Germany May Make Property Sales Harder After Berlin Rent Freeze

(Bloomberg) -- Germany’s construction minister, Horst Seehofer, wants to help protect tenants by making it more difficult to convert rental apartments into condominiums, Frankfurter Allgemeine Zeitung reported.

Seehofer is proposing to introduce a threshold of at least two-thirds of the flats in an apartment building having to be sold to tenants or their family members for any conversion plan to gain government approval, the newspaper said. Tenants in Germany have a right of first refusal if an apartment building is divided into condominiums.

In Berlin, legislators have imposed a rent freeze for five years after a property boom caused rents to double over the past decade, but property owners have asked Germany’s highest court to overturn the move. Researchers at the Ifo Institute in February warned that such restrictions would encourage landlords to withdraw properties from the rental market when they become vacant and sell them as condominiums.

As many people do not have the money to buy the apartments they live in, tenants are protected against eviction for at least three years after a conversion.

The bill, proposed by Chancellor Angela Merkel’s ally from Bavaria’s Christian Social Union, also obliges owners of undeveloped land to build residential properties. In the future, cities and municipalities would be able to insist that one or more residential buildings are part of a development, if the plan allows for it and the area in question has a tight housing market.

Within Germany’s governing coalition Seehofer’s plans are controversial. Lawmaker Jan-Marco Luczak from Merkel’s Christian Democrats said property formation must remain a central element of government policy. Real estate lobby group GdW said the planned changes wouldn’t help to accelerate the planning process.

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