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TOO GOOD TO BE TRUE?

Updated: Nov 13

On Berlin’s housing crunch – and responses to it


by Nancy du Plessis

Photo: Mark König. Source: https://unsplash.com/photos/HfGCLGHXsT0

Introduction


Housing is a big issue in Berlin – as in most cities. But that wasn’t always the case. For some years after reunification in 1990, apartments were plentiful and rents cheap. After all, in the old/new capital, salaries were significantly lower than in many other major cities – and the rest of Germany. They still are. But people who come here now with high hopes and great expectations discover that it’s hard to find an affordable place. However, it’s long-time Berliners who especially suffer from rising rents and gentrification, whereas inward migrants – from western Germany and abroad – working in the start-up scene can benefit from Berlin’s “economic supercycle”.

In this article I consider the main housing issues, focusing on my Kreuzberg neighborhood, two significant rent laws and a few promising campaigns. For 40 years, the district of Kreuzberg was the neglected periphery of West Berlin. In addition to young men fleeing the draft and people coming to enjoy lifestyles frowned upon in the rest of the Federal Republic, the district’s war-torn housing also accommodated the mostly Turkish “guest workers” recruited to rebuild the German economy. The groups interacted and cooperated, and alternative projects, including many squats, flourished.

During my first visit to divided Berlin, I was struck by the wealth of inventiveness and diversity in Kreuzberg and decided I’d live there one day. Reichenberger Kiez has now been my home for 16 years. But Kreuzberg has become central and gentrification (the process of changing the character of a poor urban area through the influx of wealthier people), appears to be progressing fast here.

At the beginning, the corner playground’s oriental embellishments seemed a nod to the people using it. Since then, however, their profile has changed completely: White parents outnumber Turks and Arabs by far. The playground design now reads like an Orientalizing gesture to the neighborhood’s past. Observing the newcomers and recalling the numerous evictions of mostly migrant residents from my kiez over these years, I wince. Protest has been massive, but it hasn’t sufficed. Kreuzberg is being gentrified beyond recognition.

Financialization

The major driver of this development is the financialization of virtually everything. Interest levels make loans cheap and push everyone who can invest to put their money into property. Bank savings are from yesteryear, and bricks and mortar more stable than stocks. Berlin’s reputation for having rock-bottom real estate prices has attracted masses of bargain hunters.

Ten years ago, an Italian friend complained about compatriots coming for weekend property-shopping sprees. Since then, insurance companies, major pension and investment funds and international real estate groups have also discovered Berlin. One of them recently bought the large apartment house on my corner that has a hugely popular neighborhood bar on the ground floor. Yet as the recent exhibit about “the issue of land” at the German Architectural Center (DAZ) explained, many of the same people hunting for housing in Berlin have investment and pension plans that are snatching up city real estate even as they scour the listings.

Living places in Berlin

More than 85 percent of Berliners live in 1.5 million+ rental apartments. As of March 2019:

  • Almost 55 percent of them belonged to professional owners (private enterprises, public housing corporations and housing associations);

  • 40 percent were owned by private persons and community associations, according to Immobilien Manager.

  • Interestingly, 5 percent of the owners were “unknown”: Shell companies make it difficult for tenants to effectively contest sales.

  • Some 230,000 rental flats belong to publicly traded companies that are raking in huge profits. More about them later.

Berlin property values have been rising steadily for many years now. Undeterred by the coronavirus pandemic, investors continue to shell out good money here. After all, Berlin is a global brand. At the same time, every sixth Berliner household pays more than 40 percent of its net income for housing:

“Berlin’s residential base is broadly made up of low to middle-income earners. In fact, more than half of single-person households in Berlin earn less than 16,800 euros ($18,000) a year.” (DW, 21 July 2017).

Despite an overall trend of rising incomes, this population can’t afford condominiums. The price of apartments is rising even faster than rents.

One federal measure implemented to slow huge rent increases was the five-year “Mietpreisbremse” (rent control) for leases signed after 1 June 2015. That limited prices to 10 percent above comparable rents – in buildings finished before 2015. The website <wenigermiete.de> claims that three quarters of all landlords are not complying with the law. When, in 2019, the law clearly had had little effect, it was extended through 2025 and the rent hikes permitted for modernizing occupied apartments lowered from 11 to 8 percent.

