German Anti-Prosperity Lunacy

You know things are bad when Berlin youth become a policy vanguard :rolleyes:

Meanwhile various US states are considering forms of universal rent control. Have people forgotten what it was like to be in a buyer's/renter's market in 2008/9 when there was too much housing supply in many of these housing markets?

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Berlin Housing Backlash Spurs Drive to Nationalize Real Estate

By Andrew Blackman
April 13, 2019, 1:00 AM EDT

In Berlin earlier this month, a blond-haired girl carried a wooden placard as she marched with her parents and thousands of others at a demonstration against soaring rents. Her sign had a stark message: “My future? Sleeping under bridges.”

The girl’s poignant protest highlights the emotionally charged nature of the housing debate in Germany, and Berlin in particular. In the capital city, where residents have been buffeted by a sudden surge in costs, a movement is gaining momentum for a radical solution: nationalizing big chunks of the housing market.


Organizers have started collecting signatures for a referendum to push the city to expropriate apartments from large landlords -- companies that own more than 3,000 units like Deutsche Wohnen SE and Vonovia SE. The activists need to collect 20,000 within six months and another 170,000 by February. While pushing the state to buy apartments won’t increase supply, campaigners argue that the measure would send a signal to landlords that they need to play fair or risk losing their assets.

The final straw for the activists came last year, when Deutsche Wohnen -- already one of the largest landlords in the German capital with about 112,000 properties -- agreed to buy 800 residential and commercial units on Karl Marx Allee, an imposing Stalinist boulevard in the former communist east. Residents fearing rent increases mobilized, and the city sought to block the deal in court.

The property company -- one of the main winners of Berlin’s housing boom -- has rejected demands to turn over its property.

“We won’t allow our assets to be expropriated,” Deutsche Wohnen Chief Executive Officer Michael Zahn said during a panel discussion in Berlin this week. “That’s just not going to happen. We’re not living in a banana republic.”

Still, the chances of the referendum’s success may not be so far-fetched. The German constitution allows for expropriation in the interests of “socialization” in return for adequate compensation. Berlin has a vibrant track record of civic activism, with a 2014 referendum successfully forcing the city to back off plans to sell parts of the former Tempelhof airfield to developers.

While most mainstream politicians, including Chancellor Angela Merkel and Berlin’s mayor, are against using taxpayer money to buy apartments, there has been tentative support. Robert Habeck -- co-leader of the Greens, the second-strongest party in Germany in recent polls -- has said state housing purchases need to be considered to counter speculation.

The risk is that such state intervention could scare away investors needed to bolster supply -- the only real long-term solution. The German construction industry association warned that compensation for expropriated owners could run to 36 billion euros ($41 billion), enough money to build over 220,000 rental units on government land.

“What we really need to do is build, build and build again,” said Stefan Koerzell, a senior official at the German Trade Union Confederation, which supports the referendum. The growing crisis is a “wake-up call” for politicians, he said at a press conference in Berlin.

Germany has the lowest proportion of home owners in the European Union, and renters are by far in the majority in Berlin. That makes rental costs a political issue. Merkel’s government has taken tentative steps by passing legislation to limit rent increases and pledging to invest more than 6 billion euros in affordable housing.

But that’s not enough for Berliners, where the growing population has pushed median rents past 10 euros a square meter -- meaning a 1,000-square-foot apartment costs more than $1,100 a month, which would still be a bargain in most other major cities.

The mounting fears were evident last weekend when over 50,000 people across Germany took to the streets to protest the housing squeeze.

On a panel with the Deutsche Wohnen CEO, Rouzbeh Taheri -- one of the leaders of the referendum campaign -- said he and other activists were treated like “pesky mosquitoes” by the property company. As public backing grows, he had a warning: “Try spending a night with a thousand mosquitoes and see what happens.”

https://www.bloomberg.com/news/artic...ze-real-estate

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German's like to nationalize things.

We have a similar housing problem here in Seattle. The main cause is that people start protesting any time someone wants to build more housing somewhere. Presumably it's convenient for the protesters, since it's often just down the road from where they were protesting the high prices that come from a housing shortage.

edit: Isn't there a lot of pressure to implement rent controls in New York these days, Dread?

