Berliners have a lot to decide next September 26, the date of the momentous general elections from which Angela Merkel’s successor will emerge. They will vote for the members of the Bundestag, the next mayor of Berlin, the representatives of the 12 districts of the German capital and they will still find a fourth ballot, that of a referendum that has the largest real estate companies in the country in suspense: do you want that the Berlin government expropriates 240,000 homes from large homeowners? The question is explosive, and its consequences may also be so for whoever wins the elections. Although the consultation is not binding, it will force a heated political debate on rising rents and rampant speculation in the property market.
If Germany is a country of tenants – more than half of the population lives in rent, the second highest percentage in the OECD -, its capital is probably a record: more than 85% of Berliners do not own the apartment in which they live. In the last five years, prices have risen 43% and for residents of medium and low income it is becoming increasingly difficult to live in the central districts. Tenants accuse large real estate companies – the initiative only affects those with more than 3,000 floors – of profiting handsomely by increasing rents and reducing maintenance on their properties.
Ingrid Hoffmann has suffered from the management of one of these companies for years. He moved into one of the typical prefabricated buildings in East Berlin 20 years ago. At that time it belonged to GSW, a public company that had just reformed it. He invested in improving the floors, hired maintenance personnel and collected reasonable rents in neighborhoods that are now highly valued. But in 2004 the company went bankrupt. From those years is the famous phrase of the then mayor who described Berlin as “poor but sexy.” The city, drowning in debt, saw no other solution than to sell public housing. GSW’s 65,000 were bought by Deutsche Wohnen, a real estate giant that almost doubled its portfolio of flats overnight. Today it has more than 100,000 in the German capital. One of them is Hoffmann’s, and that is why he asks to use an assumed name in this report.
“One of the first things the new owner did was double the community and heating costs,” explains the 71-year-old retiree. At the same time, it reduced services. The company eliminated, for example, the figure of the Hausmeister, a janitor or doorman who was in charge of small repairs in each building. Then came the rent increases, and Hoffmann’s € 1,200 pension began to fall short. “After paying the rent and the expenses, I didn’t have much left to live on. It was very fair and I didn’t want to throw away my savings, ”she recalls. So he looked for one of the few-hour jobs, known as minijobs, which have proliferated in recent years, both among young people and among pensioners seeking to improve their income. One of those jobs, which represents 450 euros a month, was delivering food by bicycle – “it was electric,” he says – for a well-known home delivery company during a winter when he was 69 years old.
Hoffmann has been very involved in the initiative ‘Expropriate Deutsche Wohnen and company’, born in 2018 and which has collected the necessary signatures to hold the referendum (they must be at least 7% of the electorate, according to Berlin law). He does not want to make forecasts, but the polls indicate that almost half of the inhabitants of the city are in favor of returning the houses to public management.
The legal basis for the consultation is Article 15 of the German Basic Law, which reads: “For socialization purposes, land, natural resources and means of production can be placed under a collective property regime. […] by a law that fixes the way and the amount of the compensation ”. An article that has never been used since the approval of this legal text in 1949.
Berlin would have to pay a “fair” price to real estate groups, something that critics of the measure wield as one of the biggest problems. The city is still in debt. “Mass expropriations do not create a single new apartment and do not reduce rent, but they cost taxpayers billions,” said the conservative mayoral candidate, Kai Wegner. The Social Democrats do not support yes in the referendum either: they say it would be the last resort. The Greens maintain an ambiguous position and only Die Linke, the party to the left of the Social Democrats, is in favor. The initiative has recovered a word, expropriation, which was believed to have been forgotten since the end of the communist regime. Entrepreneurs speak of “populism” and violation of private property.
“The money does not have to come from the Berlin budget,” says Reiner Wild, spokesman for the Tenants Association. The city would create a public law entity that would request financing from the banks with the value of the land and flats as collateral and would also count on the monthly income from the rentals. Many figures are handled on what the expropriation would cost: the Berlin Government has calculated 36,000 million euros; activists, between 8,000 and 11,000 million, and a recent study by two scientists speaks of a range of between 14,500 and 22,800 million.
“We don’t want to be like London or Paris in 10 years. The time to act is now ”, says Hoffmann, who foresees severe political clashes in the new government that leaves the polls on September 26. Affordable housing is one of the themes of the national campaign. The protests have directed the spotlight towards the combative German capital, but other cities, such as Munich or Hamburg, suffer even more from property speculation. “We have to ensure that Berliners can continue to live in Berlin, that no one has to leave the city because they cannot pay the rent.”
A failed attempt to control prices
Social pressure demanding affordable housing in Berlin forced Berlin politicians to act in 2019. The Coalition Government of Social Democrats (SPD), Greens and Die Linke approved rental price caps (depending on the year of construction and the reforms of the property) and its freezing for five years. Last April, the German Constitutional Court overturned the law, considering that the regional Parliament was not competent to regulate income by law. Berlin has a serious supply problem, Wild explains. “One of the reasons for the high demand is the massive immigration of more than 200,000 people between 2015 and 2019, a period in which only 63,000 flats were built, and most of them high-priced. There is a shortage of ready-to-build land, land prices are extremely high, there is speculative retention of plots and a lack of capacity in the construction sector and the authorities. The new developments need transport routes, connection with tram or metro, and that takes time ”, he points out.