Rent gouging in Germany? An Analysis of asking rents and public rent indices

This study investigates the developments of asking rents and public rent indices in a sample of selected German cities. As the rent indices compiled by local authorities serve as regulatory bases for rent controls in Germany, the analysis aims at quantifying the gap between rent prices offered by landlords and price ceilings determined by local rent indices. Using data manually drawn from rent index reports and a nationwide asking rent database, we identify a growing gap, both in absolute and relative terms: while asking rents have risen sharply, official rent indices have been more reserved due in parts to their methodology. This gap appears to be more pronounced in dense cities, while the gap shrinks in more scarcely populated cities. We find the results to be significant over time. Our results suggest that the current regime of rent price indices is ineffective, stressing the need for future reforms.