With buildings costing 30 to 40 times what rentals return in a year, new owners inevitably undertake costly modernizations and jack up rents … in order to get vacant apartments, which they can sell at a premium. With modernizations of empty apartments uncontrolled, landlords try to get rid of their tenants using the carrot – offering a sum to terminate the lease that’s far too little for a comparable apartment – or the stick. One nasty ruse that’s growing in popularity is for a landlord to claim to need an apartment for personal reasons. That’s very hard to disprove.

The German language has a word for “getting rid of tenants”: entmieten. One hears this a lot! Already in 2012, tenant associations observed that landlords no longer regarded their long-time tenants as positive signs of stability: They were seen instead as hindrances to profit maximization.

Beyond the housing crunch caused by speculation, Berlin’s lack of affordable flats is due to the shortsighted idea of filling city coffers by selling half of its social housing for a pittance. In 1990, East and West Berlin together had 650,000 public housing units. By 2005, only 273,000 were left. The big housing companies that snatched them up are doing very well! A 2019 study by the Tagesspiegel and Correctiv found that between 2012 and 2018, the share value of Berlin’s largest owner of public housing - Deutsche Wohnen, (115,612 apartments), had quadrupled. During that period, Vonovia, Germany’s largest private housing corporation (with 41,943 apartments in Berlin), saw its stock value triple. That of the much smaller private Grand City Properties (8,141 units), had increased nine-fold. For comparison: In the same period, the “DAX” index of the most important corporations in Germany, had increased by just 60 percent.

Moves to a housing referendum


Deutsche Wohnen regularly neglects basic maintenance such as heating and functioning elevators for high buildings. Yet it undertakes unnecessary and expensive modernizations that price long-time tenants out of their homes. In an effort to stop it and forewarn other “sharks”, the “Deutsche Wohnen & Co. enteignen” campaign seeks to bring a referendum to the public. This is to be on expropriating the approximately 240,000 apartments belonging to Deutsche Wohnen and other publicly traded housing companies with more than 3,000 units each. Most of these flats – now belonging to companies whose stocks are performing beautifully – used to belong to Berlin.


Campaign initiators view profit-oriented housing as a structural problem, and charge that Berlin is neglecting its responsibility for social welfare. Noting that all previous measures undertaken by the city have failed to halt rapidly rising rents and homelessness, campaigners invoke Article 15 of Germany’s Basic Law. This foresees a possible law for expropriation, along with articles in Berlin’s constitution ensuring each person’s right to live with dignity in decent housing. Despite horrified reactions and massive PR efforts to derail the campaign, housing for the common good has become an acceptable topic for discussion.

Practices of large investor groups


However, the majority of Berlin apartments would not be affected by the referendum, and a difficult situation is getting worse and worse. Figures about massive new purchases by global real estate actors are overwhelming, and changing so swiftly that it’s difficult to maintain an overview. The investor group Heimstaden Bosta AB, one of Sweden’s largest private housing companies, is candid about wanting to become a major player in Berlin real estate. It recently announced its purchase of another 130 apartment buildings (3,902 units) for EUR 830 million. Since 2006, its local partner, the Skjerven Group, has paid over EUR 1 billion for housing in Berlin. That according to the website of Fünf Häuser – a group of tenants-turned- housing-activists whose buildings have been acquired by Heimstaden.

The buildings are located in areas designated as “Erhaltungs-” or “Milieuschutzgebieten” whose social composition is to be maintained. Once a potential buyer sets their sights on a building in a protected area, the local council can attempt to persuade them to sign an “aversion agreement”. That is to respect the (fairer) rental practices of city-owned housing companies and not evict tenants. Heimstaden claims to have its tenants’ best interests at heart but tellingly refuses to sign an Abwendungsvereinbarung; other Heimstaden tenant experiences belie the company’s professed good intentions.

Alternatively, the district can exercise its Vorkaufsrecht to pre-emptively buy the property – usually by finding a state-owned company to foot the bill. In early October 2020, the Friedrichshain-Kreuzberg Bezirksverordnetenversammlung (BVV) or local council recommended increasing the practice of pre-emptive buying. Three weeks later, an alternative buyer was found for one of the many buildings on Heimstaden’s long list. It sounds too good to be true! What about all the other buildings?

Compounding the problems caused by speculative investment is the wholesale removal of rental apartments from the market. Airbnb vacation flats are the most glaring example, with entire buildings rented by professional landlords – firms with massive turnovers. Despite several years’ efforts to control this market, the local broadcaster RBB24 recently reported that four-fifths of Berlin Airbnb offers are illegal.

