This paper provides a comprehensive description of the private rented housing sector and its legal environment in former West Germany. Throughout the seventies and eighties, the sector benefited from liberal tenure laws, rather favorable taxation vis-d-vis owner-occupation, and the increased reliance on housing allowances as opposed to subsidies to social housing. However, when the iron curtain fell, an acute housing shortage emerged. Liberal policies have since been abandoned in favor of tighter tenure laws and large-scale subsidies to the sector.

The aim of the paper is to assist comparative housing research by providing background information on private rented housing in Germany. Hence, most of the presentation is descriptive. The following overview shows that the private rented housing sector in Germany is large by international standards. It appears to be ‘healthy’ in terms of housing quality and in terms of the social profile of its occupants. Beyond political rhetoric, housing policy in Germany used to be stable and favorable towards private rented housing. Throughout the seventies and eighties, the sector benefited from (i) tenure laws which are ‘liberal’ compared to these in most West European countries, (ii) a rather favorable taxation vis-h-vis owner-occupation, and (iii) a social policy that increasingly relied on general housing allowances while abstaining from direct interference with the market. However, during the late eighties, a housing shortage developed which led to a breakdown of the broad political consensus on housing policy. A number of controversial measures have been adopted in an attempt to tighten up tenure laws, to discourage condominium conversions, and to boost new construction by more generous tax subsidies. Today, German housing policy appears to be trapped in a vicious circle in which well-intended interventions to protect sitting tenants cause new problems begging for more regulation and subsidization.