Affordable housing is a growing problem pretty much everywhere.

What stands out is that one RE company can own so much property, and buy even more, creating a monopoly of sorts. Wouldn't it be better to limit how much rental property one corporation (and its subsidiaries) can own in the first place?

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Originally Posted by Wraith

We have a similar housing problem here in Seattle. The main cause is that people start protesting any time someone wants to build more housing somewhere. Presumably it's convenient for the protesters, since it's often just down the road from where they were protesting the high prices that come from a housing shortage.

edit: Isn't there a lot of pressure to implement rent controls in New York these days, Dread?

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"Main cause"? I need some sources for that.

I'd rather say that it's a very complex issue with no single main cause. Also, please don't forget that building more and more and more and more has some serious environmental issues - because it usually means that formerly green spaces will be sealed up, trees will be felled without being replaced and other issues. What cities need to do is grow vertically instead of horizontally.

You know there's only going to be opinion pieces on that. Fine, the main cause is that demand has increased and supply has not remotely kept up, and there have been a large number of projects cancelled due to protests. Though that dark spectral figure who's been going around stabbing people who force him to speak with overly precise language probably isn't helping attract developers.

Seattle has sunk beneath the ground twice now, so there are limits on how high it can build. There's still room to grow vertically, but Seattlites take a very NIMBY position on construction and horizontal growth attracts fewer protesters due to being more out of the way.

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Originally Posted by Wraith

We have a similar housing problem here in Seattle. The main cause is that people start protesting any time someone wants to build more housing somewhere. Presumably it's convenient for the protesters, since it's often just down the road from where they were protesting the high prices that come from a housing shortage.

edit: Isn't there a lot of pressure to implement rent controls in New York these days, Dread?

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One of my main litmus tests when voting in local elections in the Boston area is whether the candidate is open to more housing supply. Spoiler: very few meet that criterion.

Typically those people who protest or obstruct new construction of affordable rental apartments are not the same people who protest because of the shortage thereof. As a rule, the former also have more effective means of obstructing new construction that they find inconvenient or that they imagine constitutes a risk to the value of their own property.

Berlin, by the way, has overall been among the very best of the major European cities wrt. access to truly affordable housing. It's no surprise that Berliners are more leery of developments that appear to reflect the early stages of other cities' by now irreversible descent into total dysfunction or an extremely suboptimal equilibrium.

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Originally Posted by Aimless

Typically those people who protest or obstruct new construction of affordable rental apartments are not the same people who protest because of the shortage thereof. As a rule, the former also have more effective means of obstructing new construction that they find inconvenient or that they imagine constitutes a risk to the value of their own property.

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They're obviously not entirely the same groups, but you're underestimating the number of locals who want lower prices for themselves, but don't want to let anyone else in. "We don't want people thinking it's okay to move here" is a real thing said at many protests. The people here are outright and openly hostile to transplants*. It doesn't matter whether they're building affordable apartments or luxury condos, or whether it's on empty land, they're replacing an abandoned building, it's coming with a public park, or whatever - there's always protests. The last couple of years have seen some large developers saying they won't be building in Seattle anymore because of the number of projects that were approved and then un-approved after protests have made it too expensive to build or renovate in the city.

Mercer Island protests are totally about the land values, though.

Then there's the protests-as-pastime folks, and probably have the largest concentration of those outside of SoCal.

*The common advice for people who move into the area is that they should pretend they're only here as a tourist until they've been here long enough to count as a native.

Berliners have had cheap housing until unification because it wasn't exactly a place where people wanted to live if they were not intent on evading military service. Once the federal government got serious with making Berlin the capital it was inevitable that people with deeper pockets would be moving in and pick up the most desirable real estate. Cheap Berlin was a fantasy that ended with unification.

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Originally Posted by Khendraja'aro

I'd rather say that it's a very complex issue with no single main cause. Also, please don't forget that building more and more and more and more has some serious environmental issues - because it usually means that formerly green spaces will be sealed up, trees will be felled without being replaced and other issues. What cities need to do is grow vertically instead of horizontally.

