Advertisement

Property For Members

EXPLAINED: The four ways your rent can be regulated in Denmark

Richard Orange
Richard Orange - [email protected]
EXPLAINED: The four ways your rent can be regulated in Denmark
A major renovation at a property in Copenhagen. Photo: Niels Ahlmann Olesen/NF/Ritzau Scanpix

The rent landlords can charge you in Denmark is mostly -- but not entirely -- regulated. It's complicated. Here's how the system works.

Looking to move? Find your next rental apartment here.

Advertisement

It can be fairly tricky to determine which of the following systems should be used to regulate a fair rent for different apartments, Mogens Dürr, a lawyer who advises landlords in Denmark, told The Local.  

"You can't choose which system you want to use. That's determined in the law, but it's quite difficult to differentiate between the categories of real estate." 

With at least four different systems applied, it can be hard for tenants to know if they are being overcharged," argued said Alex Dagil, founder of Rent Hero, which helps foreigners get back excess rent.

"If you said to me, and I pay 10,000 kroner for 80 square metres, is that too high a rent? Then my answer would be, 'I don't know'. I would have to look and find who the owner was of the apartment on the first of January 1995. Because it might be a legal rent or you might be paying 5000 kroner too much. There's no simple way of looking at it." 

Free market rent

In order to incentivise building companies to erect more rental apartments, most privately owned properties taken into use since the start of 1992 have not been subject to rent controls. This means the owners of most of the trendy harbourside developments in Copenhagen and Aarhus can charge whatever they can find someone willing to pay, with few controls. 

You can check when a building is considered to have been completed, or opført, by putting in the address in Denmark's searchable Building and Housing Registry (BBR).  

Attic conversions, loft conversions, and warehouse conversions are also often subject to free market rent, even if the building was built before 1992, with Copenhagen Municipality, for instance, exempting attic conversions which were not used for housing before September 1st, 2002, from rent controls. 

This does not mean rent is completely unregulated, as tenants can still challenge rents that are "unreasonable", Vagil said, but he said he had never seen a verdict on this, with rents in practice set by the market.  

READ ALSO: 

Advertisement

Expense-based pricing

Expense-based pricing, called omkostningsbestemt husleje, is the simplest way of determining the rent a landlord can charge you under rent control laws, and is typically used to set rent in large building complexes with more than 50 tenants. 

"The rent is priced basically using a spreadsheet: so you calculate all the costs of running the building, and then you add a roughly 7 percent return on your investment, and then you divide out that cost for each square metre," Vagil explained. "That's the cheapest housing you get in Denmark." 

Expense-based pricing generally applies in properties in regulated municipalities which had more than seven tenancies on New Year's Day 1995.  

Advertisement

Leased value 

The Social Democrat government in power in 1995 decided that the system of expense-based pricing was too onerous for smaller landlords, and also decided to incentivise renovations of old buildings, by allowing landlords to charge higher rents.   

"The issue was that if you owned two or three apartments, the work related to making a spreadsheet on the cost of running the building became too difficult," Vagil explained. 

So a simpler, but more subjective system, called lejedes værdi, or "leased value" was brought in which allows landlords to charge the rent they think is reasonable.

This is the method used to determine the rent for properties that had six or fewer tenancies on New Year's Day 1995.

Municipalities in Denmark which have opted out of the Housing Regulation Act, also tend to use leased value.

These include the Copenhagen suburb of Greve, and the Zealand town of Fredensborg, meaning rents there are only regulated under the weaker Tenancy Act or den almene lejelov. Other municipalities which have opted out include Billund, Ikast-Brande,  Herning, Holstebro, Læsø Mariagerfjord, Rebild, Ringkøbing-Skjern, Samsø, Solrød, Struer, Thisted, Tønde, Varde, Vesthimmerland, and Ærø.

According to Dagil, there are two ways of assessing leased value, estimated expense based pricing and so-called Paragraph 19, Section 2. 

Advertisement

Estimated expense-based pricing 

This system is supposed to mimic expense-based pricing, but without requiring the landlord to construct a detailed spreadsheet showing every one of their expenses.

"They estimate what the costs would look like if this were a large building under expense-based pricing," Dagil explains. "What would the costs look like, and how should the apartment be priced?"

Advertisement

Paragraph 19, Section 2

This is the main method used for assessing fair rent according to "leased value", and is, Vagil argues "much more subjective", with fair rent based partly on the rental market in the area where the property is situated, but also on studying cases where tenants have taken rents they consider unfair to the rent board and received a judgement. 

"It's 'what are similar apartments rented out for in the close vicinity or in the neighbourhood?', but then it's also the apartments that have previous rulings [from the rent board]. What are the previous rulings from the rent board for similar apartments in the neighbourhood?'," Vagil saic. 

Mogens Dürr, who advises landlords in Denmark, said that it was very much a question of what the landlord thought they could get away with without their case being taken to the rent board. 

"It's the owner who sets the rent when he makes a contract with a tenant," adds. "If he aims too high, he's got a problem and if he aims too low, he's got a problem too." 

Section 5 paragraph 2 

Landlords can increase rent considerably if they make significant improvements in the property under Section 5 paragraph 2 of the Denmark's rental law.  

"There is a list of criteria you need to meet to use this favourable pricing methodology, such as the energy criteria, you need to modernise department for a certain amount of money, and you need to notify the other tenants that you are renting out with this pricing methodology," Vgil said. "There's a long list of items you need to fulfil." 

In 2024, the minimum investment required to count as making "significant improvements" was set at 2,497 kroner per m2 or a total of 295,515 kroner, but the number is updated every year. 

Five few years ago, concern about companies using this possibility to increase rents led to the then government to bring in the so-called Blackstone-indgrebet, or "Blackstone Intervention", named after the US investment giant, which was accused of buying up properties across Denmark and using this section to push up rents. 

Among other things, this prevents the company making the investments to increase the rent substantially for five years, ostensibly to prevent investors like Blackstone from using the rule to make a short term gains. 

 

More

Join the conversation in our comments section below. Share your own views and experience and if you have a question or suggestion for our journalists then email us at [email protected].
Please keep comments civil, constructive and on topic – and make sure to read our terms of use before getting involved.

Please log in to leave a comment.

I 2024/05/15 19:32
Nice article, just couldn't not comment that Ikast-Brande is not a suburb of Copenhagen :) "Municipalities in Denmark which have opted out include the Copenhagen suburbs of Ikast-Brande and Greve, and the Zealand town of Fredensborg, meaning rents there are only regulated under the weaker Tenancy Act or den almene lejelov."
  • Richard Orange 2024/05/15 20:43
    Thanks! That's been corrected.

See Also