Gray legality: Varying degrees of housing illegality in Berlin’s rental cap

Abstract

This study aims to understand how housing legality is negotiated and contextually constructed by investigating the highly regulated German context of Berlin. It investigates the varying tenants’ experiences affected by the enforcement and abolition of the city’s rental cap law (Berliner Mietendeckel-Geset), implemented between February 2020 and April 2021. The article frames the case study of Berlin in the context of legality and develops a typology of legal and illegal practices within this case. Through collecting data from 19 tenants using semi-structured interviews to identify recurring narratives and experiences, the article explores how legality is negotiated and socially constructed. The results suggest that a spectrum of gray legality emerges from these negotiations, breaking the binary view of legality in the Global North. This spectrum covers legality, semi-legality, semi-illegality, and illegality. Gray legality refers to incidents where it becomes hard to judge the complete adherence or lack of compliance with a law. Hence, this article contributes to understanding illegality as a state–society relationship defined not only by laws and regulations but also by publicly accepted practices and the often-untraceable stakeholder negotiations.

Keywords

Global North gray legality housing legality housing policies urban informality

Introduction

Over the past few years, there has been a growing interest in studying housing illegality in the Global North (Tanasescu et al., 2010). Traditionally, illegal housing has been associated in the literature with poor informal and squatter settlements in the Global South (Roy, 2011; Tanasescu et al., 2010). Moreover, several studies have associated illegal housing with non-native populations or ethnic minorities (i.e. Olivera, 2011). Others have argued that legal and institutional frameworks impose illegal practices on minorities (Favell, 2016). Generally, there is a significant corpus of literature that supports the imaging of illegal housing that conjures thoughts of shanty towns and slums that lack primary infrastructure and services and are provoked by economic and health inequities (Aldrich and Sandhu, 1995; Davis, 2006; Fernandes and Varley, 1998; Kumar, 1996; Roy, 2005; Smart, 2001, 2003, 2006a, 2006b; Tanasescu, 2009). This portrayal reflects a stigmatized perception that associates poor and low-quality housing with illegality.

As such, illegal housing practices in the Global North are seen as individual incidents or exceptions that occur as a reaction to unmet housing needs (Harris, 2018), reflecting exclusive perceptions of housing and assuming that cities in the Global North are primarily regulated and adhere to unconditionally accepted and undisputed regulations. In doing so, these perspectives commonly disregard that illegality extends beyond the assumptions that illegality is not merely an exception and posits that there is complete adherence to the regulatory frameworks set up in northern cities. In this context, the conversations on legality are intricate and encompass diverse deliberations concerning non-compliance (see Ewick and Silbey, 1998). However, recent literature shows that this exceptional portrayal of illegality is not always the case in some cities in the Global North, such as in southern European nations like Italy, where citizens are compelled to build illegal housing, given the inefficiency of the local government and the lack of public sector housing initiatives. The initially built illegal housing was later recognized and included in the new city’s master plan to appease the public and legalize the construction (Zanfi, 2013). In this regard, Yung (2022) asserts that the scarcity and demand for affordable housing led to a persistent struggle in numerous cities in both the Global South and Global North. Moreover, Tanasescu (2009: 2) posits that illegal housing not only exists but is also tolerated in developed countries, which is often a “noteworthy yet under-studied fact.” As such, as both “developed” and “developing” nations compete to attract investments and skills, the unequal distribution of resources, specifically housing, becomes a common challenge experienced by their inhabitants. Within this context, housing markets are subject to various forms of regulation, such as rent control, planning processes, and zoning regulations (Turner and Malpezzi, 2003).

Focusing on rent control as the scope of this article, there are examples of various cities in the Global North that experience thriving housing markets and are considering the implementation of rent controls in response to the escalation of rent prices, such as Berlin, London, and New York (Fritzon, 2020). In this regard, previous research has shown that the effects of rent control policies can be seen when they are restructured or reversed (Ruonavaara, 2017). For example, although Keating and Kahn (2002) have defined rent control as a way to limit landlords’ rental charges and protect tenants from unaffordable rent increases, they discovered that after its implementation, rent control could lead to vacancy decontrol, allowing rents to rise to market levels. This situation not only worsens the housing affordability crisis but is also a way for landlords to weaken rent control laws (Keating and Kahn, 2002). Another example of rent control having adverse effects on economic progress and social mobility is the rent control implemented in Sweden after the Second World War, which resulted in housing shortages in the country’s urban areas as apartment availability was reduced, hindering efficient utilization of existing stock (Lindbeck, 1967). In addition, previous research shows that rent controls have “contributed to social segregation by favouring individuals with high social capital” instead of young and often foreign-born individuals (Fritzon, 2020: 9). In such cases, rent controls fail to achieve their primary objectives as they contribute to political and social dysfunction (see also European Commission, 2014; OECD, 2012; World Bank, 2014).

