Price increases in housing are limited in Germany and have been for a _long_ time (and tightened up in the last couple years). This specific Berlin regulation is on top of that.

I received a rent increase today, with an apologetic letter that the government is forcing their hands. I suppose I could technically turn it down, but since I have always been on good terms with the landlord, I a not yet sure that I will. I sympathize with his cause.

Other than that, there are also restrictions in place for how much rent may be increased, so I doubt they would be able to make up for the 5 years.

And unnatural homelessness surge will just happen over night in 5 years.

If supply stayed exactly the same as it is today, sure. I would imagine 5 years gives them some room to allow for more construction to increase supply by the time the ban expires.

I'd imagine that they hope the five years is enough time to sufficiently increase the supply such that prices can't rise that much.