Regulating rents according to the surface area of the property, its location, its age and its ecological performance. This is the aim of the ‘Mietspiegel’ (rent mirror) in Germany. “It is primarily a means of observing the rental market. Second, it is used by landlords and tenants to set rents and/or rent increases (depending on the type of lease). The German tool for slowing down rent increases is known as the ‘Mietpreisbremse’ (‘rent brake’),” explains the Housing Observatory (Observatoire de l’habitat) in an analysis published on Tuesday 4 February on the subject of “Challenges and approaches to setting up a rent register in Luxembourg.”

The report begins with an overview of the characteristics of the German Mietspiegel, before proposing some ideas on how this system might be adapted to Luxembourg. The authors of the analysis, Antoine Paccoud, a researcher at the Luxembourg Institute of Socio-Economic Research (Liser), and Mike Mathias, senior government adviser at the ministry of housing and spatial planning, explain that the primary objective of the rent mirror is to be able to refer to it in the context of disputes concerning the amount of rent for a specific lease at the start of the contract. To this end, the Mietspiegel provides a reference rent for new contracts.

Land register as an observation tool

In practical terms, the rent mirror serves as a reference for setting or increasing rents and is updated every two years in the form of a report and map. The authorities responsible under the law of the German ‘land’ (or state) must establish a rent mirror if there is a need for it and if it is possible to do so at a reasonable cost. In this case, a Mietspiegel is mandatory for municipalities with more than 50,000 inhabitants.

On the other hand, the Mietpreisbremse tool is designed to slow the rise in rents in regions where the rental market is tight. It stipulates that for new rental contracts for existing homes, the rent may not exceed the reference rent determined by the Mietspiegel by more than 10%. “Luxembourg could adopt a similar mechanism to limit rent increases, although at present, rents in Luxembourg are limited by reference to the capital invested (5% of the capital invested),” note the authors.

On the Luxembourg side, they explain that in order to distinguish the German Mietspiegel from a “possible approach to be implemented in Luxembourg, this report uses the concept of a ‘rent register’ from article 28 of the 2006 law on residential leases to designate a new method of observing rents on the basis of a dedicated survey.”

National competence

“There is a case for setting up a rent register independently of any review of the rent ceiling. The rent register is an observation tool that provides better knowledge of the level of rents charged according to the characteristics of the dwellings. Its usefulness is therefore independent of the introduction of rent ceiling regulations.”

“The establishment of a rent register would thus make it possible to strengthen Statec’s work on the level and development of rents during tenancies, which is currently based on a survey carried out as part of the observation of changes in the cost of living (in the context of Eurostat's statistical requirements),” states the Housing Observatory’s analysis.

Simplified implementation

The German model provides for local authorities to draw up the Mietspiegel. “However, copying the German legislation would mean Luxembourg having a single rent register for the capital, with all the other communes having fewer than 50,000 inhabitants. In view of the work carried out by the Housing Observatory on the Luxembourg property market, which shows that it encompasses the national territory and nearby border areas, it would seem that drawing up a rent register should be a national responsibility. This requires a legal basis to be put in place.”

The creation of a rent register would be greatly simplified, or even automated, “if it were possible to set up a permanent survey of rents or to reintroduce the compulsory registration of lease contracts, at least for certain types of accommodation (rooms). Initially, however, a representative sample is technically sufficient for the purposes of market observation,” the authors continue.

Several stages

“The rent register should cover the whole country and include specific compartments for single-family houses, flats and rooms in shared accommodation (furnished or unfurnished, shared flats, co-living, etc.). Rooms in shared accommodation currently account for more than 15% of rental advertisements and therefore a significant proportion of the rental market.”

The analysis also explains the stages that would be required to draw up such a register, namely a preparation phase (between eight and 24 weeks), a call for tenders phase (between eight and 10 weeks), a survey phase (between eight and 10 weeks), a plausibility and evaluation phase (between eight and 10 weeks) and, finally, validation and publication.

Another study on estimates of the rate of return on a rental investment.was published by the Housing Observatory on .

This article was originally published in .