Residents of Berlin will vote next month in a referendum that could send shockwaves through housing markets across the globe.
If approved, the referendum could see the state take over privately rented homes under a never-before-used part of German law that allows the state to take over “land, natural resources and means of production” in exchange for “fair” compensation. In effect, the largest private landlords would be forced to sell their properties to the city government at a fair price amidst growing anger from Berliners at the rapidly spiralling cost of renting in the city.
Historically, Berlin has been conspicuously cheap for housing compared to other major European cities. Indeed, Germany as a whole has previously been an outlier among rich countries for its largely private rental-based and heavily regulated housing market. Compared to the free market approach elsewhere, this has kept the cost of housing relatively cheap. Over the last five years, however, rents in Berlin have risen by over 43 per cent as an increasing number of units have been taken over by large international private landlords and a further clutch of homes have converted to owner-occupancy. Berlin is now facing the same housing challenges that have long plagued cities like Paris and London, alongside an overall low rate of new housebuilding and relatively slow wage growth over the past decade or more.
Author and activist Cory Doctorow commented on the referendum: “Berlin is a rarity: a semi-autonomous city whose history is overshadowed by a half-century of heavy public spending in the west as part of a program to prove that capitalism was a system of shared prosperity. The Wall’s collapse and German reunification produced a distinctive legislative framework that treats housing’s function as serving the human right to shelter, not as a speculative asset that produces either capital gains from flipping or passive income from renting.
“For decades, heavy regulation and publicly operated housing made being a Berlin landlord into a safe, low-return operation. Most people rented, protected from rent shocks and poor maintenance by a vigorous enforcement apparatus. Creeping deregulation and the vast sums sloshing around the world of the ultra-wealthy and the investment firms that serve them has changed all that. Today, Berlin’s housing market looks like most cities: a skyline of safe deposit boxes in the sky.”
It’s probably safe to say that in the traditionally small “c” conservative UK we won’t see any similar attempts at mass state appropriation of private property in the near future, but given that even our capital “C” Conservative government has described the current UK housing market as “broken” it seems inevitable that state intervention, such as through “Right to Buy Back,” will increasingly be needed to meet the twin demands of housing the population and meeting environmental challenges moving forward.
Image courtesy Norbert Nagel/Creative Commons.