As some rent controls failed, there are several cases in which they were abolished after their enforcement. For example, rent control in Finland during the early 1990s was deregulated, resulting in notable effects on the rental housing market. Some of the effects include an increase in the number of private rentals and higher rents compared to social rentals. Rental contracts also became more flexible. Moreover, the removal of tax deductions for housing loan interests reduced public housing support, making housing allowances the primary form of government subsidy. This deregulation of rent control in Finland not only shaped its housing policies but also influenced other countries considering similar rent control deregulation (Ruonavaara, 2017).

Likewise, previous literature has explored how government policies and regulations can have unintended consequences on the availability and affordability of housing such as the proliferation of short-term rentals, the persistence of residential segregation, and socio-spatial inequalities and unfairness (i.e. Fritzon, 2020; King, 1991; Knopp, 1990; Sassen, 2002). In fact, the provision of affordable housing has persistently plagued numerous cities across the Global South and Global North (Yung, 2022). In this regard, Yung (2022) argues that one of the primary factors driving illegal housing is the disproportion between the supply and demand of affordable housing.

However, it remains challenging to determine whether housing regulations or deregulations are beneficial (Turner and Malpezzi, 2003). According to their research, the impact of regulations on housing markets cannot be labeled as either positive or negative. Instead, the effects of regulations should be evaluated based on their costs and benefits in relation to the particular circumstances of the housing market. They also point out that the information on the effectiveness of enforcement systems is often “uneven”; for example, in certain cities like Cairo and New York, regulations are frequently disregarded, and tenants frequently make substantial deposits for apartments that are subject to strict regulations even though such payments are against the law. Therefore, the discussion around rent regulation (and deregulation) cannot happen without considering the aspect of illegality in the context of its application.

Against this background, illegality needs to be viewed as more than a legal phenomenon; it is also a social and global phenomenon with many “prevalent forms” in the Global North. Using participant observation and semi-structured interviews with 19 tenants residing in Berlin, this article explores Berlin’s rental cap law, “Berliner Mietendeckel-Gesetz” (Gesetz-und Verordnungsblatt für Berlin, 2020). Berlin is selected as it is currently facing a widely discussed housing “crisis” (see, among others, Devraj, 2022; Guthmann, 2019; Musaddique, 2019). Within this context, the rental cap law was enforced in early 2020 to control rent prices in Berlin in response to the city’s housing crisis; however, in April 2021, the German Constitutional Court declared the law unconstitutional (Knight, 2021a, 2021b; see also Connolly, 2021; Möbert and Schneider, 2021). We argue that Berlin’s rental cap law is a case study illustrating what can be described as systemic housing illegality—existing in a gray zone within what is often dealt with as highly regulated cities in the Global North.

Accordingly, this article examines the varying experiences of Berlin tenants with the rental cap law by contending that the traditional binary perspective on housing legality versus housing illegality is too simplistic and does not account for the intricate and nuanced ways in which individuals (i.e. tenants and landlords) navigate their housing circumstances in response to different legal, social, economic, and political factors. Through empirical research, the article examines housing in Berlin and suggests an alternative, non-binary view of housing legality in the Global North. The collected data are analyzed thematically to evaluate tenants’ perceptions of the rental cap legislation in relation to their legal rights and bargaining power when dealing with their landlords. The results are visualized as a spectrum, illustrating the complex dynamics between tenants and landlords determined by their negotiation of the law.

The article begins by presenting an overview and a chronological timeline of the Berlin rent cap law, which is used as a case study. Then, the article describes the methodology used in the study to investigate the legality of housing. The results of the interviews with Berliner tenants are then presented and discussed, proposing a classification of tenants’ interactions with governments based on degrees of housing legality, providing insights into the concept of illegal housing in the Global North. A broader reflection introducing the non-binary understanding of housing illegality in literature is then presented.

The case of Berlin’s rental cap

The housing market in Berlin is dominated by rentals, with more than 85% of Berlin residents being tenants (Urban, 2018). Many housing units that were built in the pre-unification era as affordable social housing projects were privatized after reunification. With no effective rent control measures and a boom in Berlin’s population, rental prices became significantly high, leading to residential displacement and gentrification (Holm, 2012, 2013) In 2015, the federal government enacted a “rent break” that permitted landlords to raise rents by 10% over the going rate in their area (Knight, 2021b). Residential buildings built before 2015 are currently available for rent for an average of 16.95 EUR/m². This translates to an increase of around 29.9% since 2022. Looking at the past 5 years, the stock’s asking rents have increased by approximately 56.3% (Guthmann, 2023).

In April 2019, thousands of Berlin’s residents protested, demanding that the state control the increasing rental prices (Musaddique, 2019). This social pressure led to the introduction of the rental cap law “Mietendeckel” (Madden and Vasudevan, 2021). On 18 June 2019, the Berlin Senate in Germany approved the law enacting the rent cap’s key provisions. The Berlin House of Deputies passed the law on 30 January 2020, and it went into force on 23 February 2020 (Connolly, 2021). The main objective of the law was to curb rising rental prices in the city, which had become a primary concern for tenants and the local government alike (Möbert and Schneider, 2021). The law sets a cap on rent prices for existing rental properties, preventing landlords from increasing rents beyond a specific limit. It also froze rents at their current values for 5 years and provided for retroactive rent reductions for some tenants (Sagner and Voigtländer, 2022).

