Denmark caps housing rent increases at 4 percent

The Danish parliament is to prevent landlords from taking advantage of high inflation to drastically hike rents by capping increases at 4 percent.

Denmark caps housing rent increases at 4 percent
Denmark is to cap private housing rent increases at 4 percent amid high inflation. File photo: Kristian Djurhuus/Ritzau Scanpix

Landlords in Denmark will not be able to raise rent up excessively due to skyrocketing inflation after a majority of parties in parliament on agreed on a change to the Tenancy Act (Lejeloven).

While the Tenancy Act usually allows for rent increases in pace with inflation, the agreement, reached on Friday, caps increases at 4 percent for the next two years. 

READ ALSO: Denmark plans temporary limit on rent increases

“For the government it was crucial to protect Danish tenants. They can’t be forced out of house and home because of the drastic inflation we are seeing at the moment,” the minister for housing and the interior, Christian Rabjerg Madsen, told media on Friday.

“I’m therefore pleased we were able to reach this agreement to limit rents at four percent. That will give tenants security and peace of mind,” he said.

The government and allied left wing parties the Social Liberals (Radikale Venstre), Socialist People’s Party (Socialistisk Folkeparti, SF) and Red Green Alliance (Enhedslisten) are signatories to the agreement.

Concern was raised over rent increases after inflation in July reached 8.8 percent, the highest in Denmark since 1983.

Existing tenancy laws would allow landlords to charge tenants with rent increases corresponding to that percentage.

The cap agreed on Friday applies to both existing and forthcoming rental contracts.

It will also be applied to rents that were raised in recent months. Those rents typically will be reduced three months after the law takes effect. That corresponds to the typical notice period on tenancy agreements.

As many as 160,000 rental houses have been subjected to very high rent increases, according to the Ministry of the Interior and Housing.

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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

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’?