Another way to take rental apartments off the market is to turn them into furnished apartments with short-term leases for many times the cost of rental apartments. With leases running a minimum of two months (but less than one year), these offers are not considered “holiday apartments” and can thus skirt Airbnb restrictions. Furthermore, the “all inclusive” rent obscures what’s charged for the apartment and what for the furniture, making it harder to contest illegal rents. Finding an apartment offered by these services is a cinch: online, with a credit card. No standing in line with 100 other desperate people, no need to certify your ability to pay.

Usually entire buildings offer furnished apartments; Berlin’s own “Berlinovo” housing company claims to manage 6,900 units. The website of “Wunderflats” favorably compares its model to Airbnb and explains in detail how to avoid illegal “misappropriation” (Wohnraumzweckentfremdung). However, another platform seems unconcerned about extending leases and exceeding the one-year legal limit, thus belying the need for “temporary” housing. Fünf Häuser reports that in recent years many of their apartments have been converted into furnished flats.

Rent caps


With rents continuing to spiral out of control, in February 2020, a city law capping rents for five years (the “Mietendeckel”) entered into effect. Although student dormitories, buildings ready for occupancy after 1 January 2014, public housing, housing refurbished with public funds and commercial properties are not covered, 90 percent of Berlin apartments are. The ceiling applies to 18 June 2019 rents. A hardship clause allows landlords to charge more if they can show that the rent cap renders their property financially unviable and will cause its physical degradation.

The rent cap requires landlords to unilaterally lower all basic rents that are more than 20 percent above rent levels established by Berlin’s Department for Urban Development and Housing (Stadtentwicklung und Wohnen) on 23 November 2020. Failing to do so can cost EUR 500,000. Because there’s no guarantee that landlords will comply with correct calculations, tenants who believe their rents are too high should become pro-active and take advantage of the free advice for tenants offered by each district. But instead of simply paying less, it’s advisable to first ask the landlord to reduce the rent and file a complaint if they don’t.

The Bundesverband Freier Wohnungsunternehmen (BFW), which represents the larger profit-seeking companies, estimates that 31 percent of all their rents will have to be reduced – by an average EUR 1.40 per m2. According to the Berlin Tenant’s Association (the Berliner Mieterverein, BMV), charitable associations, cooperatives and smaller landlords usually do not charge inflated rents and are unlikely to have to reduce rents on that scale.

Tenants who benefit from rent reductions are urged to put aside their savings in case the Federal Constitutional Court rules against the rent cap. A decision is expected in the first half of 2021. Thus far, most district courts have ruled in favor of the new law or postponed cases. While conservatives and free marketeers loudly protest that these issues are regulated federally, such powers were in fact transferred to individual states in 2006. Objections that the new law infringes on owners’ property rights are considered indefensible by Berlin’s government and the BMV. They cite the scarcity of flats, high rents and huge rental market distortions as justifying a rent cap. The ins and outs of the law are explained in both German and English on the BMV website.

Regardless of its legality, the rent freeze is scheduled to thaw. In 2022, rent increases up to 1.3 percent of the 18 June 2019 amount will be allowed, with the exact figure still to be determined. However, landlords will be able to pass along fewer modernization costs in the future. Still allowed are insulating the building, installing an elevator and making apartments wheelchair accessible. Marble bathrooms are not.

The rent cap’s uncertain legality and continued demand for housing has created the phenomenon of “shadow rents” – rents significantly higher than what is currently allowed that the landlord agrees to waive temporarily. Assuming that the rent freeze will be ruled illegal, landlords require prospective tenants to pay the difference between the capped and the shadow rent into a fiduciary fund to insure payment of “arrears”.

Nine months into the Mietendeckel, the number of rental vacancies covered by the rent cap have dropped by 40 per cent and the number of apartments for sale has risen, according to ImmobilienScout24. Its manager, Thomas Schroeter, claims property owners have decided there’s just too little money in renting. In February 2020, as the law was entering effect, Jochen Möbert of Deutsche Bank Research* named what the rent cap does not redress: “a shortage of residential space” (200,000+ apartments): “A real estate boom in a relatively poor city brings a lot of downsides. The expropriation/rent cap shock could work. However, this requires […] a modern leftist housing policy, which implies a focus on new construction pursued with the very same vigor as the rent cap.” [my emphasis]

Does that sound too good to be true? Möbert cites a study on local construction costs that maintains that costs “for municipal housing corporations are well below the selling prices for newly-constructed residential space” and concludes, “The city’s incentives to expand its new construction activities are accordingly high.” You just have to want to do it.