Starting in November 2020, any existing rentals that were still higher than the value they were in June 2019 had to be reduced (Guthmann, 2019). Supporters argued that it was necessary to protect tenants from unaffordable housing costs, while opponents claimed that it would discourage investment in the city’s housing market and ultimately lead to a reduction in the supply of rental properties (Rasquin, 2021). Consequently, the law was opposed by neoliberal powers, politicians, and landlords, who filed a court case to overturn the law (Huesmann, 2020). A group of representative plaintiffs, consisting of private owners with various types of properties in Berlin, including single apartments, multi-family buildings, and large portfolios, have filed 12 constitutional complaints jointly. They cited the State of Berlin’s lack of legislative authority, the excessive infringement on landlords’ property rights, and the violation of constitutional provisions against arbitrary regulations. After the 12 constitutional complaints were filed, the federal supreme court of Germany in Karlsruhe declared the law unconstitutional in April 2021 (Schede et al., 2020). They argued that the state government could not impose its own law since the federal government already had the “Mietpreisbremse” law regulating rents in place. Thus, the “Mietendeckel” was overturned in July 2021 (Connolly, 2021). The legislation known as the “Mietpreisbremse,” or Rent Control, is a law applicable across Germany, which became effective in 2015. It establishes the highest permissible rental amount that a landlord can demand. According to this law, the rental price for the property, excluding utilities, cannot exceed 10% above the local rental rates for similar properties (Reimer, 2015). Figure 1 illustrates the timeline of Berlin’s rental cap.

Figure 1.

Timeline of Berlin’s rental cap.

After the court’s ruling, landlords regained the right to request unpaid rent that was accumulated during the period when rent was capped, allowing them to recover the income they had lost (Knight, 2021a). This meant tenants who paid lower rent due to the cap were now obligated to pay the remaining amount. Landlords could legally take various actions to collect the unpaid rent, including negotiations, legal measures, or issuing eviction notices if the rent remained unpaid. The reversal of the Mietendeckel created a challenging situation for both landlords and tenants. It was a significant financial burden, particularly for tenants with limited financial resources. It also raised concerns about housing security (Knight, 2021b). The specific outcomes and resolution of these issues depended on individual circumstances, negotiations between landlords and tenants, and potential government interventions or assistance.

Methodology

This study aims to understand how housing legality is negotiated and contextually constructed, taking the case of Berlin. We adopt an exploratory qualitative approach. The experience of the first author as a tenant in Berlin affected by the rental cap law triggered this research. As such, she can be considered an insider observer in this study. Insider researchers often have access to and the trust of the study participants (Dwyer and Buckle, 2009). In this study, the first author used her access and having common ground with the study participants to facilitate data collection.

Using semi-structured interviews and with the help of several research assistants, the experiences of 19 tenants in Berlin with the rental cap law were explored. Although the first author’s experience as a tenant in Berlin triggered this research, it was not added to the sample of 19 participants. Interviews were conducted after the abolition of the law. The interviewees were selected using convenience and purposive sampling. Convenience sampling is selecting the research sample based on the researchers’ ease of access to them and their readiness and willingness to participate in the study (Given, 2008). The first author contacted her network in Berlin, asking them if they would like to participate in the study and share their experiences with the rental cap law. To capture different experiences of the law, the selected interviewees had varying levels of German language proficiency (since most of the information on the law was available in the German language). Each interview had three sections covering the resident’s condition, rental arrangement, and experience with the rental cap law. Tenants’ experiences are assessed based on the tension between legality and illegality, as discussed in the subsequent section.

After conducting and transcribing the interviews, we used thematic topic analysis to code and identify similar tenants’ experiences (i.e. tenants denied a rent reduction because of loopholes in the law and tenants denied a rent reduction because their landlord refused). We compared the responses and themes with existing narratives in the literature, such as the lack of clarity of Berlin’s rental cap law and landlords’ resistance (Hahn et al., 2021; Schede et al., 2020). The scenarios experienced by the interviewees were later classified into different categories based on their degree of legality. Finally, based on the empirical analysis, a set of reflections on the concept of illegality are provided, and consideration is given to what these mean for future research on illegal housing in highly regulated contexts.

Results—varying experiences of tenants in Berlin

This section examines tenants’ experiences with the law and their respective landlords. We analyze tenants’ views on the legality of the rental cap law based on their experiences dealing with the law to achieve lower rent by presenting the stories of interviewees who were unable to reduce their rent, as well as those who successfully claimed rent reduction and the strategies they employed. The findings suggest that tenants had varying experiences with respect to their rent reduction inspired by the usually perceived highly regulated German (housing) system.

The selected sample consists of 19 tenants living in Berlin renting apartments when the rental cap law was in effect. Although all participants expressed support for the law, they had varying experiences with it. Eight tenants received a rent reduction, while nine did not due to the unwillingness of their landlords or the exploitation of loopholes in the law. In addition, two participants lived in buildings constructed after 2014, rendering them ineligible for rent reduction. Nine of the 17 eligible participants (~50% of the sample) did not receive a rent reduction. All eight tenants who had received a rent reduction were later required to return the money difference following the law’s abolition in April 2021. An overview of the interview findings is presented in Table 1.

