The Battle for Social Housing in Berlin

Jennifer Sizeland on Berlin’s fight to expropriate monopoly landlords…

Berlin’s expropriation vote back in September, to re-socialise some of the housing that has been sold off to corporate landlord monopolies, was historic not only for Berlin and Germany but also the world. 

The vote, which took the shape of a city-wide referendum, came about as Berliners grew increasingly frustrated by a few large property owners—Deutsche Wohnen & Co, Vonovia, the Pears Group, Heimstaden, Akelius—buying up available housing that was sold off by the state to fund other projects, and which inevitably led to an increase in rents around the city that effectively priced renters out of its (innercity) boundaries. 

Given Berlin’s house prices are some of the fastest rising in the world, it’s not surprising that the referendum gained so much attention, being largely regarded as a beacon of hope in terms of the possibility of taking on profit-driven cartels as well as fighting for renters’ rights. But the referendum has gained interest outside of Germany too, due to its potential to set a precedent for other cities with the same, often more intensified, problem.

Excitingly, the ballot returned a majority in 10 of Berlin’s 12 districts, with 56% of voters in total in favour of it, compared to 39% against, meaning it received more votes than any single political party in the general election. But—and it’s a bit but—the referendum is not binding, meaning that the fight is far from over for those who want housing back in the public domain. 

Those who own the housing stock in Berlin, and other powerful companies and individuals with vested financial and political interests, inevitably want to retain the income and power that comes with such monopolies—especially as they might be offered market value or less for their properties if the result is honoured.

Image by Max Rabus/DWE

Several factors led up to the referendum. First, Germany is famously a country of renters, with over half of its residents renting their properties, making it the second-highest rate in the OECD (Organisation for Economic Co-operation and Development). Wages in Berlin are not as high as might be expected for a capital city either, falling below the German average and coming in 11th out of the 16 states. 

There is also the issue that the majority of Berlin’s large landlords are modernising buildings to increase their value but undertaking fewer repairs than public housing companies, according to an investigation by the Rosa Luxembourg Foundation. A final impetus for the referendum came from the ruling to overturn the Mietendeckel (rent cap) law by the German Constitutional Court (Bundesverfassungsgericht); it was deemed unconstitutional and therefore effectively illegal, so the decision was reversed by the court, which is the highest authority in Germany.

If the expropriation is passed it would mean more than 240,000 apartments ending up back in the public domain and managed by the government with accordingly cheaper rents. The company that would be the most affected by the vote is ​​Deutsche Wohnen, who currently own 100,000 properties—nearly half of those proposed in the buyback. 

The situation is further complicated by the announcement on the same day as the vote results by Germany’s large residential rental company Vonovia, that it had reached the required threshold to purchase Deutsche Wohnen with the majority voting rights. The merger went through in October and created a property behemoth of over 550,000 apartments. The expropriation result did not concern shareholders as the acquisition disclosure actually increased their share value at the time. In contrast, smaller corporate landlord Akelius made the decision to sell some of its city property portfolio, including 14,000 in Berlin, although it was not clear if this was related to the campaign.

Prior to the vote (and the subsequent national election), the Berlin senate announced that it would be buying 14,750 apartments from Deutsche Wohnen and Vonovia for 2.46 billion euros. This would bring their portfolio of publicly-owned housing to around 355,000 or approximately a fifth of the city’s property to bridge the gap. This wasn’t, however, enough for campaigners since the condition of the properties was worse than before privatisation, and they were bought at market value. 

Image by Jana Legler/DWE

The lobby group behind the vote, Expropriate Deutsche Wohnen & Co. was formed in 2018. “There were several groups fighting against rising rents and unscrupulous landlords in Berlin before which joined our efforts,” explains campaigner Felix. “Many of them already participated in the organisation of an earlier referendum, the ‘Mietenvolksentscheid’ (rent referendum) in 2015. Nearly everyone in this city has either personally had their fair share of bad experiences with corporate housing companies or at least has heard some stories from family and friends.”

Part of the group’s argument is that the apartments in question were previously owned by the state of Berlin before they were sold to corporate landlords. Germany sold off its public housing in order to ‘clean up’ its finances during a time of fiscal trouble, using the money raised by selling to corporate landlords. In Berlin, more than 200,000 of its flats were sold to private companies between 1990 to 2005. The biggest publicly-owned house provider, GSW, was originally sold to Cerberus, a US investment company in 2004, but by 2013 it became part of Deutsche Wohnen.

The aim of the lobby group is to “remove twelve percent of Berlin rental apartments from speculation and enable affordable rents in the long term. No more fat dividends for shareholders that have to be paid out of our rents. No more crowding out of people who can no longer afford their apartment.” They believe that “we can only end the housing crisis if we manage living space on a non-profit basis again.”

It hasn’t been a simple process. To initiate the referendum, the group had to collect 20,000 signatures in the first stage and 275,000 in a second stage. Now the big question for Berlin—and other cities facing similar issues that may want to plan a referendum in the future—is whether the political parties currently in power will follow through on it, and what that would involve. 

Initially, Berlin’s newly elected mayor in 2021, Franziska Giffey of the Social Democratic Party (SPD) said “for me, the subject of expropriation is already a red line. I don’t want to live in a city that sends the signal: This is where expropriation is taking place.” She later conceded that the result should be respected and a bill drafted, but that it would need to be legally and financially watertight, something that many have cautioned would be very difficult to achieve. 

