Federal Minister of Justice Marco Buschmann is blocking calls for restrictions on index rents. “Our problem with rents is not that we have too little regulation, but too little living space,” said the FDP politician to the German Press Agency. Stricter regulation of index rents would not change this deficiency.

“On the contrary: investments in residential construction are only attractive if rental promises stable income,” said Buschmann. If the federal government wants to mobilize private capital for housing construction, it shouldn’t send out the signal “that more regulation is imminent.”

Proposals from the SPD and the Left

The SPD faction came up with the proposal to link the rental price to the development of net cold rents instead of general consumer price inflation in the case of indexed rental contracts. “That would be a pragmatic, quickly implementable solution to the problem,” said SPD MP Zanda Martens.

The opposition left called for index rents to be frozen to protect tenants. At the same time, she considers billions in investments in housing to be necessary, which the federal government, municipalities and cooperatives would have to take on. “This is the only way to guarantee that rents in new buildings won’t go through the roof,” said party leader Janine Wissler.

What does the coalition agreement say?

The Minister of Justice referred to the coalition agreement, which contained no specific agreement on index rent. At the same time, he emphasized: “We agreed on various tenancy law reforms in the coalition agreement; I stand by these agreements.” The traffic light coalition has also set itself the goal of 400,000 new apartments per year, “unfortunately we are still lagging too far behind”. The Federal Association of Housing and Real Estate Companies (GdW) expects only 214,000 new apartments for 2024.

SPD MP Martens pointed out that many thousands of tenants were groaning under the enormous inflation and the associated rents. “To stoically refer to the coalition agreement misjudges the reality of life for these people,” she added. Wissler added that the index rents also drove up the local comparative rents. “Thus, those who have not even signed an index lease pay more.”

Federal Building Minister Klara Geywitz (SPD) said at the German Tenants’ Day in June that she saw “a great need for change” in the index rent. In times of high inflation, this is a heavy burden for tenants.

In index rental contracts, the rents can be increased annually according to the value of the consumer price index of the Federal Statistical Office. With this variant, there is no adjustment of the rent to the local comparative rent. The bottom line is that what is cheaper for tenants depends on what is rising more strongly: consumer prices overall or rents in your own neighborhood.

Consumer prices rose 6.2 percent in July compared to the same month last year. In June, the annual inflation rate was still 6.4 percent.