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In Germany’s major cities, furnished apartments already make up around a third of the rental market. That means: even more horrendous rents. The trend has consequences for the housing market as a whole.
Anyone who wants to rent an apartment will have to deal with rising prices – and not just in Germany’s metropolises. The housing shortage is great and the demand for living space is high. While at times of low interest rates the main demand was to purchase real estate, now the demand is concentrated on the scarce supply of rental apartments. The result is persistently rising rents.
Politicians have tried to mitigate the problem with rent controls. At the same time, furnished apartments are making up an increasingly larger share of the rental market, especially in major cities. “The rent brake is actually intended as a regulatory measure to slow down the development of rent prices,” says Lennart Dannenberg, spokesman for the real estate portal Immoscout24. But the boom in furnished apartments, which are actually rented out for temporary use, is overcoming the strict rental laws.
“Substantial surcharges”
“In the last two and a half years, the proportion of furnished rental offers in the total offering on our platform has increased from around 4 to 8 percent,” explains Barbara Schmid, press spokeswoman for the real estate portal immowelt. “We are observing a considerable and increasing supply of furnished apartments,” says Christian Oberst, senior economist for housing policy and real estate economics at the German Economic Institute (IW), in an interview tagesschau.de. “Furnished apartments are rented with significant price premiums, especially in tight housing markets,” says the real estate expert.
The rents for furnished apartments are significantly higher than those for comparable unfurnished apartments. This has consequences for the level of all rents, says Jutta Hartmann, spokeswoman for the German Tenants’ Association: “These high rents in turn flow into the rent index and thus drive up all rents – a vicious circle.”
Highest share in Frankfurt
The observation is supported by current data from ImmoScout24. Germany’s top 5 metropolises are particularly affected. On average, every third offer here is now a furnished rental apartment. On average, they are offered for 10 euros more per square meter, according to Immoscout.
“The proportion of furnished apartments is highest in Frankfurt am Main at 41 percent. Furnished apartments are most expensive in Berlin. Even more expensive than in Munich,” says ImmoScout24 managing director Gesa Crockford. “Berlin is the absolute leader when it comes to furnished apartments, with just under 36.82 euros per square meter,” it said. These are offered in the capital for almost twice as much as unfurnished ones.
Furnished living space definitely serves a purpose in a niche, according to real estate expert Oberst: “Especially in Frankfurt, where many workers, for example from the financial or consulting sectors, stay on site for a limited time, furnished apartments make sense and there is a justified demand. ”
Furnished apartments are generally covered by the rent cap. Renting a furnished apartment may only be ten percent higher than the rent for comparable living space as long as the apartment is in the area of a valid rent control regulation and there are no exceptions, according to the tenants’ association.
Does that apply? Rent cap?
However, the current legal structure can be exploited by landlords and housing groups: “Renting out furnished apartments for a limited period of time is still a legal gray area,” said Crockford. For example, the rent control does not apply if the apartment is only rented for “temporary use”. There must therefore be a time limit in the rental agreement. According to a study by the Federal Ministry of Justice on the furnished housing market from June 2023, courts have already rejected a time limit of seven months as being too long.
It was also determined by the court that there must also be a “special purpose of use” in which the focus is not on living in the sense of “being at home”. Examples include a study visit or a stay until a work goal is completed, such as with mechanics or visiting a trade fair.
In practice, however, it turns out that the term “temporary use” can be interpreted broadly by tenants and landlords when concluding a contract. And: Where there is no plaintiff, there is no judge.
Furnishing surcharge is difficult to understand
But there is another problem: Furnished apartments can be rented out at a higher price due to the furnishing costs borne by the landlord. However, there are no clear legal rules. “Since the amount of the permissible surcharge is not regulated by law and does not have to be stated in the rental agreement, tenants usually do not know how valuable the furniture is and what surcharge is appropriate,” says Hartmann. According to the expert, the apartment can be considered furnished with just a few pieces of furniture.
That is why there is a demand to redesign the rent cap so that furnished living space is also better covered – and ways to get around it are blocked. “I’m fundamentally skeptical about the rent cap. But if you decide on this regulation, then you can’t leave any loopholes, otherwise there will be injustices between the segments,” says IW economist Oberst.
Politicians can ensure additional transparency – for example by requiring providers to clearly indicate the furnishing surcharge, says immowelt spokeswoman Schmid. The German Tenants’ Association is also calling for the furnishing surcharge to be mandatory in the rental agreement: This would make it more difficult for landlords to circumvent the rent cap by furnishing the apartment and to charge utopian prices for the furniture.
Federal Council initiative from Hamburg and Bremen
In fact, there is a political attempt to respond with stricter legal rules. Federal Construction Minister Klara Geywitz (SPD) declared in April last year that she wanted to prevent the rent cap from being undermined by offering furnished apartments. The increase suggests that it is a case of “circumvention,” Geywitz told the Funke media group.
At the initiative of Hamburg and Bremen, the topic is also on the Federal Council’s agenda. The state chamber has submitted a draft law with proposed changes to the Bundestag. “Not yet discussed,” says the parliamentary information system on the status of the procedure.
Federal Justice Minister Marco Buschmann (FDP) is likely to view the project critically. He commissioned a study on the subject of furnished living, which was published in June 2023. Result: The application of the rent cap to furnished apartments does not represent a significant issue of dispute either out of court or in court.
Upon request from tagesschau.de a ministry spokesman refers to a statement from the federal government from July 2023. At that time, the traffic light government announced that it would examine any need for action. She will also take a closer look at the Federal Council’s proposals. “The affordability of housing and the formation of appropriate rents on the housing market are important concerns for the Federal Government.”
The proportion is also increasing in the province
How big is the problem on the entire German housing market? “Nationwide, the proportion of furnished apartments has increased, but it is at a significantly lower level than in major cities,” says Immoscout 24. Overall, the proportion of furnished rental offers is comparatively low compared to all rental advertisements, explains competitor immowelt.
But it is increasing – even outside the metropolises. However, the proportion there is in the low single-digit percentage level, explains immowelt spokeswoman Schmid. In cities with a population between 100,000 and 500,000, the share of furnished offers in the platform’s total offering has increased from around 3 to 8 percent in the past two and a half years. At Immoscout24, the share nationwide has climbed from eight to eleven percent since 2019.
According to Schmid, “the lack of construction activity is primarily responsible for the increasingly tense situation on the housing market.” In order to alleviate the housing shortage, more living space urgently needs to be created – especially in the affordable rental segment.