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Munich Caps Rent Increases Becoming First City to Act on New Law

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April 18 (Bloomberg) -- Munich, which has Germany’s most expensive real estate, will no longer allow rents to rise more than 15 percent in three years, making it the first city to take advantage of a new federal law.

The Bavarian government yesterday voted to cap rent increases in the state’s capital, according to a statement on its website. The rules takes effect on May 15.

“Housing must be affordable for renters in Bavarian cities,” said Bavarian Justice Minister Beate Merk. “With balanced rental regulation, we ensure this happens.”

Rents in German cities such as Munich and Berlin have soared as home construction has failed to keep pace with an influx of people. On average, rents in the largest cities rose 15 percent in the past five years, according to data compiled by online broker ImmobilienScout. In Munich, they gained about 21 percent.

In December, the German parliament passed a law that allows state governments to cap rent increases in certain areas at 15 percent every three years, compared with 20 percent previously. The law comes into effect at the beginning of May.

The median rent in Munich is 13.80 euros per square meter compared with 7.60 euros in Berlin, according to data compiled by broker Jones Lang LaSalle Inc.

To contact the reporter on this story: Dalia Fahmy in Berlin at dfahmy1@bloomberg.net

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net

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