Table 1.

Overview of interview findings.

	Is the building eligible for rent reduction?	Did they receive a rent reduction when the rental cap law was in place?	Landlord	Did they receive a letter asking to pay back the rent difference after the rental cap law was overturned?	Did they pay back the rent difference after the law was overturned	loopholes/reasons used by owners not to accept rent reduction, as it is written in the law	Citizenship of tenant
1	Yes	No	landlord	No	Ineligible	Landlord refused to give a reduction as he is against the rent cap law	Non-German
2	Yes	Yes	developer company	Yes in the contract	No		Non-German
3	Yes	Yes	developer company	Yes in the contract	No		Non-German
4	Yes	No	landlord	No	Ineligible	Has a good relationship with her landlord and is unconcerned about a reduction occurring	Non-German
5	No	No	Unknown	No	Ineligible	(not a loophole) the law is not applicable due to the building being constructed after 2014	Non-German
6	No	No	developer company	No	Ineligible	(not a loophole) the law is not applicable due to the building being constructed after 2014	Non-German
7	Yes	No	landlord	No	Ineligible	Landlord refused to give a reduction as he is against the rent cap law	Non-German
8	Yes	No	landlord	No	Ineligible	Did not receive communication from the landlord that lives in the same building	Non-German
9	Yes	Yes	developer company	Yes in the contract	Yes		Dual citizenship, German and non-German
10	Yes	No	developer company	No	Ineligible	No communication from the company and then no answer to the tenant’s letter demanding a reduction	Non-German
11	Yes	Yes	developer company	Yes in the contract	Yes		German
12	Yes	No	Unknown	No	Ineligible	Newly furnished apartment rented via a short-term contract	German
13	Yes	No	developer company	No	Ineligible	Contract states that the apartment was used as an office	Non-German
14	Yes	No	developer company	No	Ineligible	Newly renovated with a good bathroom	Non-German
15	Yes	Yes	developer company	Yes	Yes		Non-German
16	Yes	Yes	Unknown	Yes	Yes		German
17	Yes	No	Unknown	No	ineligible	Tenant believed the law would be repealed and willingly agreed with the landlord to not reduce it	German
18	Yes	Yes	Unknown	Yes	Yes		German
19	Yes	Yes	Unknown	Yes	Yes		German

Examining the 9 tenants who did not receive a rent reduction out of the 17 who were eligible for it, the study’s findings show that they had different experiences. Three of them (participants 12, 13, and 14 in Table 1) requested rent reduction but were denied their rights by their landlords, who exploited legal loopholes in the law. For instance, participant 12, a male German tenant, requested a rent reduction from his landlord but was denied since his apartment is furnished and rented via a short-term contract, two points not addressed in the rental cap law. The law limited the amount of money landlords could charge as cold rent (rent without furniture or services) (Paul, 2020). Thus, landlords were able to charge more money for furniture, which allowed them to circumvent the rent reduction rule. Similarly, participant 14, a female non-German tenant renting from a developer company, requested a rent reduction, but her request was denied despite her apartment being built in the 1980s. The company claimed that the apartment was newly renovated and had a good bathroom, which they used as a loophole to rule out the rental cap law since part of the house was recently renovated. Participant 13, another female non-German tenant, was denied a rent reduction due to her contract stating that the apartment was used as an office, which resulted in her paying more than other apartments in the building and not benefiting from the rental cap.

In addition, three tenants were unsuccessful in reducing their rents through the Berlin rent cap despite negotiating with their landlords. Two of them, participants 1 and 7 in Table 1, did not receive a rent reduction because their landlords expressed their opposition to the rental cap law. The third participant (number 10 in Table 1), renting from a developer company, did not receive an answer to his request. Participant 1, a non-German female renting from an individual, did not request a rent reduction. However, her landlord mentioned the topic several times, stating that “he does not accept the rental cap.” She added that to avoid a conflict with the landlord, she did not insist on her right to reduce her rent. She also expressed her desire to move out, but she believes that current rent prices make relocating challenging. In contrast, participant 7, a non-German male renting from an individual, decided to confront his landlord about his right to rent reduction but was unsuccessful. He explained that his landlord was against the law and considered it unfair. Eventually, to keep the peace, the participant did not ask again for his right to a rent reduction. Participant 10, a non-German male renting from a developer company, did not receive a rent reduction as well. As he was renting from a developer company, he sent a letter to the company requesting a rent reduction, but he did not receive a reply and did not follow up with another letter.

Another subset of participants did not receive the reduction and opted to disregard the law and continue paying their total rent. Of the participants who did not ask for a rent reduction, participant 4, a non-German female renting from an individual, reported having a positive relationship with her landlord and did not care if a reduction occurred. Participant 8, a non-German female renting from an individual, did not receive communication from her landlord regarding the reduction but had heard negative consequences from others who had their rent reduced. She shared her opinion on the rent cap, stating,

I read about the rental cap on social media. It was bad! I know several people who got into trouble because of it. Their rent was reduced, and when the law got cancelled, they were asked to pay a lot of money back that they did not have.

