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

Anja M. Hahn
Vienna University of Economics and Business

Konstantin Kholodilin
DIW Berlin & NRU HSE, St. Petersburg

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

Working Paper

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Abstract

In 2020, Berlin enacted a rigorous rent-control policy: the “Mietendeckel” (rent freeze), aiming to stop rapidly growing rental prices. We evaluate this newly enacted but old-fashionably designed policy by analyzing its immediate supply-side effects. Using a rich pool of rent advertisements reporting asking rents and comprehensive dwelling characteristics, we perform hedonic-style Difference-in-Difference analyses comparing trajectories of dwellings inside and outside the policy’s scope. We find no immediate effect upon announcement of the policy. Yet advertised rents drop significantly upon the policy’s enactment. Additionally, we document a substitution effect affecting the rental market of Berlin’s (unregulated) satellite city Potsdam and adjacent smaller municipalities. On top, the supplemental quantity analyses reveal a stark reduction of the number of advertised rental units hampering a successful housing search for newcomers, (young) first-time renters and tenants aiming for a different housing opportunity.

Dissemination

In the press

  • “Das radikale Mietgesetz in Berlin und seine Folgen”, Die Presse, 30.11.2020 [online/print]