What Happened When Berlin Tried Rent Control?

"While there's broad agreement among economists that rent control is ineffective and even counterproductive, it still seems like a tempting and direct solution to the problem. What happens when a big city imposes rent control?"

Joe Cortright looks at a study on Berlin's attempt to tamp down rents. Like many U.S. cities, Germany's capital has seen rents rise lately. But in Berlin, a full 85 percent of households are rentals. That means a lot more support for pro-renter policies.

Called Mietpreisbremse (a "brake on rents"), "Berlin's rent control ordinance is a complex one: it's not a freeze on rents per se, but rather a limit on rent increases on existing rental units." Complex rules govern which apartments the law covers. 

The policy hasn't been that successful. "The key finding of the Thomschke paper is that the initial enactment of the law has reduced rents in rent-controlled flats compared to those not included in the scheme, but the effects have been less than the law intended." In fact, the law tended to lower prices only on luxury apartments. That ironic result, Cortright says, is "a stark reminder that while posed as a way of promoting affordability for low income households, in practice, rent control may actually provide greater benefits for higher income renters."