What Germany can teach us about renting

Many readers will be aware that being a private sector tenant is quite normal in Germany, without the stigma it carries here. Some may also have heard of recent measures in Berlin to cap private sector rents. In due course we should see their long term impact, but looking at policy over the last 50 years should tell us something about why private renting works well now.

Tenancies are normally for unlimited terms, so landlords have no equivalent to our detested Section 21 ‘no fault’ evictions. This makes a much fairer balance of power between landlord and tenant, but landlords would not accept this if they risk ending up with sitting tenants paying well below the prevailing rents. However, German municipalities are required to publish regular surveys of local market rents, per square metre, with those for major cities detailing the district, age and condition of the property. It is called the Mietspiegel – ‘rent mirror’ – and an indefinite tenancy can then be agreed on the basis that rents will follow the Mietspiegel , with not costly, contentious renegotiations needed.

There is no reason this could not happen here. A recent Central Government consultation on barriers to longer private rented sector (PRS) tenancies had a question on how rents should be indexed, including an option for a linking to a local market average, rather than a national inflation index. This suggests that someone in Whitehall is thinking about the economics which has allowed the emergence of a large and healthy PRS in Germany. If so, they will surely be looking for local authorities to trial such an approach. Could Oxford and its surrounding regions be among them?

Politically it would be non-partisan, with wins for both landlords and tenants. While it would need initial Central government funding, the critical decision making would be at a local level, involving representatives of local tenants and landlord groups.

A word of warning however. A Mietspiegel is desirable in itself, but a survey does not control rents, and a lack of housing where people want to live will push up rents, or lead to calls for rent controls, and long term disincentives for any landlord, private or public sector. German lower housing costs come from cities being able to buy land at existing use value and masterplan urban extensions. In the biggest cities, densification as much as extensions are needed, and current moves in Berlin suggests even Germans may now struggle with this.

That aside, the German experience shows that the PRS can work for both tenants and landlords. If that is what we want too, we need to understand how that has happened. The Mietspiegel is an important part of the ‘how’.

This version of the argument for the use of local market rent indices along the lines of the Mietspiegel was written in November 2018, and published in the Oxford Civic Society ‘Visions’ July 2019

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