Housing is one of the most pressing social issues of our time. But the public debate focuses too much on the lack of supply. That falls short. There is also a lack of affordable living space because the existing living space is distributed extremely inefficiently. Young families in particular are looking for larger apartments, while many older people are prevented from moving into smaller apartments without more due to old rental agreements Rent to pay.
One Study by DIW Berlin shows the dilemma: the average living space per person has more than doubled since the 1950s to around 49 square meters – one of the highest in the world. At the same time, households are shrinking and many people are living in apartments that are too large for their current living situation. To solve this mismatch, currently a suggestion that was recently discussed in a commentary in ZEIT: Tenant protection in existing contracts should be relaxed or completely abolished.
The idea: The rents between old and new contracts should be equalized so that older people whose children have moved out can move into smaller apartments without financial disadvantages. That would Housing market revitalize and enable better distribution. In fact, this confirms Researchthat rent regulation often leads to living space being distributed inefficiently and the mobility of tenants being slowed down.
Higher rents only make the situation worse
It is not just the lack of apartments in metropolitan areas that is crucial, but above all the low availability of affordable apartments on the market. The Seventh Poverty and Wealth Report the federal government
shows the consequence: almost every eighth household has to spend more than 40 percent of its income on housing, and for people in poverty even every third. New tenants – often younger people who are moving out of their parents’ house or starting families – are bearing the brunt of this development.
But “open at the bottom, cap at the top” would not solve the social imbalance, but would make it worse. In regions with a housing shortage, relaxing tenant protections would significantly increase existing rents without reducing rents for new rentals. One study My colleague Konstantin Kholodilin confirms: Rent regulation reduces rents in regulated units, but regularly leads to higher rents in the unregulated segment. What’s more: “Capping the roof” wouldn’t work, as rising rent levels would allow owners to pay even higher prices for new rentals. The only big winners would be the apartment owners. Acquiring home ownership would also become even more difficult for young people.
A radical but socially fairer alternative would be to reduce the rent index to the level of a key date, for example January 1, 2014. At that time, rents were closer to their long-term average. Thereafter they would increase annually with nominal economic growth. Owners would share in society’s wealth gain, but would not benefit disproportionately. The rent increase since 2014 would have been three to four percent, instead of ten percent or more in some metropolitan areas. Exceptions would be necessary for properties acquired after this deadline and for those in which owners have invested far beyond the usual maintenance.
In addition, a strong tax on increases in real estate value could regulate the market. Both instruments together – lowering the rent index and taxing real estate profits – would reduce the value of residential properties. Owners, especially speculators, would have strong incentives to sell. Acquiring home ownership would be possible again for young families.