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It is complex and multifactorial. On top of supply/demand there's population density to consider -- and how that impacts infrastructure, schools, utilities, etc.

Wiki says Berlin's population is over 3.7 million on just 344 square miles of land, roughly 2,600 people per sq mi (if my conversions are correct :noob:). Compared to where I live (not a large US urban city like Seattle or Boston) for context -- we're just under 500,000 people on 900 square miles, about 422 people per sq mi.

Those are huge differences but we have the same problems: population growing every year and not enough housing. Especially "affordable" housing. Berlin has a pretty low home ownership rate, and high rate of renters. My city is the opposite. After the housing bubble burst, many home owners became rental landlords, but there was still a great need for more apartments/townhouses to be built.

Big backlash from property owners (ie property tax payers). Protests at town hall meetings similar to what Wraith described. But it wasn't just that rental units would decrease home values -- while also increasing taxes to pay for updating roads, sewer, building more schools, etc. -- or that high rises would look like "public housing". No, it got ugly on the cultural side of things. We don't want to attract low-income people! We don't want our kids going to school with people migrating from bigger cities, or immigrants who can't speak English. :(

As our rural/farmland shrinks, the 'locals' resist zoning changes for multi-use or multi-family housing, better land management in general. It's a shame, and embarrassing to admit, but there's a racist component to their objections.

You seriously can't compare Berlin to a small US city.

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Originally Posted by Wraith

They're obviously not entirely the same groups, but you're underestimating the number of locals who want lower prices for themselves, but don't want to let anyone else in. "We don't want people thinking it's okay to move here" is a real thing said at many protests. The people here are outright and openly hostile to transplants*. It doesn't matter whether they're building affordable apartments or luxury condos, or whether it's on empty land, they're replacing an abandoned building, it's coming with a public park, or whatever - there's always protests. The last couple of years have seen some large developers saying they won't be building in Seattle anymore because of the number of projects that were approved and then un-approved after protests have made it too expensive to build or renovate in the city.

Mercer Island protests are totally about the land values, though.

Then there's the protests-as-pastime folks, and probably have the largest concentration of those outside of SoCal.

*The common advice for people who move into the area is that they should pretend they're only here as a tourist until they've been here long enough to count as a native.

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Having moved out to the burbs, that are fast becoming its own city, I've seen it all. I bought a 30 year old house in an established community but the way the city is allowing/allowed construction and expansion without support has gotten insane. I could care less about property values as long as the neighborhood is safe. I view this house as a home, not an investment to profit from. But thats lead to plenty of nextdoor arguments (the most entertaining being when some assholes wanted to bitch about the house that was doanted to an organization that helps women who have escaped human trafficking). In my 6 mile drive to work I pass 11 schools, 6 of which are charter, meaning no buses and gridlock for hours each day. Takes my wife almost an hour to get home and her drive is shorter than mine. The county approved most of the land development in these parts decades ago, and its only now being acted on, and since its already been approved there are no hearings for people to voice their concerns. All the green space is disappearing at an insane rate and no one seems to care. The county plans to reduce our community roadways from 4 to 2 lanes while expanding the surrounding roads to 6 lanes because so much traffic has found its way off the main routes trying to cut their commute down by a minute or two.

I get that people need places to live, affordable places to live, and thats seriously lacking around here, but the government has completely dropped the ball of being able to prepare for and support all the development they've allowed. I think thats a major part of what causes so much of the anger.

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Originally Posted by Hazir

You seriously can't compare Berlin to a small US city.

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No, but if you read OG's post maybe you'll see what I was getting at. Anti-prosperity 'lunacy' isn't just for Germans, and Berlin youth aren't the only policy 'vanguards'. ;)

The US has real problems with affordable housing. Infrastructure, transportation, education, and taxation are integral parts of the mix. But we don't have any comprehensive national plan that's future-oriented. Sprawl is endemic but haphazard. States (and their small towns) act as if they're independent from the US as a whole, when the truth is that we're all connected.

