Stealing buildings from private owners – Reason.com

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Facing a housing shortage, voters in Berlin approved a plan to seize part of the existing stock from its private owners.

On Sunday, 56% of voters in the German capital approved a non-binding voting initiative that calls on the city government to expropriate property from owners who own 3,000 units or more. This would make it possible to municipalize about 240,000 units, or about 15 percent of the city’s rental housing stock.

“The majority of Berliners eligible to vote have opted for the socialization of large real estate groups and therefore against speculation with living space”, announcement the organizers of the Expropriate Deutsche Wohnen and Co., according to Deutsche Welle. (Deutsche Wohnen is a large real estate company.)

Referendum organizers want the Berlin government to use a prominent domain article of the German Federal Constitution to seize the assets of Deutsche Wohnen and other large landowners, pay them “well below market value” and then rent them out. apartments at a more affordable price. rates to current residents.

The immediate practical effects of voting are minimal. This does not force the Berlin government to consider an expropriation law, let alone pass one. However, it puts pressure on politicians to take action.

“To ignore the referendum would be a political scandal. We will not give up until the socialization of housing groups is implemented,” said Kalle Kunkel, one of the organizers of Expropriate Deutsche Wohnen and Co., Recount Reuters.

It is also a symbolic victory for a particular left-wing approach to solving housing affordability issues in large, high-cost cities, an approach that focuses more on redistributing existing housing stock than building new ones. units.

Elected officials from Canada to California see it as an example to follow.

On the ground in Berlin, proponents of expropriation face a number of practical obstacles.

It is not clear whether massive foreclosures of private apartments would be constitutional. In 2019, legal advisers at the Berlin House of Representatives said it would, reports Deutsche Welle. But a real estate attorney who spoke to the publication argued the courts would bring it down quickly, saying the 3,000 unit limit was arbitrary and paying below market value would violate the constitution of the country.

The city’s new mayor, Social Democrat Franziska Giffey, said an expropriation bill should be considered in order to respect the will of the voters. But she doubts the legislation is constitutional, and she thinks politics is a bad idea anyway.

“Expropriations do not help create even one new apartment or solve the big question of affordable housing,” she said. Recount a local broadcaster.

In addition to not creating new homes, the plan would be very expensive. The Expropriate Deutsche Wohnen campaign estimated that compensating the current owners of the targeted property would cost only 8 billion euros ($ 10.5 billion) – about € 34,000 per unit. But the Berlin Senate estimated that it could cost 20 billion euros, and some estimates stand at 36 billion euros (150,000 euros per unit).

Earlier this year, the city OK to buy 14,750 apartments from two large owners for 2.46 billion euros (or 166,000 euros per unit), which is in line with high-end estimates. The city spent a similar amount per unit to acquire 6,000 formerly public housing units in 2019. All of this suggests that the higher estimates of expropriation costs are more realistic.

And that money would come at the expense of new development for a city already suffering from a severe housing shortage.

The real estate company Guthmann Estate estimates that Berlin is short of 205,000 units. A to study of the German Economic Institute says the country as a whole has only built about 80% of the homes it needs to meet demand.

A socialist criticism of the Berlin expropriation plan would be that it would give billions of euros to private real estate companies to buy existing units when that money could be spent to build new public housing to meet the growth of the city.

A free trader, meanwhile, could argue that seizing 15% of the city’s rental housing stock would strongly discourage developers from building new private units. They would have a very real fear that the state would expropriate their investment and not even pay market rates for it.

Tenants of newly foreclosed homes obviously benefit from the lower rents that would flow from state ownership. Everyone else would be in a worse situation, as they would be forced to compete for a smaller share of private units.

This is indeed what happened with the brief experience of Berlin with a law that froze the rents of apartments built before 2014. Rents have indeed stopped increasing in regulated units, to the benefit of tenants who inhabited them. But prices have skyrocketed for unregulated units. (In April 2021, the German Constitutional Court hit Berlin rent control.)

The number of regulated units in the rental market also collapsed, while new listings of unregulated units were not enough to fill the void.

Rent control represented “a boon for a group of tenants: those, rich or poor, who are already installed in regulated apartments”, wrote Bloomberg columnist Andreas Kluth in March. “At the same time, they hurt all other groups, especially young people and those from other towns, by excluding them from the market.

There are solid evidence than new housing, even expensive new housing, makes cities more affordable for everyone. Berlin’s rulers should consider ways to boost housing production so the city can continue to grow and prosper, instead of simply redistributing existing units for the benefit of a minority of incumbent tenants.



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