Back to my kiez


Luxury condominiums in place of old, unrenovated flats attract a new population with deeper pockets who squeeze out long established residents and also price out less-well-heeled newcomers. Everyday services, family-run businesses and cultural icons, such as the Kisch & Co. bookstore in Oranienstraße, give way to expensive shops and bigger, more sophisticated eateries and bars – and the kiez gets featured in Trip Advisor. The quirky venues for alternative culture, like the tiny performance spaces and cafés that once dotted the neighborhood, are supplanted by cookie-cutter “trendy” locales. “Free spaces” like the Meuterei bar, where strategies and solidarity actions are planned, vanish. Not least, neighborhood walls also change, as I discovered while postering one night: Many renovated facades are coated with a non-stick finish. Recalcitrant residents are not only unwanted, they’re also prevented from publishing their protest. Berlin street photographer Jürgen Große’s 2008 album is full of unique and witty scenes; his recent “Works in Progress” – buildings covered by scaffolding and tarp. Ho-hum. Gentrification is sooooooo boring!

Back in 2008, a blatant harbinger of change in my kiez was the new building in which residents can take their cars home in a special elevator. CarLoft GmbH explains [it’s] “In the middle of the big city but like in your own house in the country”! No need to walk in the street – much less use the stairs. Gentrification denies and limits the mix of lifestyles that make city life so exciting and rewarding. It suburbanizes cities.

Hermannplatz Karstadt development

A major gentrifying project in walking distance from my home concerns the Karstadt on Hermannplatz – part of the German department store chain that once shaped many city centers. In May 2019, plans for the building aroused hefty protest and “Initiative Hermannplatz” started to organize rallies and round table discussions and collect signatures. Signa Holding, a major pan-European real estate group founded in 2000 by Tyrolian entrepreneur René Benko, had bought Karstadt in 2014. It then split the business from its property, a move that allowed for inflating rents, rendering the stores unprofitable. Benko is interested in making the most of his prime real estate – not in retailing.

Aside from questions about how Benko amassed his wealth so quickly and overlooking his proximity to the Austrian rightwing extremist party FPÖ, his Hermannplatz Karstadt project spells radical gentrification of the heavily migrant neighborhood that straddles Kreuzberg (the Karstadt building) and Neukölln (Hermannplatz) and hollows out local authority. The plan is to destroy the current structure and rebuild a much larger one clad with the 1929 façade. Drawings by the architectural office of David Chipperfield highlighted the reconstruction of the original large roof garden with a crowd enjoying the space – that bears no resemblance to neighborhood residents.

Just what would be inside the new/old building remains unclear. Each objection is deftly countered, including that destroying a large functioning concrete structure is environmentally indefensible: Signa will build without concrete! Affordable housing has been added to the plans, a few non-white faces inserted into project drawings. Signa promises 2,000 new jobs, 600 new parking spaces for bicycles, 3,500m2 of new space for the common good. All that is too good to be true. In Stuttgart, where Signa was permitted to raze and reconstruct an old Karstadt, it left the store out of the new building. A huge investment has to earn a giant return.

Signa’s expensive PR assault has included an exhibit about the history of Karstadt on Hermannplatz featuring historic photos and objects, mannequins in Roaring 20s dresses and a guestbook. The comments – mostly from tourists – were clueless. But they provide Signa with enthusiastic quotes. Signa also opened a café for “brainstorming” in the open space behind Karstadt and a shortcut bike lane through the block. Now huge banners hang on the façade: “Not Without You!” – and to demonstrate its closeness to Neuköllners, Signa recommends visiting local community gardens. When gardeners protested the co-optation, Signa linked to their statement on Facebook – because “We rely on dialogue and transparency”. Sounds good! Time to rehang the banners with critical messages from tenants facing Karstadt on Hermannplatz that were removed under threat of eviction.

For years, Karstadt employees have been asked to make more and more concessions to keep their stores open. When the coronavirus pandemic eliminated in-store sales, Signa had the perfect excuse. This past June, news that 62 Karstadt stores throughout Germany would be closed for good caused panic in many city halls. But on 3 August, in exchange for “saving jobs” for three to 10 years at four Karstadt stores in the capital, representatives of Berlin’s coalition government signed a letter of intent supporting three of Signa’s mega-projects, including Karstadt on Hermannplatz! (The others are high rises on Kurfürstendamm and Alexanderplatz.) That was no swap, it was a sell-out – in which the city also assumed Kreuzberg’s building authority. The new Senator for City Development and Housing, Sebastian Scheel (Left Party), said in a private meeting that the district remains in charge of Karstadt’s construction plans. For now.

