Under the slogan “Join Together – RESIST Displacement and Rent Madness”, demonstrators met in Berlin on April 14 and marched from Potsdamer Platz to Kreuzberg and Schöneberg to protest against the rise in residential rents in the capital. They demanded a “radical change in housing and rent policies” and a renunciation of the housing business model in which the construction of new housing is motivated by the prospects of a high return on investment.
Following decades of Sleeping Beauty-like inertness, Berlin’s rents have in recent years indeed begun to approach the level of big cities, particularly in fashionable neighborhoods – though the rents are still worlds away from the price levels prevailing in, for example, Paris or London.
New-build targets missed due to bottlenecks with building permits
Has housing in the hip inner-city quarters meanwhile really become, as the demo initiators claim, “unaffordable”? Obviously not, because all of the more or less luxuriously renovated apartments are not vacant, but selling like hotcakes. So they are quite affordable, but not for everyone. Particularly families with average incomes can now afford housing only in outlying, less desirable districts.
The only remedy for this problem lies in energetically expanding new construction activities, but there is little prospect of this happening. Between January and November 2017, fewer building permits for residential projects were issued than in the same period of the preceding year. “Against this backdrop, the proclaimed goal of 1.5 million new apartments in the next four years seems utopian”, warns Dr. Andreas Mattner, President of the German Property Federation (ZIA).
Enormous investments required to build own home deter young people
Who is supposed to build desperately needed housing? If the demonstrators were to have their way, investors looking for a return should not be an option because housing should not be a source of profit. So what about the people looking for housing themselves? In terms of its property-ownership ratio, Germany traditionally lags far behind its European neighbors. This is due not least to the dense web of cost-magnifying regulations that make residential construction here in Germany much more expensive. As Mattner explains, “In 1990 Germany had around 5,000 building regulations, while there are now more than 20,000”. What is more, building plots in sought-after locations are scarce and commensurately expensive. As Jacopo Mingazzini, Chairman and CEO of ACCENTRO Real Estate AG, points out, the high capital requirements consequently placed on prospective buyers have the effect of stymying the efforts of young people in particular. Towns and cities face the same problems when trying to respond to frequently voiced requests to expand the construction of subsidized housing: communities, too, are subject to both the scarcity of building plots and all applicable building regulations. It is, therefore, doubtful that they should be able to build for significantly less money than private investors. Moreover, the routinely seen trend in the costs of public building projects does not exactly inspire confidence in their having a construction-cost advantage over private projects.
That is why the ZIA has called for a number of measures to stimulate housing construction: rapid allocation of inexpensive building plots, faster building permit processes, lower property acquisition taxes and reduced bureaucracy.
Yet even if all of these measures were to be implemented quickly, all those searching for housing must realize that Prenzlauer Berg, for example, simply cannot accommodate everyone.