German elections last Sunday saw the success of a sweeping attempt to stop a housing crisis. In Berlin, the city’s skyrocketing rents and leftist politics came together to produce a referendum, approved by 56% of the city’s voters, which calls on the city’s governing body to socialize much of its housing stock. In the wake of a failed city rent control law that entered into force in 2020 but was struck down by Germany’s highest constitutional court a few months later, the latest measure is likely to cause serious collateral damage and provides a worrying sign of how many voters will choose stagnation if the alternative is capitalism.
According to a website put in place by the organizers, the referendum “Expropriate Deutsche Wohnen” (referring to a large real estate company) calls on the Berlin government to socialize around 240,000 apartments belonging to large real estate companies, which represents 12% of the total stock of rental housing in the city. “More big dividends for shareholders paid on our rents”, promise the organizers. “We can only end the housing crisis if we re-administer living space for the common good.”
The newspaper Zeit given More details. The referendum was backed by two of Germany’s six main parties: the far-left Die Linke and, under certain conditions, the more moderate Greens “as a measure of last resort if other attempts to cool the rental market fail”. Referendum organizers estimate costs between 7.3 billion and 13.7 billion euros, based on the dubious assumption that apartments could be legally acquired well below market value; they also claim that the socialized apartments could be rented at a price of 4.04 euros per square meter per month, less than a third of the city’s average market rate.
The rents that trigger such drastic measures are, in absolute terms, not that high. A report from the real estate listing service wohnungsboerse.net estimates that an average 60 square meter Berlin apartment (about 650 square feet, a typical size for a bedroom) cost 12.83 euros per square meter per month in 2020, or about $ 900 per month in total, which is quite low compared to American cities such as New York, or with many other European capitals. Average rents in Paris, for example, are around 35 euros per square meter. But rents in Berlin are still much higher than in the recent past: wohnungsboerse.net reports that in the last ten years alone, rental prices in Berlin have doubled, an increase much faster than the national average.
The underlying cause, as noted by many German commentators, is the legacy of a massive deficit in housing production. Emigration to West Germany after reunification in 1989 left Berlin in the 1990s with a surplus of cheap apartments that drew bohemians from all over Europe. But the influx of new Berliners, combined with slow construction, has since overwhelmed the existing housing stock. A report by the Berlin Ministry of Urban Planning finds that only around 4,000 new residences were built per year in the 2000s, with a nadir of 3,200 in 2006. For a city of around 3.5 million inhabitants, this is a much lower rate of new housing construction per capita than that achieved over the past decade by all major US cities except Detroit.
The pace of construction in Berlin has picked up in recent years, with 19,000 apartments completed in 2019, but still not enough. A report an independent economic research institute suggests that Berlin should have built an additional 80,000 apartments per year over the past five years to meet demand. A 2019 item by Jens Sethmann in the magazine of the Berlin Tenants Association called the Berlin construction boom a Aufholjagd– basically a race to catch up – and argued that other measures such as rent controls, then hotly debated, would be needed at least in the short term.
The housing shortage in Berlin has a few specific local causes. Sethmann notes, for example, that land speculation has delayed the start of many projects with legal approval: once a plot of land receives a building permit, its value increases sharply and it becomes an attractive object for speculators.
But one big reason will sound familiar to Americans: Longtime city dwellers are on the defensive to keep their neighborhoods from changing. A 2018 story in the Berlin newspaper Der Tagesspiegel, for example, reported on a protracted struggle by residents of Ilse-Kiez – an area of poorly developed mid-rise apartment buildings eight kilometers by direct train from central Berlin – to stop construction on the area’s open fields by Howoge, a company development owned by the city responsible for building apartments for rent at below market rates.
Leftist tendencies in Berlin give much of the housing opposition a green tinge, especially since the politically mainstream of German environmentalism is still the hippie anti-industrialist of the 1970s (the Green Party , for example, wants shutter German nuclear power plants). The leader of the Greens in Berlin, for example, has offers retain an undeveloped field near city limits for small-scale urban agriculture rather than housing. Berlin supporters of Die Linke and the Greens are also less likely than supporters of other parties to partially support redevelopment from the old Tempelhof Airport, currently a square mile of barren land used as a park.
Indeed, two aspects of housing policy in Berlin run parallel to the leftist opposition to new housing in the United States: a questionable environmentalism and a demagogic insistence that housing problems can be solved by doing so. holding on to a handful of capitalists. Not so long ago, for example, Alexandria Ocasio-Cortez co-signed a letter opposite a development project in Inner Queens with a long list of leftist rhetoric, including complaints about the project’s lack of climate compliance (although all new buildings in Queens are more environmentally friendly than the practical alternative of buildings in the suburbs). Likewise, it has become a common topic of discussion on the left that homelessness could be addressed simply by redistributing existing vacant housing to homeless people, rather than letting developers take advantage of new housing. (Like Darrell Owens, a housing activist in California, points out, this argument misinterprets the statistics of vacant homes: a majority of homes listed as vacant in census reports are simply vacant for a short period between tenants and sellers, and most of the rest are abandoned homes, often in impoverished remote areas.)
Berliners only need a two-hour flight north to see the results of onerous rental regulations combined with construction shortages. Stockholm has a rent control ordinance so strict that it makes housing functionally socialized: to get an apartment you have to go to a government office and spend years on a waiting list. (waiting time mean years, up to 20 in some neighborhoods.) Rent control works well for Stockholmers, but at a high cost: Stockholm’s free housing market is so small and expensive that the workers there often install find longer stays in cheaper hotels. And the housing shortage has not only dissuaded innovative companies to settle in Stockholm, but has also been recognized by the Swedish government as an obstacle to the integration of immigrants.
Shifting housing from the market to bureaucratic control can reduce housing burdens for insiders, but it reduces the openness to outsiders that makes cities vibrant in the first place. The success of the referendum on the expropriation of Berlin and the applause it received from left-wing activists outside Germany are disturbing.
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