Sniffing gold, Berlin’s landlord’s are ruthlessly raising rents as the demand for housing in the capital soars with the growing population. A new report by people in the know says rental prices rose by five percent last year. Of course we can’t expect landlords and property investors to display restraint and compassion for poorer and middle-class tenants when they could be taking them to the bank. To these complaints, “investors” would answer: “Well, in that same report, it also states that property purchase prices in Berlin rose by a staggering 10 percent in 2015.” In short, people and institutions (for example, Japanese university pension funds!) have no choice but to jack up rents in order to make their money back. And a tidy little profit on top – which is, of course, the whole point of investing.
“Nobody has the the right to live in Mitte,” former mayor Klaus Wowereit once said in response to exploding housing prices in central Berlin. Of course Wowi is right. And renters are willing to pay: according to the report, it’s common for newcomers in Mitte or Kreuzberg-Friedrichshain to spend up to half of their income on rent. Times are a changin’. And not for the better. This scary news from the real estate front fits perfectly with the news from the government that the wealth gap between rich and poor continues to rise in Germany. According to the latest stats (from 2013), 10 percent of the population controls 51.9 percent of the country’s wealth, up from 49.4 percent in 2003. Rising rent prices and rising wealth inequality go hand-in-hand – real estate in German urban centres has become one of the favourite “safe” investments of the country’s rich. The Berlin boom sends ever greater amounts of wealth in their direction.
What to do? Remember last year’s Mietbremse (“rent brake”)? This new law stipulated that landlords could only raise rents by 10 percent above the local average when someone new moved into a flat. Heralded as an adequate response by Angela Merkel’s government to the country’s housing problems, the Mietbremse has turned out to be a paper tiger. In Berlin, at least, it has failed to prevent rapid price increases.The Mietbremse should be tightened, e.g. why not limit rent increases to 3 percent when a new tenant moves in?
Another tool that could be used to regulate the rental market would be to follow the lead of Munich and legislate that developers (who prefer building highly profitable luxury flats) must offer a certain number of “affordable” flats in every apartment block they build, if they want to build in Berlin. How many flats must be “affordable” as well as the definition of “affordable” can be debated, but this might be a good way to prevent central Berlin from becoming a London-style ghetto for the upper-middle classes and super-rich.
There is some good news. Under the Wohnraumversorgungsgesetz, a law that went into effect on January 1, the tenants of rougly 400,000 state-owned flats are supposed to receive a subsidy if their rent exceeds 30 percent of their net income. Mayor Michael Müller and the Berlin Senat didn’t pass this law out of the goodness of their hearts, but only because they came under immense pressure from the Mietenvolksentscheid campaign for a referendum on the issue which gathered tens of thousands of signatures of support in the summer of 2015. Scared of the prospect of a repeat of the Tempelhof referendum embarassment, the Senat’s lawyers found legal problems in the campaign’s proposed social housing law and offered instead a watered-down version – better than nothing.
Tens of thousands of people are expected to move to Berlin every year – for years to come, with the population growing by 500,000 by 2030. We need a plan.