’s one for Berlin.

READ ALSO: German rent brake to be extended until 2029: What you need to know

However, there are a number of exceptions to the rent brake. Perhaps the most frustrating of which is a loophole that allows landlords to maintain an overpriced rent if the previous tenant did not challenge it. 

“Rents agreed in violation of the rent brake can also be included in the rent index and in turn lead to an upward spiral of rents,” Hamann-Onnertz said.

The BMV recommends three policy adjustments to fix the holes in the rent brake which include: applying sanctions to landlords who violate the rent brake, eliminating most of the exceptions to the rent brake, and supporting tenants’ in enforcing their rights through municipal inspection bodies.

Whether policymakers in Berlin (and beyond) will heed any of the BMV’s advice is another story.

READ ALSO: ‘Tense housing situation’: Why a Berlin renter can’t be evicted for two years

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