Giffey’s party, the SPD, was narrowly voted in with a 25.7% majority in the 2021 federal election, forming a coalition with the Greens and Free Democrats (FDP). Although the business-friendly FDP would never have backed the referendum, the green mayoral candidate (Bettina Jarasch) stated her intention to vote ‘yes’ in the referendum prior to the election, and the SDP broadly supported the campaign from the beginning. “The parties agreed upon forming an ‘expert commission’ to examine ‘possibilities, ways and prerequisites for the implementation of the referendum’ as they wrote in their coalition agreement,” points out Felix.

Image by Ian Clotworthy/DWE

One of the big questions looming over such a decision is the financial burden: it will cost somewhere between 26 to 36 billion euros to buy back these properties, although Felix points out that Berliners voted specifically for socialisation rather than buying back. “Our concept and also the German constitution is very clear on this: expropriation can be done at prices significantly below those of the market,” he says. 

Debt and therefore rent prices are entirely dependent on the remunerations that are paid to Deutsche Wohnen & Co. Naturally, Expropriate has already thought about this. “We calculated the levels of rent needed to pay off the debt within 43 years for a few different levels of compensation on our website. We proposed to pay the remuneration via freely tradeable debt bonds with a yearly payout of 1/43 of the total sum every year for 43 years,” he explained. This would mean payments can be made from rents even when accounting for high maintenance costs.

Article 14 of the constitution states that ‘expropriation shall only be permissible for the public good’. It goes on to clarify that ‘such compensation shall be determined by establishing an equitable balance between the public interest and the interests of those affected.’ As it is open to interpretation, a compromise between public and corporate interests may be tricky to achieve. With no clear answer, they may likely turn to the last point that states ‘in case of dispute concerning the amount of compensation, recourse may be had to the ordinary courts.’

Campaigners are relying heavily on the next point of the constitution, Article 15, which cites ‘land, natural resources and means of production may, for the purpose of nationalisation, be transferred to public ownership or other forms of public enterprise by a law that determines the nature and extent of compensation’, with respect to Article 14. It has, however, never been triggered before so there is no legal precedent for using it to enact a major change like this.

Benjamin Hersch, a Berlin-based lawyer specialising in residential property told us “the main argument against socialisation is that the constitution protects the fundamental right to own property particularly strongly, which is in conflict with the socialisation of living space. Ultimately, the Bundesverfassungsgericht would decide the matter.” The job of this particular court is to make a ruling on whether legislation is constitutional or not. 

Berlin does, however, have a precedent for respecting referendum results, in particular the public vote against building housing on Tempelhofer Feld, (a decommissioned airport strip), which was crushed by a public vote and has remained a much-beloved public park.

Hersch agrees that expropriation would have some positives for Berliners, namely that it would “lower the cost of living for tenants and thus increase their purchasing power.” There would be further benefits for renters “as the rents would not rise any further. The tenants would be heavily involved in or even determine decisions about their homes. This would be an extreme improvement of their material situation and relieve the fear of losing their home.” 

Image by Max Rabus/DWE

Hersch concedes it could create a major issue in that “the real estate market would certainly be less attractive for investments” but believes there would not be any other large-scale effects “because this form of socialisation is an isolated case; though it is difficult to say exactly at this point.” 

Felix believes that market power goes both ways when it comes to socialising housing. “This expropriation amounts to around 220,000 apartments and when we add those of the city-owned housing companies and cooperatives we end up at a share of roughly 50% of the housing market which is not profit-oriented.” He points out that small landlords can still continue their business, but they won’t be able to increase rents so ‘relentlessly’ with the new market shares. 

Several detractors have stressed that expropriation is missing the point as it will not address the true issue that there is not enough housing stock in the city and would not create any new apartments in Berlin. Deutsche Wohnen has gone on record to say it will be fiscally catastrophic and they believe it will affect the city’s budget. Developers and real estate associations like Haus and Grund have also argued that it will drive away investors and therefore take away the funding necessary to build new housing that the city desperately needs. 

Much of the housing built in recent years is classed as ‘unaffordable’ due to price rises dramatically reducing the amount of square footage that a buyer or renter can get for their money. In the period between 2013-17, 60 districts had an affordable housing shortage. From 2015-19, this rose to 144 districts. This means that investors are not creating properties suitable for an average citizen in Berlin, so their financing may not be relevant to everyone.

Hersch concludes that “activists could be pacified through socialisation” but that  expropriation “would neither affect the entire housing problem nor solve other serious social problems, like poverty in general”.

Campaigners throughout Europe are already looking to Berlin to see if they can also make history by socialising their housing to address rising rents, corporate monopolies and shortages of suitable housing. Whether it works or not will be a fascinating experiment as to what happens when a government takes control of its housing––how feasible it is to achieve and if it actually solves the problems created by unrestricted capitalism, or whether it creates a new set of issues entirely.

Campaigners say that the law needs to be drafted based on the referendum results as their plan has been verified as constitutional by independent legal reports as well as being voted for by more than a million Berliners. “In our opinion, this commission should start to work on a legally watertight bill to be submitted to parliament as soon as possible,” insists Felix. “Our group already published such a law half a year ago and we don’t mind if they just copy it. We will not accept any attempts at stalling the implementation of the referendum.”

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