Statement by Thomas Aigner, Managing Director of Aigner Immobilien GmbH
Housing market madness in Berlin
Billion-dollar grave socialization: How ideology ruins new construction
The plans of the Berlin Left Party to socialize the housing stock of large corporations sound like social justice to many people – but if you look behind the populist scenes, you will see a fiscal disaster with an announcement! Instead of solving the acute housing problem, Berlin is threatened with economic ruin, decay and shortage management. Everything has already existed – but it seems that people today no longer want to learn from history and dismiss the consequences as annoying background noise. This makes it all the more important to draw attention to the drastic consequences of such ideological wishful thinking.
The shortage remains: The fundamental paradox of socialization is as simple as it is devastating: expropriation does not create a single new apartment. Berlin, like other metropolitan regions, suffers from high rents, but these result from a massive shortage of housing – not from the alleged greed of the real estate companies. This shortage can only be remedied by consistent new construction. Anyone who rewrites existing ownership structures instead of massively promoting housing construction does not alleviate the shortage. He merely redistributes it.
A financial disaster: Depending on how it is designed, the compensation for hundreds of thousands of apartments devours between 10 and 40 billion euros of taxpayers’ money – out of a total state budget of around 46 billion euros. Berlin would thus accumulate gigantic new debts, while at the same time enormous running costs for maintenance, operation and administration would have to be covered. Apart from the fact that this money is lacking in other important areas, this sum could be used to directly finance a large number of affordable apartments.
Poison for the investment climate: socialization below market value destroys confidence in the rule of law. No private investor puts long-term capital into a city where there is a risk of state intervention. But who – I ask the voters and politicians – is supposed to build all the apartments now and in the future? Elif Eralp personally? Whether you want to hear it or not, it is the private sector that is responsible for the lion’s share of housing construction. It is the foundation of the housing market. With expropriation fantasies, private housing construction will collapse for decades.
The historical irony of the plans of the Left Party could hardly be greater: Of all things, those housing stocks that are now to be socialized were sold to investors in the 1990s and 2000s by a then red-red senate out of acute financial need. Anyone who today pretends that a chronically cash-strapped city can handle the buyback, modernization and simultaneous construction of new construction completely ignores reality.
The problem lies in the offices, not in the corporations
There are effective solutions for Berlin and other cities to get a grip on high rents: create supply. Unlike Munich or Frankfurt, for example, Berlin still has numerous building areas, brownfields and vacancies in the city area that would easily find investors in a normal investment climate.
But this is exactly where the problem lies. Housing construction in Berlin suffers not only from ideology, but also from a massive blockade due to official requirements and bureaucratic hurdles. Extremely detailed social preservation statutes often prohibit roof conversions or apartment enlargements. At the same time, development plan procedures take up to ten years, while the two-tier administration leads to constant disputes over jurisdiction between the Senate and the districts. In addition, strict requirements for species, monument and fire protection slow down densification. In addition, there is a lack of pragmatism: In times of acute housing shortage, no other world city can afford to shut down an airport in the middle of an urban area and leave this huge area completely undeveloped for decades due to a referendum! Tempelhofer Feld shows the grotesque extent of the political denial of reality.
While on the one hand people are crying out like a mantra for more cheap housing, actual new construction and land activation hardly play a role for the left. Instead, there are reflexive calls for a “rent cap” or socialization in order not only to freeze rents, but to artificially reduce them. At the same time, the average rents of large portfolio holders such as Vonovia are already below the rent index. Freezing them across the board helps above all those who are already provided for – while tenants in numerous other private apartments are completely ignored and the market as a whole is dried up. This is unfair and short-sighted!
It is high time that Berlin stops managing its own problems in ideological cloud cuckoo land and instead begins to solve them: through pragmatism and real housing construction instead of pure symbolic politics.