In contrast, participant 17, a German male renting from an individual, believed the rental cap law would be repealed and thus willingly agreed with his landlord to continue paying their regular rent without seeking a reduction. So, he willingly agreed with their landlord to go against the law by paying the full rent amount without a reduction.

Besides the above-mentioned nine tenants who did not receive a rent reduction, eight participants received a reduction in rent while having varying experiences with their landlords and varying attitudes from their landlords toward the reduction. They had varying experiences in two ways: in terms of how they received the reduction and in terms of what happened when the rental cap law was abolished. Four participants (15, 16, 18, and 19 in Table 1) received a letter from their landlord after the rental cap law was in place informing them about the reduced rates. Another four tenants (participants 2, 3, 9, and 11) rented their apartments when the rental cap law was in effect, and hence their contracts included the reduced rates. After the abolition of the law in April 2021, most of these tenants, participants (9, 11, 15, 16, 18, 19), had to pay back the rent difference, while participants 2 and 3 were not asked to pay back the difference.

The first set of tenants (15, 16, 18, and 19) had similar experiences, as they received a letter after the law was in place stating they would be charged less starting from the date of the letter. Participant 15, a non-German male renting from a developer company, shared, “They did not have any arguments about it; they applied it immediately when it was legally stated.” After April 2021, participants 15 and 16 did not disagree with paying the rent back. According to participant 15, paying back the difference was only a problem for those with high rent since they had to pay back a lot. While participant 16, a German female, shared her dismay with the system, she said, “I am disappointed with the politicians. Our system is not like that; our system is not taking care of people who are paying too much rent.” The remaining two participants, 18 and 19, both German females, received similar letters but did not share specific details regarding their experiences.

The second set of tenants (2, 3, 9, and 11) had a different experience as they rented their apartments when the law was in order. In their contracts, two different rates were written, the amount they would pay and the higher amount before the rental cap law (shadow rent). The contract includes a clause about paying back the difference between both rates in the event of the abolition of the law. After the overturning of the law, two participants (9 and 11) had to pay back the difference and were both dissatisfied. Participant 11, a German female renting from a developer company, received a letter right after the law was overturned stating there was no need to worry and that they would not have to pay back the difference, but 2 weeks later, they received another letter asking them to pay back the rent difference since the beginning of their contract. She shared that “we never thought it would actually happen. In Berlin, it is very difficult to find flats. Not having any other option to rent a flat, we felt pressured to accept this contract.” Participant 9, a German male possessing second citizenship and renting from an individual but in a company-managed property, negotiated with his landlord after receiving a similar letter, ultimately paying the difference in several installments and joining a tenant association to learn more about his rights. Reiner Wild, managing director of the Berlin Tenants’ Association (BMV), mentioned that including the shadow rent clause in contracts is illegal (Paul, 2020). Nevertheless, participants 2 and 3, non-Germans renting from developer companies, had the shadow rent clause in their contracts, but they were not asked to pay back the difference. Instead, they received a letter after the law was overturned stating they would be charged the original rate onwards.

Figure 2 summarizes the scenarios experienced by the interviewed tenants in the study. By categorizing the tenants’ responses to the interview questions, the figure divides them into two main groups. The first group comprises those who did not receive a rent reduction due to living in houses not covered by the rent cap law. The second group consists of those who lived in houses constructed before 2014 and should have been eligible for rent reduction. As discussed above, this second group had varying experiences—some have received a rent reduction, and others have not. Therefore, based on their specific experiences, group 2 was further divided into several subgroups. Figure 2 also includes the estimated percentages derived from the sample.

Figure 2.

A flow chart showing the different scenarios experienced by the interviewed tenants.

Rethinking legality

The interviews show that legality does not need to be viewed as a fixed and absolute set of rules. While the tenants who took part in this study acknowledged the importance of the law, they expressed uncertainty regarding the legality of the practices that were associated with it. In other words, they did not know whether the actions following the law were lawful. When asked whether specific actions were legal or not, participants often responded with phrases such as “I do not know,” “I’m not sure,” or “I guess so.” It is possible that these uncertain responses were due to the participants’ limited knowledge of the law, but it could also be because the law itself was unclear (see Hahn et al., 2021; Kandler, 2021). In fact, during the interviews, tenants expressed confusion regarding the legality of their own experiences and the legality of their landlords’ actions. Previous literature suggested that citizens and non-citizens would have different housing experiences (Hanhörster and Ramos Lobato, 2021), but this study found that they shared similar experiences and views concerning the rent cap law in the case of Berlin. The interviewed tenants in this study were from different backgrounds: 12 were non-Germans, 6 were Germans, and 1 had dual citizenship. This suggests that the law affects tenants similarly, regardless of nationality or ethnic background. In this study, almost all participants were against paying back the rent difference when the law was overturned but were uncertain about what was legally required from them.

