It's an established fact that Germans don't bother themselves about owning houses. Europe's most thriving economy boasts of renting rather than buying property. Germany's home ownership rate ranks among the lowest in the developed world. Strange as it may seem, apparently the German populace seems quite content with the whole system of renting. Let's take a look at the ‘whys and hows’ of this intriguing rental model?

The obvious question that comes to mind is, ‘isn't home ownership a vital criterion needed for a healthier and stable economy?' I would say, 'not really....German policies were penned down differently yet practically.’

Over the last 10 years, while the residential prices in UK have almost doubled, in Germany they have barely risen by 2% to 3%. What keeps the rents so low? Below are listed a few of the many factors that are responsible for low rents:

1. Germany's rental market is staunchly regulated, and these regulations are pretty much in favour of renters, e.g., the German legislation allows state governments to cap rent increases at not more than 15-20% over duration of three years. Unlimited contracts are standard and tenants, if given notice, can demand continuation.

2. The Govt.'s lack of encouragement towards house ownership by not letting the home-owners deduct mortgage interest payments from their taxes, explains why the Germans are less likely to buy houses. Without this deduction the advantages of owning and renting are in a way evenly balanced out. The home owners as well as the landlords are barely subsidized.

3. There is a surplus of good quality rental accommodation. The supply of rental housing in Germany is relatively higher owing to decentralized and regional approach to planning. The German housing associations along with municipal authorities hold about 12% of the stock, private housing companies nearly 10% and property funds around 1%. The rest is held by the private investors.

4. Since buying a house is a relief against the shooting rents, the stability of German rents results in fewer home buyers and a subsequently lower home ownership rate.

5. The policy of German banks is to ensure that there isn't an easy availability of housing finance. Lenders are risk averse and generally require a deposit of 20% or considerable collateral and a proof of good income history. The banks have made mortgages not only harder but also more exorbitant to get.

6. In contrast to societies afflicted with economic catastrophes in recent years, Germany's rental plan looks quite sturdy in the long run. Germany's taxation is not particularly favourable for property owners. There are very likely chances that the Grunderwerbsteuer (property transfer tax) might soon rise to about 5% in a lot of states- an average increase of about 1%. So also is Grundsteuer (annual land tax) expected to increase, it is at present about 13% of the value of single residential properties.

7.  The transparency of the entire renting model in Germany is acknowledgeable. You can easily check if your rent is fair using the rental index or Mietspiegel. It helps in keeping the unfair practices grounded. The Mietspiegel is generally published by the Municipalities on a yearly basis. More so, the renters can even join the association of renters known as 'Mieterverein'.

The economists are of the view that Germany's housing policy is in a better position to strike a balance between government involvement and private investment than most of the other countries. Nearly, 93% of the Germans believe that their current renting scenario is the best in the world. They like being referred to as 'the Nation of Renters'.

To understand the intricacies of Germany's unique rental market, one has to go through the pages of history. Germany's unconditional surrender in May 1945 during the Second World War led to a series of serious introspections needed to rebuild Germany. At that point of time more than 20% of German housing stock was rubble. In order to accommodate the homeless, some sort of government program was the need of the hour.

Immediately after West Germany was re-erected in 1949, the government passed its first housing law. The law aimed at promoting the construction of houses which in terms of their rents were more appropriate for the population at large. This plan worked out very well due to the combination of direct subsidies and generous tax exemptions accessible to the public, non-profit and private organizations. Thereby, a vast majority of new units that came into being were rentals which were primarily due to:

1. Large demand from the potential buyers.

2. The German mortgage market was at an all-time low and banks required borrowers to place down large down payments. And only a few Germans had enough money.

Since the rental model worked out superbly during the era of reconstruction and rehabilitation, Germany has remained loyal to it and the plan seems to be working just as good as before.