BERLIN — Rental prices on more than 1.5 million Berlin apartments will be frozen or lowered for five years as a result of new legislation aimed at halting a recent spike in rents that is driving out older and lower-income residents.
The measure, which lawmakers approved on Thursday and which is to take effect next month, is an attempt by Berlin’s leftist government to slow the gentrification of a city that built a reputation on a creative scene but is being squeezed by real estate investors and infrastructure projects.
“We have created an instrument that will stop the partially absurd price developments for the next five years,” Katrin Lompscher, Berlin’s senator for city development and living, said at a news conference on Friday. “It is up to politicians to create the basic conditions for lower- and middle-class earners to be able to afford to live in Berlin.”
Renting is more common in Germany than homeownership, with more than half of the country’s residents renting their homes. In Berlin, a city of three million people, only 18 percent of residents own their homes.
The new law caps most rents in the city at 2019 levels and limits the amount that can be charged based on the apartment’s condition and amenities.
Critics say the move will hamper desperately needed growth in the property market and frighten off those willing to build affordable housing in a city once known for its “poor but sexy” party scene of the 1990s that has become a rapidly changing European capital.
Real estate developers and members of Chancellor Angela Merkel’s conservative party have threatened to challenge the law. They argue that it violates the country’s Constitution, which stipulates that rents are set by the federal government.
“The rent cap is equivalent to an expropriation and is a catastrophe for Berlin’s real estate market,” said Jürgen Michael Schick, the president of Germany’s Real Estate Association. The group has warned about the negative effects the measure could have since the city government proposed it last year.
“Limiting and reducing the income from rents will create uncertainty for investors and will ward off real estate developers from investing,” Mr. Schick said.
Ms. Lompscher said the aim was not to halt growth in the city’s housing stock, but to ease the strain on renters while private developers and city officials facilitate the construction of more housing. The city, Germany’s capital, plans to construct more than 60,000 apartments in the coming years, many of them lower-priced properties, she said.
After the fall of the Berlin Wall in 1989, the reunited city found itself with a glut of apartments, many of which were publicly owned. In an effort to bring in desperately needed cash to pay for the reunification of East and West Berlin, many properties were privatized.
Foreign property investors quickly understood the potential for growth in Berlin — where rents are still notably cheaper than in London, Paris or Rome — and began buying and renovating apartments. They also started charging higher rent.
At the same time, the city’s population continued to grow, adding about 250,000 new residents from 2012 to 2017, according to official figures.
That combination of factors led to a spike in rental prices, especially in the most desirable areas of the city. In 2017, Berlin ranked internationally as the only major city where property values had increased more than 20 percent from a year earlier, with rents keeping pace.
“Three million tenants will benefit in the city,” said Iris Spranger, the housing affairs spokeswoman for the city’s Social Democrats, one of the governing parties that approved the law.
“After a long phase of galloping prices, rents will now be stopped,” she said, “and that is sorely needed.”