Sure, Berlin used to be crazy cheap, now it's just cheap. Rents are increasing, but that's happening everywhere. For large cities, Berlin is still the least expensive (compared to Western Germany, Eastern Germany is a different thing), by far. If you're looking at Hamburg, or worse, Munich, be prepared to pay two or three times the rent.

It's been my impression from the two or three times a year that I'm in Berlin for a few days that it just works very differently, there's a trade-off between cost of living vs convenience that people accept when they move to Berlin. It's dirtier, a bus or train may just break down, people are generally a bit more rowdy, and you don't expect much from the administration, but then again: you pay a lot less, so it's worth it, like a hostel compared to a hotel.