(Bloomberg) — Berlin’s plan to rein in the city’s rental market was approved by lawmakers, capping revenue for property owners and potentially driving investors away from the German capital. Shares in major landlords slumped.Berlin’s legislature backed measures including a five-year rent freeze Thursday, more than six months after they were proposed by the left-leaning administration. The changes will likely come into force by the end of February, though opposition parties have signaled their intention to challenge them in court.The initiative put forward by the Left party’s Katrin Lompscher, head of urban development and housing, is intended to ease the burden on tenants after a property boom caused rents to double over the past decade. The political intervention has spooked investors as a separate campaign attempts to force Berlin’s government to expropriate properties from large landlords including Deutsche Wohnen SE.“We don’t want Berlin to become a copy of overpriced cities like London and Paris, where many people can no longer afford an apartment,” Lompscher said during the debate that preceded the ballot. Out of 150 votes cast, 85 lawmakers voted in favor and 64 against, with one abstention.Deutsche Wohnen shares fell as much as 2.1% and were down 0.8% at 12:37 p.m., extending its decline over the past 12 months to 13.1%. Vonovia SE declined as much as 1%, and Berlin-based property owner Adler Real Estate AG dropped as much as 2.4%.The Christian Democratic Union — Chancellor Angela Merkel’s party, which is in opposition in Berlin — plans to challenge the measures in Germany’s constitutional court “as soon as possible,” according to a spokesman. That can only happen once the new legislation takes effect.Philip Grosse, Deutsche Wohnen’s finance chief, claims the law won’t survive such a review. However, “the damage has already been done,” he said in a November interview.The government’s actions are a catastrophe that “threatens to cause considerable damage to both the housing market and Berlin as a whole,” IW institute economists wrote in a recent report for the CDU. The value of some properties in the city could fall by more than 40% as a result of the rent restrictions, the IW estimates.Like many critics of the plan, IW economist Michael Voigtlaender has bemoaned the fact that Berlin is focusing on rent controls rather than encouraging investors and developers to build more affordable homes to keep pace with the city’s rapidly growing population.‘El Dorado’Lompscher has dismissed such concerns. In an interview this month, she called Berlin an “El Dorado” for real-estate companies. Her department has worked closely with other German cities, and she expects Berlin’s intervention in the property market to “have consequences” within the country and internationally.Not everyone agrees, though. Vonovia, Germany’s largest landlord and owner of about 40,000 apartments in the capital, this month described the rent reforms as “Berlin specific.”The company doesn’t expect the measures to be replicated by other German states “except in the unlikely event that the Federal Constitutional Court were to rule largely in favor of the legislation,” Vonovia said in a Jan. 23 note to investors.(Updates with shares, vote count)To contact the reporter on this story: Andrew Blackman in Berlin at ablackman@bloomberg.netTo contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net, Iain Rogers, Chris ReiterFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.