Forward to the past: Short-Term Effects of the Rent Freeze in Berlin

Anja M. Hahn
Vienna University of Economics and Business & DataScience Service GmbH

Konstantin A. Kholodilin
DIW Berlin & NRU HSE, St. Petersburg

Sofie R. Waltl
Luxembourg Institute of Socio-Economic Research & Vienna University of Economics and Business

Marco Fongoni
Aix Marseille Univ, CNRS, AMSE

Abstract

In 2020, Berlin introduced a rigorous rent-control policy responding to soaring rents by setting a cap on rental prices: the Mietendeckel (rent freeze). The policy was revoked one year later by the German Constitutional Court. Although successful in reducing rents during its duration, the consequences for Berlin’s rental market and adjacent municipalities are not clear. In this paper we evaluate the short-term causal effect of the rent freeze on the supply-side of the market, both in terms of prices and quantities. We develop a theoretical framework capturing the key features of the rent freeze, and test its predictions using a rich pool of detailed rent adverts. In addition, we estimate hedonic-style Difference-in-Differences and Spatial Regression Discontinuity models comparing price trajectories of dwellings inside and outside the policy’s scope. Advertised rents drop significantly upon the policy’s enactment. A substantial rent gap across the administrative border emerges, with rapidly growing rents for Berlin’s (unregulated) adjacent municipalities. Moreover, we document a significant drop in the number of advertised properties for rent, a share of which appears to be permanently lost for the rental sector.

JEL Codes: C14; C43; O18; D04
Keywords: First-Generation Rent Control; Rent Freeze; Urban Policy; Local Political Economy; Supply Disruptions; Legal Uncertainty; Berlin

Dissemination

Forthcoming in Management Science

Working Paper: Hahn, Anja M., Kholodilin, Konstantin A., Waltl, Sofie R. & Marco Fongoni. Forward to the Past: Short-Term Effects of the Rent Freeze in Berlin (2022). DIW Berlin Discussion Paper No. 1999.

Policy Brief: Hahn, Anja M., Kholodilin, Konstantin A., and Waltl, Sofie R. (2021). Die unmittelbaren Auswirkungen des Berliner Mietendeckels: Wohnungen günstiger, aber schwieriger zu finden. DIW Wochenbericht, 8/2021(2):117–124.

Presentations: [LISER, Luxembourg, January 2021] [3rd International Workshop “Market Studies and Spatial Economics”, Moscow, April 2021] [WU Brownbag Lunch Seminar, Vienna, April 2021][idealista España, Spain, May 2021][2021 European Real Estate Society’s Annual Conference, Kaiserslautern, Germany, June 2021] [20th International Conference in Public Economics, Journees Louis-Andre Gerard-Varet, Marseille, France, June 2021] [2021 Annual Meeting of the Austrian Economic Association (NOeG), Innsbruck, June 2021] [Social Policy Association Annual Conference, Swansea, UK, July 2021][European Network for Social Policy Analysis (Espanet) Conference, Leuven, Belgium, September 2021][AK Young Economists Conference, November 2021][2021 ReCapNet Conference, Stockholm, Sweden, November 2021][Housing and Finance Workshop, Free University Berlin, January 2022][2022 WU Department of Economics Research Retreat, Podersdorf, Austria]

In the press (selected):