Florida is good example of that disconnect. It's built on swamp land....and is directly impacted by climate change/rising sea levels. But it keeps attracting people, especially senior citizens looking for an "affordable" retirement. That low cost-of-living is an illusion perpetuated by politicians. Disaster Preparedness is a pesky after-thought, and sustainable land management is a creation of tree-hugging liberal hippies that want to replace Capitalism with Socialism, dontyaknow. :bored:

Forgot to add that with the explosive growth I've noticed that a lot of community stores and food joints have been pushed out in favor of stupid boutique muffin top like places with crazy high prices. I'm talking grilled cheese that's pushing $10. So even if you manage to squeeze in affordable housing the community still ends up outside your budget. Especially for new families. Every street corner lately seems to have a micro brewery on it. It's gotten quite ridiculous.

Gentrification is a real paradox, not just for large urban cities but small towns and suburbs, too.

It can happen fast and almost go under the radar. Growth for its own sake isn't always a great deal -- it can drive RE prices up and displace people. But since the US still has a lot of land *and a heavy reliance on the automobile*, our housing problems mostly go unnoticed. Sprawl is still seen as a viable option, even tho there's no comprehensive planning or land management involved. :rolleyes:

To be fair, communists in NY and Washington have also been drinking from the stupid fountain lately. Housing makes people dumb on both sides of the Atlantic.

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https://www.thelocal.de/20190607/cou...for-five-years

Berlin considers freezing rental prices for five years

As rental prices in Berlin skyrocket, the city's senate is considering a plan to freeze the capital’s rents for a full five years, starting in 2020.

The proposed legislation, to be presented to Berlin’s Senate on June 18th, would guarantee that rents remain at the last price agreed upon by tenants and landlords.

This would mean that people moving into new flats would pay the monthly amount that previous tenants paid for rent, without facing huge price hikes as can be the case now.

It would not, however, affect social housing units or newly-constructed flats which have not yet been rented.

City development planner Katrin Lompscher (Die Linke) drafted the paper “Limitation of Rents Under Land Law” to tackle the issue of rapidly rising rents in the capital, which in some central areas are shooting up by as much as eight percent per year.

If the law receives final approval by Berlin’s House of Representatives (Abgeordnetenhaus), new tenants will also be able to have their rental costs checked by authorities to ensure they aren’t being charged more than previous tenants.

Landlords would also be required to notify authorities about any modernizations to the flat. Such upgrades would be allowed to increase the monthly rent, but only by a maximum of 50 cents per square metre.

Any increase of more than 50 cents would also have to be approved by authorities first, states the proposal.

If they failed to comply, landlords would be slapped with a fine of up to €500,000.

The Berlin Tenants' Association (Mietverein) welcomed the draft legislation - which has also been backed by Berlin's Social Democrats (SPD) and Greens - calling it "a clear strengthening of tenant protection" in a statement.

The Berlin CDU faction, however, criticized the draft as "immature and legally vulnerable," reported Spiegel Online.

This could "lead to years of dispute before the Constitutional Court," said Christian Gräff, spokesman on building policy. "Court hearings in Berlin often last for years, so tenant protection becomes a farce."

Differing policies

A complete freeze on rents differs from policies which Berlin already has in place. The ‘Mietbremse’ (rental price brake) enacted in the summer of 2015, set a cap for how high landlords in urban areas in Germany could charge above the so-called Mietspiegel, or rental average for the area.

Yet while the ‘Mietbremse’ only applies to vacant flats for rent, the new law also would cover rents regardless of whether the apartment has been rented for a long time, or whether it is free and will be let again.

Other cities have proposed similar legislation. In Frankfurt, Mayor Peter Feldmann (SPD) proposed limiting the rents of public housing companies and private landlords to one percent per year.

This failed because of resistance from the CDU, which stated that landlords would barely renovate their apartments or repair them after damage if there wasn’t enough of an incentive to do so.

There is also a problem with vacant apartments in many cities, which some politicians criticize a cap wouldn’t change. In apartment-squeezed Hamburg, similar legislation failed to pass.

Berlin housing shortage

With a rapidly growing population, Berlin is also tight on living space. Only 16,706 new apartments were built in the capital in 2018, slightly more than a year earlier.

According to experts, Berlin would have to build around 20,000 apartments per year just to create enough living space for newcomers to the city, which is growing annually at a rate of 40,000 people.

