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Germany's Merkel snatches rent control issue from rival before election

German Chancellor Angela Merkel and Brandenburg State Premier Matthias Platzeck (R) meet volunteers reinforcing a dyke at the bank of the ri
German Chancellor Angela Merkel and Brandenburg State Premier Matthias Platzeck (R) meet volunteers reinforcing a dyke at the bank of the ri

By Erik Kirschbaum

BERLIN (Reuters) - Chancellor Angela Merkel has stolen a page from the opposition's campaign playbook ahead of the September election and is now calling for rent controls, a sign she is in a tight fight and does not want to risk upsetting Germany's 40 million renters.

Merkel is well ahead of the center-left Social Democrats (SPD) in opinion polls for the September 22 election. But concern that the center-left could still win enough to form a coalition without her Christian Democrats (CDU) has pushed Merkel into unusual territory - diving into what is normally a local issue.

She took the astonishing step last week of announcing she now backs the idea of rent price controls - much to the chagrin of apartment owners, building companies, the pro-business wing of her own party and her Free Democrat (FDP) coalition partners.

"We've decided to include this in our program," Merkel said. "Yes, it was an idea from the SPD," she said, candidly admitting she had poached an SPD idea.

Rents have been rising sharply in major metropolitan areas such as Berlin, Hamburg, Munich, Cologne and Frankfurt, and some people are finding themselves priced out of the cities they always lived in. In Berlin, rents have shot up 40 percent since 2007, according to the independent DIW economic think tank.

Rental prices are a closely followed barometer of inflation in a country where most people rent and whose relatively low rental costs, combined with generous state pension system, have helped keep the home-ownership ratio low and demand in check.

Millions of Germans live in state-owned housing, paying modest rents.

At 46 percent, Germany has the second lowest percentage of homeowners in Europe, behind only Switzerland at 39 percent. By comparison, 93 percent of the people in Slovakia live in their own homes and in Britain the home ownership rate is 69 percent.

Merkel's challenger, SPD candidate Peer Steinbrueck, has tried to turn what is normally a local political issue into a vote-winning campaign theme for his party, which has struggled to gain traction and is far behind Merkel in voter surveys.

WINNING ISSUE?

"She's finally figured it out that the SPD's got a winner issue here," Steinbrueck told journalists in Hamburg last week.

His party's idea is that prices for new rentals should be no more than 10 percent higher than the previous tenants paid.

The SPD's rent control vow has been a rare bright spot in an otherwise hapless campaign, attracting attention and headlines in many of Germany's metropolitan areas. A poll by ARD TV found nearly two-thirds of Germans want to see the plan implemented.

But German real estate companies warn that a rent cap would hit investment and even exacerbate the housing shortage problem as more people move into Germany's cities, the numbers of immigrants increase, and there are more single households.

"Political leaders can influence supply and demand but they should stay out of setting prices (for rents)," said Thomas Zinnoecker, chief executive of real estate firm Gagfah said at a Reuters roundtable meeting in Berlin in May.

In Berlin - where rents have stagnated for years due to high unemployment, patchy demand and limited building activity - the average rent is still strikingly low for a European capital.

A 100-square meter apartment excluding utilities costs 554 euros ($730), according to city government figures released in May. That 554 euros would only be enough for a 42-square meter apartment in Madrid, 14 square meters in Paris and just 11 in London, according to website Global Property Guide.

($1 = 0.7564 euros)

(Additional reporting by Stephen Brown, Holger Hansen, Peter Dinkloh and Katherin Jones; Editing by Noah Barkin and Louise Ireland)

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