Fairness was a recurring theme among the participants in the interviews. Many interviewees expressed their opinions on the rising rent prices in Berlin’s housing and how disabling it can be for them and other members of society. Participant 17, a male non-German who received a rent reduction and paid back the difference, believes that the housing market is structured unfairly and that rent control measures are necessary. He suggested that rental prices in big cities force people to move out, leaving the possibility of living in the center for only a small group of society who can afford it. In addition, he emphasized the need for effective measures to lower the rents, not only attempting to keep them at the current rate.

Other participants also expressed dissatisfaction and felt unfairness with the absence of rent control measures in Berlin. Two interviewed tenants, 1 and 8, both non-German females who did not receive rent reduction, found the absence of rent control measures unfair to tenants. Although dissatisfied with their apartments, they could not move out due to “the lack of affordable housing in Berlin,” explained participant 1 (see also Devraj, 2022). Two participants, 1 and 7, who did not receive rent reduction, stated that their landlord believed that the rental cap was unfair. In contrast, participant 2, a non-German male who received a rent reduction and later had to pay back the difference, acknowledged the perspective of landlords who were against the rental cap law and mentioned that the law was unfair. He said, “I used to live in a student dorm two years ago and paid 400 euros, now I live in a studio apartment and pay 290 euros.” Another opinion was given by participant 15, a non-German male who received a rent reduction and had to pay back the difference. He believed that there could be better solutions than issuing a legislation, such as public investment in residential units.

Tenants generally want to pay less, and landlords want to earn more. Nevertheless, this study also includes accounts of developer companies that did not want to claim their money back after the rent cap was reversed (participants 2 and 3). From the perspective of individual economic interests, many participants viewed the law through this lens. Tenants shared that the rental rates in Berlin did not match their income and should be decreased. Participant 16, a German female who received a rent reduction and was required to reimburse the difference, expressed her disappointment, stating that the Mietendeckel illustrated the exorbitant rents in Berlin. She said,

I think what was interesting about the Mietendeckel was that it showed how far rents in Berlin are too expensive. I was frustrated when they overturned the law, and I was disappointed when I had to pay back the rent difference.

Similarly, participants 9 and 13 expressed a desire to pay less rent, regardless of whether the rental cap law was enforced or not. The first, participant 9, a German male with dual citizenship, decided to join the Berlin tenant association after receiving a rent reduction and paying back the difference in installments. He suggested that “there could be other ways to reduce the rent, such as the mietspiegel (rent mirror) and the Mietpreisbremse (rent price break), which prevent landlords from overcharging tenants more than the local rates.” The second, participant 13, a non-German female, was denied a rent reduction due to a legal loophole. She then filed a court case to reduce her rent, arguing that she was charged more than other apartments in her building. Despite the overturn of the rental cap law, she won the case and received a rent reduction. The landlords’ practices, such as the shadow rent mentioned in the contracts, were believed to be illegal and motivated by the landlord’s personal interests in profit.

In Table 1, we identified the loopholes that were exploited by landlords to deny reducing the rents for their tenants. The first includes charging more for furniture in furnished apartments rented on short-term contracts (i.e. participant 12), which was an issue not covered by the rental cap law Therefore, these types of apartments were exempt from the rent reduction rule. Another loophole affecting the interviewed tenants was the recent renovation of apartments (i.e. participant 14), which allowed them to claim exemption from the rental cap law. Finally, the qualification in the contract of the apartment as an office led to charging more and made the apartment ineligible to benefit from the rental cap (i.e. participant 13). These loopholes reflect that the rental cap law was practiced differently on a case-by-case basis, reflecting diverse perceptions of legality.

The diverse perceptions of legality observed in this study indicate that legality is a socially constructed phenomenon shaped by daily practices and negotiations between public actors. As a result, a dynamic spectrum of legality emerges, with different degrees of legality ranging from being completely legal to completely illegal and many “varying degrees” in between. Figure 3 illustrates how the study’s findings relate to this spectrum in relation to Figure 2. In the next section, we reflect more on the four scenarios that illustrate this spectrum, ranging from strict compliance with the law to complete non-compliance with the law, in relation to the empirical study in the case of the Berlin rental cap law.

Figure 3.

The varying degrees of legality related to the interviewed tenants’ experiences.

Varying degrees of (il)legality

The absence of clear regulation in the case of the rent cap law in Berlin (as noted by the interviewees) implies that negotiation and informal agreements between landlords and tenants dictate its implementation. Such agreements associated with the formal declaration of the law are indispensable to sustain the functionality of the housing market. Nevertheless, in the case of the rental cap law, the ambiguity of the law made it subject to the individual behaviors and interests of the involved parties, leading to the aforementioned tensions among the stakeholders. In the case of Berlin, a clash of interests is illustrated between tenants seeking reduced rents and landlords seeking higher profits. This clash evokes divergent and even contradicting interpretations of the rental cap.

