Lessons from Germany: tenant power in the rental market

Last month the Institute for Public Policy Research (IPPR) released its report “Lessons from Germany: Tenant power in the rental market”. It examines the relative strength of protection for German renters, and how these benefits might be brought across to England.

 

German renters experience much greater security than renters in England. They can only be evicted in certain circumstances, and the average tenancy lasts 11 years (compared to just 2.5 in the UK). It’s often said that this is because German landlords tend to be professional companies rather than the small, non-professional landlords that operate in England. The IPPR’s report challenges this idea, and finds that the two markets are in fact very similar in ownership patterns and renting processes.

A few things stood out to us. Firstly, it shows that it is perfectly possible to have a market of small landlords that works for renters too.

Secondly, the report reaffirms that English rented sector should be seen as the outlier; few developed countries give renters such a poor deal in security and standards. Too often landlords and policymakers claim that it’s simply market forces at work, and imply that nothing but increased housebuilding will solve the problem. This is categorically not true. It is a policy decision to give landlords almost unlimited rights to evict their tenants, and England is unusual for taking it.

So why the difference? Unsurprisingly political power appears to be at play. 40% of Germans rent privately, compared to just 19% of the English. And German renters are far more likely to vote than their English counterparts. As a result, parties across the spectrum have taken an interest in improving standards.

Getting on to the report’s recommendations, we were particularly pleased to see IPPR back Generation Rent in calling for the creation of a nationwide renters’ union and the introduction of a renters’ insurance product. Tenants’ associations in Germany provide legal cover and advice to tenants in exchange for membership fees. An insurance product could be an alternative deposits, which create a significant burden for renters seeking new homes (not to mention being stolen by unscrupulous landlords on a regular basis).

In terms of security, the report called for local authorities and not-for-profit builders to introduce two-year minimum tenancies in their new build properties. It received a swift response in the recent Housing White Paper, as the government promised to look into this. While positive, new build properties are just the tip of the iceberg and this recommendation does not go far enough. Renters cannot simply be empowered to ask for longer tenancies in such a competitive market. Abolishing no fault evictions is a minimum to having any semblance of a fair market, and given the government’s expressed interest in improving renting, now is as good a time as ever to ask for it.

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  • commented 2017-02-22 18:17:23 +0000
    I think you also need to look at the legal and financial framework in the German rental market – see this from Prof. Stefan Kofner, http://www.hogareal.de/Pres_Kofner_PRS_MRI_Silver_Jubilee_2014_as_of_04.12.2014.pdf, who Julie Rugg directed me to. See also this blog post of mine
    http://lund.co.uk/to-more-satisfactory-discussions-about-housing/
    Anyone designing a contract to allow indefinite rental contracts, in a given rental market, which will be centred on large cities, and where systematic incentives for either landlord or tenant to end the contract will not arise, will always come up with something like the German Mietspigel system. It is something City mayors, such as in London, should be working towards, in parallel with the regulation of letting agencies.