That's true for, say, bread. Or really any fungible good where labor makes up most of the price of the product. If you artificially suppress those prices, there isn't enough money to pay the farmers and bakers, and no bread will be made.
This freeze actually exempts new construction, so the whole problem is mood. But it's still interesting to think it through, and the result is different than simple economics may make you think:
Housing is different than bread, or cars, or mobile phones. It doesn't actually cost meaningfully more to build a new house in the middle of Berlin than to do so in some empty village in the countryside: the costs of material are the same, and for the most part so is labor.
The only difference is the cost of land.
The effect, according to the basic supply/demand scheme of economics you are invoking should be to depress land value, with no effect on the amount of housing units being built. That's true as long as the rent it is possible to charge is high enough to cover the costs of construction. One can take a guess at the actual value by looking for the cheapest rents in newly constructed housing, which for Germany is about half of Berlin's average. In the limit, land value would tend toward zero, although that's rather theoretical because at some point owners just wouldn't care about selling.
This hints at some additional factors that may have minor impact: maybe there is an expectation that land value will rise again after those five years, and the actual discount in the market is therefore smaller, etc. But even then, it's only land value that would be affected.
> This freeze actually exempts new construction, so the whole problem is mood.
_This_ freeze excepts new construction, but it exposes the risk of a future freeze. Now, being a landlord in Berlin means being prepared for a rent freeze being applied in the future. That must be taken into account for projections of future income, and will either reduce your projected profit, or require raising rents on new construction to keep your projected profit.
You seem to be asserting that the land value is arbitrary simply because it's located in a different area. The value is higher because the land is a lot more useful/productive / accessible/developed. You can't just wipe all that value away.
But you can arbitrarily depress it. Its value is the sum of all positive aspects (such as good infrastructure, nice views at a river) and all negative aspects (such as air pollution, noise). Implementing a restriction on rents adds a huge negative aspect that however is only negative for those interested in investing for appreciation, not at all for those who eventually live in that place. This should indeed depress the lands' value, just like it would happen if an airport opened up right next to it, but without all that noise. But as long as land costs plus construction costs are still lower than whatever you can get in return via rents, investors should still be inclined to invest in new buildings, they should just not be willing to pay too much for the land, because there's this big negative aspect connected to it.
The cost of a housing unit will be (land value + construction cost) / density. The idea is that you can simultaneously increase land value and decrease housing cost by increasing density.
This freeze actually exempts new construction, so the whole problem is mood. But it's still interesting to think it through, and the result is different than simple economics may make you think:
Housing is different than bread, or cars, or mobile phones. It doesn't actually cost meaningfully more to build a new house in the middle of Berlin than to do so in some empty village in the countryside: the costs of material are the same, and for the most part so is labor.
The only difference is the cost of land.
The effect, according to the basic supply/demand scheme of economics you are invoking should be to depress land value, with no effect on the amount of housing units being built. That's true as long as the rent it is possible to charge is high enough to cover the costs of construction. One can take a guess at the actual value by looking for the cheapest rents in newly constructed housing, which for Germany is about half of Berlin's average. In the limit, land value would tend toward zero, although that's rather theoretical because at some point owners just wouldn't care about selling.
This hints at some additional factors that may have minor impact: maybe there is an expectation that land value will rise again after those five years, and the actual discount in the market is therefore smaller, etc. But even then, it's only land value that would be affected.