The Strategist

Housing crisis makes Berliners think about nationalization

04/22/2019 - 12:53

There is a housing crisis brewing in the capital of the largest economy in the euro zone, Germany. In recent years, rental prices in Berlin began to rise sharply and have more than doubled in ten years. As a result, thousands of Berliners went to the streets. Some even began to demand nationalization of housing, which is owned by the largest management companies.

In early April, many thousand protest rallies were held in Berlin against rising rent for housing. This is not a new problem: such rallies are held in the German capital not for the first year, but the last major protest was held in September 2018.

According to analysts of the real estate website, over the past ten years, the cost of renting housing in Berlin has more than doubled: from € 5.6 per square meter per month in 2008 to € 11.4 last year.

Such growth can be explained influx of people in Berlin: about 40 thousand new residents come here every year.
Now the population of the city is about 3.5 million people, and by 2025 it will most likely overcome the 4 million mark. The situation is complicated by the fact that most Berliners - about 85% of the city residents - do not own housing, but rent it.

Against the background of a sharp rise in rental rates, Berliners have increasingly began to urge the city authorities to take a radical measure. They are calling to return apartment buildings in Berlin to ownership of its authorities, that is, to nationalize a large share of city real estate.

The criticism focuses on two largest management companies: Deutsche Wohnen and Vonovia SE. In total, they own about 200 thousand apartments in Berlin.
Deutsche Wohnen, the leader of this market, owns 115 thousand apartments. Increasingly more Berliners are supporting nationalization of the rental housing fund. It follows from a survey conducted in February by the research company Forsa that 44% of city residents considered such a measure reasonable, and 39% were against it.

Activists of the movement for the nationalization of housing have already begun to collect signatures in support of such a decision. According to local laws, it is necessary to collect at least 20 thousand signatures in six months in order for the land parliament to consider the initiative. The campaign activists believe that although the nationalization of housing will not increase supply in the real estate market, it will force management companies to think that they cannot raise prices to infinity. It is about expropriation of real estate from those companies that manage more than 3 thousand apartments. Companies will be paid compensation for housing. The money will go to the state, and German experts estimate the total amount of such compensation at € 36 billion. At the same time, campaign activists demand that compensation be paid to companies at prices that are significantly lower than market prices.

Most prominent politicians, including Chancellor Angela Merkel and Berlin Mayor Michael Müller, oppose the nationalization and redemption of housing by the state. “I understand the anger towards real estate firms who want to squeeze every penny out of tenants. But expropriation will take years and will not add a single new apartment,” said Andrea Nahles, leader of the Social Democratic Party of Germany, who commented on the situation. The German Construction Industry Association indicates that the amount of compensation - € 36 billion - would be enough for construction of new housing for 220 thousand apartments.

The German government has already taken measures to combat the housing crisis by setting restrictions on rental growth and promising to invest € 6 billion in the construction of new housing.

However, there are parties that support radical measures, and the Green Party, one of the strongest at the moment in Germany, and its leader, Robert Habeck, are among them. “The constitution explicitly provides for possibility of such expropriations for the common good. It would be absurd if we would use this opportunity only when we need to build a new highway, but not to resolve the situation with the rampant housing shortage,” said Mr. Habeck.