The findings of this study indicate that the concept of legality, as it relates to compliance with rental cap regulations, is not a static, legally binding set of regulations but rather a dynamic and socially constructed issue. In this context, legality is non-binary: a spectrum ranging from fully legal to being fully illegal. The majority of this continuum exists in a gray area where legal and illegal practices are indistinct, and the interpretation of legality is negotiated between the different actors involved. As such, what is illegal becomes unclear or unreported. Based on the experiences mentioned above by the interviewees, we have identified four scenarios along this spectrum: (1) strict compliance with the law (fully legal), (2) conditional compliance with the law (semi-legal), (3) conditional non-compliance with the law (semi-illegal), and (4) complete non-compliance with the law (fully illegal/illegal legality), as depicted in Figure 4.

Figure 4.

The four degrees of negotiated legality/illegality observed in the case of the rental cap law in Berlin.

I have subsequently mapped the nature of the interactions between tenants and landlords by characterizing their negotiated degree of adherence to the law in the following manner:

Strict compliance with the law (fully legal)

In instances where the rental cap law was acknowledged as it is, such as in the case of participants 5 and 6, where the two tenants resided in non-affected buildings, strict compliance with the law was observed, and the tenants did not receive rent reduction. In fact, tenants residing in buildings not subject to the rental cap law (constructed after 2014) did not share that they attempted to negotiate their eligibility for rent reduction, acknowledging that their properties were not covered by the legislation. Based on these observations, we postulate that the state of complete adherence to the rental cap law represents a state of full legal conformity.

Conditional compliance with the law (semi-legal/gray legality)

A proportion of interviewees’ experiences (5 participants ~25%) can be observed as a gray area of legality concerning enforcing the rental cap law. These tenants encountered one of the two scenarios: (1) their rental contracts included a clause with a condition to repay the difference in rent if the rental cap law was overturned, but they did not follow this condition (participants 2 and 3), or (2) their apartments were eligible for rent reduction under the law, but they did not receive it due to legal loopholes in their contracts, as clarified in Table 1 (participants 12,13, 14).

The first two tenants (participants 2 and 3) who experienced this degree of legality moved to new apartments after the rental cap law was enforced in February 2021; therefore, their new landlords included in the contract, alongside the reduced rent, the shadow rent (rent difference). In this case, the tenants would need to pay back the rent difference if the law was overturned. The head of the tenants’ association argued that this clause was illegal (Paul, 2020). While signed contracts are legally binding, they are only enforceable within the limits permitted by the law. The rental cap law specified the rent rate based on several factors, such as the apartment size, age, and amenities. The two tenants who signed this type of contract were then informed by their landlords that they did not need to pay back the rent difference. By doing that, they have breached the terms of their contract. Nonetheless, this clause was already debatable for violating the law.

Participants 12, 13, and 14 also show semi-legal conditional adherence to the law. Although their rented apartments fulfilled the conditions of the rental cap law, they were denied rent reduction due to legal loopholes in their contracts, such as renting a furnished apartment (participant 12) or having the apartment registered as an office instead of a residence (participant 13). These participants could have received a rent reduction had they pursued legal action, which was the case for participant 13, who was able to reduce her rent by suing her landlord.

Although these experiences can be considered technically legal, they can be seen as violating the spirit of the rental cap law and, therefore, represent a gray area of legality or what can be observed as a semi-legal state. This term reflects the fact that, while these actions may not be explicitly illegal, they are not fully compliant with the law and can be ethically questionable.

Conditional non-compliance with the law (semi-illegal)

The majority of tenants who were interviewed (9 participants ~50%) experienced a form of illegality that was difficult to confirm but could still be perceived as more illegal than legal. There were two common scenarios among these tenants: (1) those who received a rent reduction but had to pay back the difference later, and (2) those who ignored or agreed with their landlords not to follow the rental cap law. These experiences can be considered semi-illegal because they disregarded the rent cap law, but at the same time, there remains room to argue for their legality. For instance, tenants who paid back the rent difference (participants 9, 11, 15, 16, 18, and 19) were following a contract that was deemed illegal by the tenant association (Paul, 2020), but they still adhered to the contract. The second group of tenants and their landlords (participants 4, 8, and 17) ignored or negotiated the law yet did not receive a penalty, which raises the question of whether their actions were entirely illegal. We propose that this partial non-adherence to the rental cap law represents a state of semi-illegality or gray legality.

Complete non-compliance with the law (illegal legality)

Only three of the tenants interviewed faced this degree of legality, namely participants 1, 7, and 10. These tenants preferred paying lower rent but did not receive any rent reduction. They had rented their apartments before the rental cap law was enacted, so they had to negotiate with their landlords to obtain a rent reduction. The landlords of two participants (1 and 7) explicitly stated that they did not recognize or intend to follow the law, while in the case of participant 10, who rented from a developer company, they did not respond to his letter request for a rent reduction. Unlike the previous degree of legality, where landlords and tenants had mutually agreed to disregard the law, this degree is different since the landlords and developer companies explicitly disregarded the law. In these cases, tenants were unsure about the legitimate actions to be taken, particularly given external factors such as their inability to move out (as was the case for participant 1) or due to the power dynamics between them and their landlords. As a result, we postulate that this complete disregard for the rental cap law represents a state of complete illegality within a legal structure, which could also be considered another form of gray legality.

