Building Senator Andreas Geisel has repeatedly suggested that the six state-owned housing companies (LWU) should build and sell a proportion of condominiums in the future. According to Geisel, this is intended to refinance the construction of social housing. This proposal is neither covered by the coalition agreement nor makes sense. With us on the left, that won’t happen. The sale of municipal housing in the early 2000s is at the root of the key housing market problems we face today. We have learned from the mistakes. Instead of throwing the social service mandate of public companies overboard, we need new financing for municipal housing construction.
If there is anything in Berlin that is not lacking, then it is condominiums for high earners. Between 2014 and 2021 alone, 120,000 rental apartments were converted into condominiums. In the last three years, about every third new apartment has been built as a condominium, a total of 18,500 apartments. As a result, the ownership rate has increased slightly in recent years. Due to rising interest rates and an uncertain economic situation, demand is likely to decrease in the future.
At the same time, just 6,500 social housing units were built in the last three years (almost exclusively by public companies), although Berlin has the greatest need in this segment. Around one million of Berlin’s households would be entitled to a housing entitlement certificate (WBS) and thus social housing, but there are only 88,000 of them in real terms. In addition, another 20,000 apartments will lose their rent and occupancy restrictions in the next four years.
This is not the only reason why condominiums built by municipal companies and financed from public funds seem odd. Less than a year ago, a majority of Berliners spoke out in favor of the socialization of private real estate groups, i.e. for large parts of the housing market to be transferred to public ownership and removed from the logic of the market. We should use the successful referendum as a tailwind for the public welfare-oriented restructuring of the housing market. The building senator’s proposal envisages the exact opposite: State-owned apartments, which have hitherto been subject to strict regulation, are to be brought onto the market.
According to City Development Senator Geisel, these “public condominiums” should not only cross-subsidize the construction of social housing. In addition, they should also be given to low and middle income groups in order to ensure security in their own four walls. What sounds good does not work in the housing industry: in order to be sold cheaply, condominiums would have to be massively subsidized by the state. If the money is to come from housing subsidies, condominiums then compete with the construction of social housing. For cross-financing of subsidized housing, municipal housing would have to be sold at high prices, but then only high earners would benefit.
We cannot afford to plaster scarce urban land with housing that does not meet social needs. Every square meter of urban building land and every euro available for municipal housing construction must be invested in the construction of affordable rental apartments. Because the more public housing, the greater the controlling effect of the state on the housing market. If municipal housing is sold, the state relinquishes its most important housing policy instrument.
Of course, the demands on the six state-owned housing companies are high. With their 340,000 apartments, they form the backbone of social housing and an important counterpart to the private real estate industry. With their low rents, they dampen the rent index. They rent 63 percent of the vacant apartments to WBS beneficiaries and are to build 35,000 new apartments over the next five years, at least half of them in the subsidized segment.
Thanks to favorable conditions, the state housing companies have so far been able to carry out their numerous tasks largely without financial support. That’s about to change. Of course, rising construction and energy costs and the turnaround in interest rates are putting companies under pressure.
The purchase of 13,000 apartments from Vonovia’s portfolio at high market prices also worsened the companies’ economic situation. However, these rising costs must not be compensated for either by selling apartments or by increasing rents.
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For us on the left, housing is a social infrastructure and the municipal companies are a central control instrument. In case of doubt, housing as a public service must be subsidized, as is also the case in other areas – for example in education and local transport. Instead of aligning the state housing companies more market-oriented, we have to steer them more towards a course oriented towards the common good.
In the past, the ambitious new construction targets set by local authorities have not been met. In order to make municipal housing construction possible even in the crisis, we should open up new financing channels and increase the equity of companies. In the new state budget, subsidies for the construction of social housing were noticeably increased from 500 to 740 million euros.
So far, the funding has been aimed equally at private and public companies. But the private sector has so far hardly taken advantage of the funding and will do so even less during the crisis. We should therefore use these funds exclusively to finance municipal housing construction in the future, instead of using them to support private builders who are not reliable partners in the crisis.
The crisis in the private construction industry also offers the opportunity to finally tackle pending reforms and set up a municipal building hut: instead of six LWU (and the Berlinovo) each buying construction and planning capacities on the market, synergies could be developed through cooperation and the development of joint capacities and costs be saved.
Private builders are currently withdrawing from construction projects in droves. The state housing companies should be put in a position to step in for them. This could result in a new municipal construction industry. A look at the history of Berlin shows that 100 years ago the housing question was answered by building up strong non-profit and municipal property developers.