D.he time is of the essence. The Berlin Senate wants to buy 20,000 apartments from the Vonovia and Deutsche Wohnen housing groups and transfer them to its state-owned companies. The deal, which is expected to cost more than 2 billion euros, is part of the planned merger of the two companies. But because it is not clear when the shareholders will approve the transaction, the red-red-green state government is now putting pressure on it. The appraisal should be ready by mid-August and the negotiations should be concluded “promptly”. Elections will take place at the end of September not only at the federal level, but also in the state of Berlin. Politicians like to signal: We are doing something against rising rents.
But, is this really the truth? The main reason for the sharp rise in prices on the property market in recent years is the lack of supply in terms of demand. A survey by the FAZ among the ten largest German cities shows that the ambition to create more living space is not the same everywhere. Frankfurt is one of the positive examples.
Housing problem in cities with many newcomers
The number of apartments in the financial metropolis has increased by more than 6 percent since 2016, from around 378,500 to 401,900. The latest figures date from 2019, so a few more apartments are likely to have been added in the meantime. Hamburg follows in second place, where the housing stock grew by 4.1 percent between 2016 and 2020 to 976,900. For comparison: the number of inhabitants increased by only 2.3 percent during this period. But something has also happened in Berlin: there are 3.5 percent more apartments there than in 2016, around 1.98 million. The population grew by 2.5 percent.
In cities such as Cologne, Stuttgart, Dusseldorf and Dortmund, on the other hand, the housing supply increased by less than 2 percent. There, however, the number of residents has only increased slightly recently. Essen has shrunk slightly since 2016. This could be an indication that the housing problem is concentrated in a few cities with a comparatively large number of newcomers, while elsewhere there is no longer so much need to build more. One city in which the situation is tending to worsen is Leipzig: The city has had 4.6 percent more inhabitants since the end of 2016. The housing supply, on the other hand, only increased by 2.8 percent.
More state-owned apartments again
The CDU / CSU and SPD had set 1.5 million new apartments as the target for the legislative period in spring 2018. If the Federal Minister of the Interior, Horst Seehofer (CSU), is responsible for building policy, it will be achieved. However, the calculation only works if those apartments are included that only exist on paper. The construction overhang – that is, apartments that have been approved but not yet built – is estimated at more than 700,000 apartments throughout Germany.
Because it is becoming apparent that it will probably take years before the supply in the sought-after cities can keep up with demand, the SPD, the Greens and the Left are promising more protection for tenants in their election programs. This includes a rent cap, as Berlin tried to do until the Federal Constitutional Court denied the state the authority to do so. Another aim of the parties is to increase the number of government-owned apartments, as was the case before the big sell-off in the 1990s. “Many cities need a realignment towards a housing market oriented towards the common good,” says the Greens, for example.
In Berlin, the six state-owned companies recently owned almost 17 percent of the housing stock. In Hamburg, the share of municipal SAGA is almost 14 percent, in Frankfurt ABG and Nassauische Heimstätte together have 68,000 apartments, around 12 percent of the total offer.
Munich remains the front runner
The efforts that cities are making to increase their own holdings are not only shown by the current purchase debate in Berlin. For years, the districts in milieu protection areas in the capital have been exercising their right of first refusal when a property is for sale. According to the Finance Senate, a total of 50 pre-emptive rights in favor of state-owned housing associations were exercised between 2017 and the end of 2020. These comprised 1471 apartments. The costs for the pre-sales amounted to 278 million euros, which results in almost 190,000 euros per apartment. The state of Berlin granted grants of 38 million euros.
Other cities also rely on the right of first refusal, albeit to a lesser extent. By the end of July this year, Hamburg exercised the right of first refusal for a total of 367 apartments. According to the city development authority, the costs amounted to 100.5 million euros. The undisputed front-runner in Germany has significantly higher sums of money when it comes to rent levels and property purchase prices: Between 2016 and May 2021, the city of Munich purchased 934 apartments by exercising pre-emptive rights. This cost around 515 million euros – more than 550,000 euros per apartment.