Discussion: toward a non-binary understanding of housing illegality

By studying the introduction and abolition of the Berlin rent cap law, we uncover a non-binary perspective on its legality, which adds complexity to the situation and renders the distinction between what was and is legally permissible and which actions were prohibited more challenging. Generally, “illegality” can be viewed as a condition that emerges in specific ways within different regions and countries (Squire, 2021). Each country or region has its own distinct frameworks and mechanisms through which specific actions, behaviors, or objects are deemed illegal. Thus, being “(il)legal” relates to “the public regulatory system of the time/space in which it exists” (Chiodelli, 2019: 499).

The traditional discourse on legality implies a north–south divide (see, among others, Aguilera and Smart, 2016; Pizzo and Altavilla, 2017), indicating that it is not universally uniform. Instead, legality becomes influenced by distinct legal frameworks, norms, and practices. Nevertheless, recent studies have attempted to move away from this divide by scrutinizing essentialist theories that represent “illegality” as a condition that is inherent and constant (Flores and Schachter, 2018). While acknowledging the state’s legal production of “illegality” can be regarded as an advancement in the way it is understood, it is imperative to not only focus on its legal roots and, in turn, ignore the social construction of illegality (Flores and Schachter, 2018). Similarly, Squire (2021) investigates illegality as a constructed phenomenon that manifests in context-specific ways across different regions. Through studying the “dynamics of illegalization” in different Global North and Global South regions, he highlighted the “complexity and ambivalence of illegality as a social condition” (see also De Rosa and Trabalzi, 2016). These discussions demonstrate that illegality is generally a complex and ambiguous condition (Squire, 2021), involving different elements of legality as people navigate between legal and illegal statuses over time, across different places, and through various social roles (Rigo, 2011).

Consequently, non-compliance is often connected with state tolerance, especially in the Global North, where the legitimacy and effectiveness of the law are considered significant (Alterman and Calor, 2020). Yet, still, formal systems of rules often involve exceptions (Harris, 2010, 2021) and discretionary interpretations (Colomb and Moreira de Souza, 2023). Moreover, to enforce regulations, “pragmatic politics” is usually included (Coslovsky et al., 2011). These observations also apply to the issue of housing illegality, indicating that the dynamics of the north–south and illegal–legal divides are similarly manifested. Consequently, these differences in the implications and origins of illegality, both in general and specifically regarding housing illegality, call for a nuanced perspective that transcends binary thinking. As such, these perspectives imply that illegal activities are not synonymous with “criminal” activities nor exclusive to criminal groups (Chiodelli et al., 2018). In addition, differentiating between what is legal and what is illegal becomes even more complex when we consider how the state implements intricate legal frameworks in contexts where illegality is subject to negotiation (Tanasescu, 2009).

The importance of the relationship between the state and society in the creation and implementation of laws and regulations remains overlooked. This is exemplified by the rental cap law in Berlin, which was prompted by pressure from tenant movements. Legality, in this case, had been based on the failure of negotiation versus social acceptance, offering a global viewpoint. In this perspective, negotiations and street-level bureaucracy are more critical in determining legality (and formality) than top–down regulations and the effectiveness of the rule of law. In addition, this viewpoint recognizes the value of contesting laws and regulations as a democratic practice, eventually leaving most practices in a gray zone—hard to judge their legality or illegality. We use the reflections from this study to attribute the controversy surrounding the rental cap law to the lack of social co-construction and negotiation of its legality.

Conclusion

This article examined the degrees of legality related to Berlin’s housing regulations, specifically the rent cap law. The study revealed that the rental cap law has given rise to alternative solutions in the housing market that exist beyond the traditional binary understanding of legality, showing incidents of gray legality. Gray legality refers to incidents in which it becomes hard to judge the complete compliance or lack of compliance with the law. These semi-legal practices are often disregarded in the Global North, but this research shows that they are a fundamental aspect of the relationship between the state and society in Northern/Western cities. Therefore, illegal housing practices should be acknowledged as a natural component of urban development. Finally, more research needs to be undertaken on gray legality, exploring other scenarios where negotiations between multiple actors lead to situations that are not completely legal or illegal. This could happen by expanding housing research to include the perspectives of landlords.

Footnotes

Acknowledgements

Special thanks to Nagham El Hayek for her valuable assistance in developing this article. Thanks also to Adeposi Stanley for his support in this article as a part of his internship at Impact Circles, e.V. Moreover, the authors sincerely thank Jonas Le Thierry d’Ennequin for his valuable contribution to the initial version of this article at the Houses of Cards conference (April 2021). They would also like to thank Jasmin Gamal for the copy-editing and Ola K. Esmail for her assistance in adjusting the article references. This research had been incubated by the research program at Impact Circles, e.V. Berlin.

Author’s note

Ahmed A Rezk is now affiliated to Impact Circles e.V., Germany.

Declaration of conflicting interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

ORCID iD

Mennatullah Hendawy

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