Denmark plans temporary limit on rent increases

Current rules in Denmark allow landlords to increase rents in line with general inflation. The government wants to place a temporary block on such increases.

Denmark plans temporary limit on rent increases
Denmark's government could introduce a temporary rule to prevent inflation from enabling steep rent increases. File photo: Asger Ladefoged/Ritzau Scanpix

The Danish government is to propose a temporary limit on how much private landlords can increase rents.

Under the current Renting Law (Lejeloven), tenants are permitted to let rents follow inflation – which is currently at its highest level for 39 years.

“There is no doubt that with the very extreme inflation that we have at the moment, many groups will be impacted,” interior and housing minister Christian Rabjerg Madsen said.

“We have a situation on the private rental market where some landlords can look forward to very drastic rent increases,” he said.

The limit on rent hikes would be temporary and limit rent increases to a maximum of 4 percent over a two-year period. Inflation in July was calculated at 8.7 percent.

The minister said the measure would take the form of an immediate intervention, meaning it would apply to existing rental agreements and not just those which are signed after the new rule takes effect.

It would also apply retroactively to rents that have been raised in recent months, he said.

“It’s obvious that when there’s a possibility that tenants can put rents up by a potential 8-9 percent, there’s also a risk that some will do that. And that could have drastic consequences,” Madsen said.

In addition to the temporary limit, the government wants to introduce a new, permanent index that would regulate rents.

The index should be independent of increasing energy and food prices, Madsen said.

The government has previously said it cannot compensate the population in general for increasing prices due to concerns this could exacerbate inflation.

“The reason this proposal does not further push inflation up is that we are not pumping more money into society,” Madsen said.

Around 180,000 private tenants in Denmark face possible rent increases at the turn of the year, according to tenants’ interest group Lejernes Landsorganisation.

READ ALSO: EXPLAINED: What is a Danish ‘housing association’?

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Number of homes for sale in Denmark up 30 percent in 2022

After a period with low numbers of homes for sale, 2022 offered a lot more to choose from for buyers in Denmark.

Number of homes for sale in Denmark up 30 percent in 2022

New data from banking organisation Finans Danmark show that the number of houses for sale across the country is around 31 percent higher than it was a year ago.

This represents the largest influx of homes onto the market for 16 years, economist Brian Friis Helmer of Arbejdernes Landsbank told news wire Ritzau via written comment.

“The many extra ‘for sale’ signs come as a result of interest in buying houses drying out notably during the course of the year, as the housing market began to experience a headwind,” he said.

Higher interest rates in particular have dealt a blow to the market, he said.

Around 36,000 detached houses, terraced houses and apartments were for sale at the end of 2022, according to Finans Danmark.

The number of homes on the market is now at its highest for two years, Helmer said.

“But that comes from a point where it was at its lowest since 2006,” he also noted.

The price of a new home or flat has meanwhile fallen for the fourth consecutive month.

Copenhagen and its surroundings in particular have seen a sharp jump — the number of owner-occupied flats on the market has leapt nearly 70 percent in the last year.

But it’s not all roses for the would-be home buyer in Denmark. Higher interest rates make it more expensive to finance home loans, Helmer noted. 

“There are handles at both ends of the rope and the overall package for home buyers is therefore not better measured over all parameters,” he wrote.