Soaring rents and a halt in new construction lead to strain in Berlin's real estate market

Berlin, once known for its affordable housing, is now grappling with a housing crisis as prices soar and long-time residents are forced to move to the city's outskirts. According to recent reports, the influx of new Berliners is increasingly concentrated in the city centre, while many locals are finding themselves priced out and relocating to the outer districts.

The average rent for newly offered apartments in the city is 14.90 euros per square meter, a figure that soars to 19.50 euros per square meter in the city centre. In contrast, offer rent in the outskirts hovers around 12.94 euros per square meter. This gap in prices is larger than in any other major German city, making Berlin the 10th most expensive city in Germany, a stark contrast to its 53rd place ranking just two years ago.

Construction costs have risen significantly since 2022, due in part to increased interest rates from the European Central Bank. As a result, many construction companies have stopped or postponed planned projects, further exacerbating the housing shortage. Last year, the Senate was only able to complete around 15,000 new apartments, falling short of a target of 20,000. Berlin's state-owned housing companies completed only 3,461 new apartments in 2024, missing their own targets by a significant margin.

The Bundestag extended the existing rent control until 2029, but the SPD considers it insufficient to stop the dynamics on the housing market. Berlin's faction leader Raed Saleh is demanding an opening clause in federal rental law that would allow Berlin to reintroduce a rent cap. The SPD also wants to introduce stricter rules for furnished lettings and index rent contracts to prevent circumvention of existing regulations.

The Left Party (Die Linke) in Berlin demands a renewed discussion on rent capping, and an expert group appointed by Federal Justice Minister Stefanie Hubig is currently conducting consultations to evaluate the future of rent capping in Germany. A new expert commission will also be established to examine how violations of the rent control can be punished in the future.

The housing market report by Investment Bank Berlin shows a divided housing market within the city, with significant price differences between the city centre and outskirts. New tenants in Berlin are paying on average more than twice as much as households with existing contracts. The SPD is calling for a "legislative rent policy revolution" in Berlin, advocating for more regulation.

As the housing crisis deepens, it's clear that action is needed to address the imbalance in prices and ensure affordable housing for all Berliners. Whether it's through rent caps, stricter regulations, or increased construction, the city must find a solution to prevent further displacement of long-time residents and ensure a vibrant and diverse Berlin for years to come.