The trend is back towards leases with inflation indexing. That could increase inflation again
(Photo: dpa)
Inflation has triggered a trend in the housing market: more and more new contracts are signed with inflation indexing, so that rents rise in line with consumer prices. In popular cities like Hamburg, the rate for private landlords is already over 50 percent.
This is not a good development for two reasons. For one thing, indexation tends to exacerbate inflation. And secondly, an economic risk is shifted from the usually stronger to the usually weaker partner.
Indexing is dangerous when it affects wages, because then a wage-price spiral is set in motion. However, rents often represent a high proportion of household expenses, especially in expensive cities.
It can therefore be assumed that in areas where qualified workers are scarce, the salary level is also indirectly affected. This would increase cost pressure in the labor market, which is currently intensifying anyway.
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At the same time, in many cases the landlord is likely to be the economically stronger partner than the tenant. This applies to housing companies anyway, but also in the private sector.
Just imagine the case where a married couple moves to a smaller apartment after the children have moved out or when they retire and live there for another 30 years – without much opportunity to increase their own earnings. Should a situation then arise with permanently higher inflation, indexation could lead to an emergency.
Of course, there can also be counter-examples where private landlords with manageable financial means rent out a second home to high-earning managers. But as a rule, the wealthy are the better off.
When discussing rent control, the argument often comes up that low rents in existing buildings are usually compensated for by correspondingly higher rates when new tenants are rented. The argument may similarly apply to higher inflation and non-indexed contracts.
It is correct: For newcomers to the city, this equalization makes the situation more difficult, it inhibits flexibility overall. But in the housing market, flexibility is not a value in itself. People are attached to their homes, they are the most important piece of home.
In addition, overly flexible markets lead to uniform rents and thus possibly to a uniform population mix. And many people prefer to live in lively, colorful neighborhoods – especially high earners.
More: Seven risks for home buyers