Germany’s Tenants’ Association has said that “adequate and affordable housing” is one step to solving the housing shortage.

Yet it has also called on local and federal governments to make more land for construction available - and to prevent land speculation, or the purchase of real estate in the hopes that prices increase.

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Originally Posted by Dreadnaught

To be fair, communists in NY and Washington have also been drinking from the stupid fountain lately. Housing makes people dumb on both sides of the Atlantic.

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So what's your solution? You know that "freee market" principles don't apply to "affordable housing" when land is tight and populations grow. Especially not when land speculators and RE developers heavily influence local zoning/ordinances, and will exploit tax breaks that get passed onto the public, etc.

My apartment complex was bought by a NY-based RE management company in January. They're raising rents nominally for non-renovated units (normal COL increases) and by hundreds of dollars for renovated ones. OK, that makes sense, and protects people who renew their lease from having their budget busted.

But they're also stripping out costs of water/sewer/trash that used to be included in the rent AND adding "asset liability insurance". (Different from renter's insurance.) They're using a third party to collect these 'utility asset costs' but can't explain how they're calculated. Also, they're charging pool membership (used to be an 'amenity' included in rent) but basing it on # of bedrooms (not # of people on the lease).

Needless to say, pretty much every tenant is outraged. Especially since they did NOT give the 72 days advance notice stated in our lease. It's a novel approach to make money without actually raising the rent, but not sure it's fair or even legal. (The only individual unit meters are for electricity and gas for heat.)

BTW, one of the things I liked about living in this apartment complex was its cultural and ethnic diversity -- something I didn't/couldn't experience as a suburban home-owner. But it made me sad and mad when my immigrant neighbors didn't understand what was happening, and were basically forced into a lease-renewal without a full and proper explanation of the increased costs. They were blind-sided and exploited because English is their second language, and they weren't familiar with the legal system, or their rights as renters.

(I contested the new pool membership charge by citing terms of my lease, as a legal document, that expressed the pool as an 'amenity' included in rent, so they waived the fee. That wasn't something my elderly immigrant neighbors knew they could do, so they paid the fee even tho they don't use the pool!)

Maybe that's the sort of thing that Berlin is trying to avoid with its new proposals? If there's a better way to handle that, lay it out.

Rumor has it that next year (2020) my apartment complex will start billing tenants for school taxes, making them separate charges along with water/sewer/trash and "asset liability insurance" that isn't included in rent. It's confusing and confounding :mad:

I suspect they'll try to use the school taxes (that tenants pay) as a corporate tax deduction. We can't claim it as a tax deduction on our personal tax returns, because we're not the property owners. This feels like a big fat scam without much recourse. :(

This would be highly unusual...as in I've never heard of that happening. Does your area have a separate tax for schools or do property taxes fund schools?

This seems like effectively a massive rent hike. But if you are paying a state-calculated amount of money for a local tax, I suspect you can and should claim it as a deduction on your personal tax return. A tax is a tax. If it's not, it's a rent hike.

It's PA so it's complicated :rolleyes: Our property taxes are divided into a Real Estate tax -- valuations for land and structures are plugged into an algorithm that figures costs for police/fire and other municipal services, and a separate School tax -- which varies by township and school district. It's probably done differently in every county, township, and school district.

Property tax bills are collected by the township Tax Collector, but only property owners are billed. It's assumed that some of that cost would be absorbed by tenants in their rent, and the tax deduction would only go to the property owner, but this idea is ridiculous if true. Maybe it has something to do with the recent cap on property tax deductions ($10,000 for single family homes, not sure what it is for commercial or rental properties) and this company trying a scheme to run-around rent hike rules? :confused:

Oh hey, let's just wave our hands and reduce rents. Also prohibit building and raise taxes. This seems reasonable.

https://amp.dw.com/en/berlin-landlor...nts/a-55704047

Well this has been interesting and instructive :haha:

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Berlin’s Rent Controls Are Unconstitutional and Worse
Germany’s highest court has nixed one of the world’s most draconian rent caps. That’ll only fire up the controversy more.