Berlin’s government also fell for Signa’s argument that Hermannplatz should become “significant” for the whole city “again”. That translates into destroying inner city neighborhoods inhabited by poor people and those with moderate incomes… to draw more tourists. Attracting tourists in great numbers to residential neighborhoods is always a mistake, and in the age of pandemics, relying on tourism is plain unhealthy.

Furthermore, Signa’s interest in renovating Hermannplatz and redesigning the traffic flow is dangerously reminiscent of public-private schemes in other cities, where well-funded unelected sources gained authority over public spaces that were eventually closed to the general public. Involving Signa in planning decisions beyond the boundaries of its property is risky. Signa says that it’s got enough money to wait out the protest.

In fact, the fate of Karstadt is only part of the gentrification around Hermannplatz, witness the new and unusually high apartment buildings on Hasenheide. In old factory premises there and in Reichenberger Kiez, eviction notices have been sent to tenants, including artists, who can’t afford to pay triple rent prices.

Tenants feel pinched… and small businesses crushed. Commercial property has no protection from exorbitant rent hikes. When family shops on Kottbusser Damm and elsewhere are forced to move or close, older shopkeepers in particular suffer a radical loss of income and poorer retirements. As for culture, the legendary Moviemento, Germany’s longest running movie theater and host to unique film festivals, is also threatened with eviction.

These developments are not following laws of nature. Neglect and greed are destroying what Kreuzberg/Nord Neukölln once embodied and the lifestyles it fostered.

That said, organized protests have led to some successes (at least provisionally): Google Campus was convinced to not open its “community of start-ups” in the old electrical substation on the Landwehrkanal, and a big hotel and hostel complex on Skalitzer Straße was cancelled in favor of space for Kreuzberger businesses and shops. Outcry over the threatened eviction of a bakery and meeting point for locals ended with a new and better lease, and landlords’ bogus claims of “Eigenbedarf” have been exposed. The new owner of the house on my corner has even signed an aversion agreement. Not without a fight!

What you can do:

First, inform yourself (and learn German). Never unquestioningly accept undocumented rent increases or extra charges. Building managers are famous for adding unauthorized sums to the annual Betriebskostenabrechnung (utility bill). Failing to challenge them makes you, too, guilty of driving up rents. But you are not alone: For a membership fee, BMV counsellors provide very thorough advice (and even type your letters to the landlord) and legal defense, as well as a monthly magazine.

Join one of the countless groups fighting the myriad drivers of gentrification. These include Deutsche Wohnen & Co. enteignen, which in February 2021 will begin its second round of collecting 170,000 signatures in favor of a referendum. Visit www.dwenteignen.de to learn more about the campaign and sign up to help – or learn how to start a tenants’ group and organize your neighbors with its “AG Starthilfe”.

Fünf Häuser is working to network tenants in all the recent Heimstaden acquisitions and has an excellent website. Among its recent events was one for networking with the Initiative Mieter:Innen Gewerkschaft Berlin (MGB, Berlin Tenants Union) – activists from the 2019 “Mietenwahnsinn” (rent insanity) alliance. According to the MGB, Berlin has a good tenant law, but cases like the Fünf Häuser call for aggressive public actions. Tenants must be united in a group that can react quickly, with at least one contact person per building, and research has to keep abreast of investor plans and investigate other options. The MGB is planning a series of meetings for late November with local tenant groups because each building is a special case.

The Initiative Hermannplatz regularly collects signatures and takes part in public debates. Its website is in German, English, Turkish and Arabic. Still other groups are investigating Airbnb’s presence throughout the city and working to support storeowners.

There are tons of initiatives. Get involved. Hold the politicians’ feet to the fire. Fight for the right to housing and the city. These campaigns all represent serious battles in the fight to reclaim Berlin for the people who live here. Together we can make Berlin “too good” and true.

*“Any views expressed reflect the current views of the author, which do not necessarily correspond to the opinions of Deutsche Bank or its affiliates.”(!)

Nancy du Plessis takes courage knowing that in the end, the mega-construction project next to her place in Manhattan was scaled back significantly and her block in Paris was not razed for the commercial center and offices endorsed by Mayor Jacques Chirac!


©Nancy du Plessis 2020

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