Delays Encourage Rent Hikes and Uncertainty

Published on 2014/07/08
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Is it a good thing or a bad thing that the rent freeze will possibly enter into effect not on 01 January 2015 but six months later? It depends, of course, on the angle you take, and above all on the question what sort of stake you have in the matter. Landlords will see it as an opportunity to use the few extra months left for raising rent rates in their residential housing stock. Since the last rent rate negotiated before the law becomes effective will be the lower threshold that must not be undercut when reletting, it makes perfect sense for landlords to raise their rents now, at the eleventh hour. This means that the rent freeze will initially cause the opposite of the intended effect, namely rent hikes for unexpired leases at an accelerated pace.

As no one can say how exactly the rent freeze will be structured, we are likely to see two different responses:

  • The optimists will be given yet another occasion to ignore the issue and to hope that “things won’t be as bad as they seem.”
  • The pessimists will put their investments on the back burner because uncertainty in regard to the future legal parameters is the very bane of investments.

So what do I expect to happen?
First: The rent freeze will come, sadly so. Anyone hoping at this point that something will prevent is in for a disappointment.
Secondly: While one thing or another might well be changed, the law will by and large be enacted along the lines of the present draft bill.
Thirdly: I expect the rent freeze to enter into
force sometime between 01 January 2015 and summer of 2015.

About the Author

Dr. Rainer Zitelmann is one of the leading experts for the strategic positioning and communications of companies.