By Andreas Kluth
April 16, 2021, 1:00 AM EDT

As the late Swedish economist Assar Lindbeck memorably put it, “In many cases rent control appears to be the most efficient technique presently known to destroy a city — except for bombing.” And yet that’s never kept economic populists from passing new rent curbs.

One of the most radical such attempts, watched by cities all over the world, was enacted last year in Berlin. This week, however, Germany’s constitutional court ruled that the law is null and void. In the short term, this will cause even more chaos in the city, forcing many tenants to pay back rents. Worse, the judges’ reasoning won’t put the controversy to rest but stoke it instead, making rent controls an unfortunate hot-button issue in this election year.

Over a year ago, Berlin’s all-left government of the Social Democrats, the Greens and The Left — a party that largely descends from East Germany’s communist regime — passed a batch of rent caps. For all buildings erected before 2014, rents were frozen for five years at what they had been in June 2019. Rents defined as excessive were reduced.

Economists all over the world rolled their eyes. Rent controls, like all price fixing, cannot address the fundamental problem of a mismatch between supply and demand — only more supply can do that. Instead, caps simply create shortages in place of high prices.

Using charts from the Ifo Institute, a think tank, I showed the consequences unfolding in Berlin while the law was in place. Only one group benefited from capped or lower rents: existing tenants of old apartments, even the well-heeled ones. Everyone else lost, either paying even higher rents or being locked out of the market altogether.

That’s because tenants of regulated apartments stopped moving out, and the few units that did come on the market were sold in a hurry rather than re-let by their landlords. The overhang in demand — all those frustrated house hunters — converged on the unregulated units, whose rents soared even faster than before. Many found no accommodation at all.

Meanwhile, several opponents of the legislation were suing in the courts. Some focused on fundamental issues such as the law’s impingement on property rights. But the case before the constitutional court in Karlsruhe — brought by politicians from the center-right Christian Democrats of Chancellor Angela Merkel and the pro-business Free Democrats — pursued a different logic.

What it argued and what the judges confirmed was that in Germany’s federal system the 16 states, including Berlin, have no business legislating matters that are already covered by federal law. And there’s already a lot of national housing regulation, albeit less ambitious than Berlin’s attempt. Because the city-state’s law conflicted with federal statutes, it therefore never took effect.

This verdict will satisfy few people and enrage many. Many tenants now have to pay arrears for which they didn’t save. This could become social dynamite. Moreover, the rent controls’ creeping long-term distortions of the market won’t now become visible, allowing the radical left to perpetuate the urban myth that they would have saved Berlin’s struggling tenants, if only conservative adversaries and judges hadn’t interfered.

Already, politicians of the three left parties have concluded that the answer to this week’s court verdict is to go ahead with the same draconian rent controls at the national level. They will make this one of their rallying cries leading up to the election of Sep. 26, alongside calls for new wealth taxes — also ruled unconstitutional in Germany in the 1990s. The hard liners of the three left parties will wage a campaign that’s economically illiterate and populist.

This will put moderates on the center-left in an uncomfortable spot. In particular, the two charismatic and thoughtful leaders of the Greens, Annalena Baerbock and Robert Habeck, were rather hoping to steer clear of the old pseudo-Marxist propaganda. They want to get to grips instead with the pandemic and with their core issue of climate change. And they want to stay open for coalitions in all directions, even with the center-right. Now they’ll have to appease the lefties in their own ranks.

https://www.bloomberg.com/opinion/ar...-irresponsible

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Unsurprisingly, the Guardian min Hezbollah propagates opinions that this law was a success based on the single metric controlled by the legislation: https://www.theguardian.com/commenti...andlords-empty

https://imageproxy.ifunny.co/crop:x-...25a2be13_1.jpg

Ah yes, the old "landlords are all rich people so we can eviscerate property rights" trope that seems to somehow lead to more expensive, poor-quality and ossified housing markets.

Dreadnaught thinks landlords cause house prices to go down?

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Originally Posted by Steely Glint

Dreadnaught thinks landlords cause house prices to go down?

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Constructing more housing causes house prices to go down.

House prices go up when you have a massive increase in housing demand due to demographic changes or population growth, without a commensurate increase in housing construction.