Federico Fuentes (FF) interviews Thom McGath (TM)
Housing activists in Berlin have responded to a recent German court decision to strike down the state government’s rent cap by upping the ante, and calling for the expropriation of large housing corporations.
Having successfully collected hundreds of thousands of signatures, they have won the right to put this bold proposition to a referendum in September.
FF asks: For context, could you tell us how Berlin came to introduce a rent cap?
TA replies: Back in 2018, the Berlin government suggested it would be willing to explore the option of a rent cap. This responded to pressure from activists, following an unsuccessful referendum to introduce rent caps in 2015.
But it was our campaign for expropriation — which preceded the introduction of the rent cap — that really brought the topic to the fore. Within a few months of starting our campaign, the rent cap was introduced, in January 2020.
I would say that it would not have been possible without us. It was a response to or, at least, an attempt to appease, those who were making demands for expropriation.
What did the rent cap entail?
It meant rents were capped at 2019 levels and could not be raised for five years.
There were certain exceptions to the rules. For example, if you modernised or renovated the rental unit, you could increase the rent by about one euro per square metre. There were also allowances for a small increase after two years, but the increase could not be higher than inflation, which is about 1.2%.
On the other hand — and I think this was one of the more radical aspects of the cap — it also actively lowered rents based on how old the building was and the quality of amenities it provided. For example, whether it had things like central heating or not.
The government set an upper limit of €9.80 per square metre, which progressively dropped depending on the age and state of the apartment. This meant many renters saw massive decreases in their rent, in the order of 20‒30%.
This represented a very radical interference in the market.
Did the rent cap work?
Berlin’s rent cap provided a positive contrast to the failure of the rent brake [Federal Rent Control Act] introduced at the federal level in 2016, which limited rent rises to 15% every three years. During this time, Berlin was the only state to see rents drop, by about 11%.
But in the end, the federal rent brake was used by the Constitutional Court to overturn Berlin’s rent cap. The main issue raised in the court decision was that Berlin simply didn’t have the competency as a state to introduce such measures, given the federal government had already introduced restrictions.
In my opinion, rent caps work. The discussion on whether rent caps work or not is usually focused on the question of supply, which misses the whole point.
The argument is always that rent caps lead to shrinking apartment availability. This makes sense, because the research shows people stay in the same apartment for longer. But this is a positive thing, because it means people don’t have to move around so much, or are not being forced out due to rent rises, so that’s a positive.
One negative aspect of Berlin’s rent cap was that it excluded new buildings constructed after 2014. We saw a big explosion in rents in that segment. A lot of people who moved to the city were forced to that segment, as they couldn’t find anything else because people weren’t moving out.
In this regard, you must be a bit stricter with new buildings, while also building more public housing so that people can afford to move here.
But it’s important to note that we always saw the rent cap as a stop-gap measure. It was only set to last for five years and didn’t work to shift the structure of the existing market in favour of more not-for-profit models. We always said: “Ok, this is something that will last for five years, but what happens after that?”
For the Social Democrats, the main party in the governing coalition in Berlin, the answer was to just build more. But we said that was not enough.
Rather than campaign for restoring the rent cap, housing activists are setting up a campaign to expropriate housing corporations. Could you tell us why?
It’s important to start with the context of housing in Germany. The proportion of tenants is much higher in Germany than in most other countries. At the federal level, tenants make up 60% of the housing market. In Berlin, it’s about 85%.
This is largely because, for a very long time, there were certain regulations and policies in place that ensured rent was affordable. Up until about 1988, there was a not-for-profit housing law. That meant a certain amount of funding had to go to not-for-profit housing corporations or other not-for-profit models (such as cooperatives and state-owned housing).
But then we had a big wave of privatisation and neglect of the public housing sector. Institutional investors bought up a lot of expiring social and public housing units that were privatised in the wake of financial crises.
These companies entered the housing markets with the sole purpose of renting, as they realised it was much easier to make money from this if they could corner the rental market.
In Berlin, there was nothing in place to stop this happening. In fact, the government facilitated it through its privatisation of housing units, and the ease with which it allowed companies to inject international capital into the market.
These companies function as real estate investment trust funds that have concentrated a greater and greater share of housing in their hands. They get around taxes by buying up companies rather than the apartments themselves. This means they don’t have to pay any acquisition taxes or property taxes.
The result has been the rise of these huge housing companies. For example, Deutsche Wohnen has about 110,000 apartments and Vonovia has around 50,000. They are now planning to merge.
What impact would expropriating these companies have on the housing market?
We are proposing to expropriate all for-profit rental companies with 3,000 apartments or more and for these apartments to be put into public hands. We are also proposing to create a new institution to manage these apartments with built-in democratic structures — from building to neighbourhood to citywide councils. This will mean renters would be able to decide on things like investment in apartments that need modernisation and where utility costs are spent.
There are currently about 1.9 million units in Berlin, of which about 340,000 are public housing and 300,000 are owned by the tenants. Through this process we would bring another 250,000 apartments into public ownership.
This would remove a large proportion of the housing stock from the market and remove the incentive to speculate in the market. It would also push rents down, as private landlords would be forced to compete with more public housing.
Overall, it would place the not-for-profit model at the forefront of the housing market.
Can you give us a sense of the level of support for the campaign?
We have just finished the second round of signature collections and have moved onto the next level, which is the referendum. It will be put on the ballot at the state and federal elections on September 26.
I think we have had a huge impact in terms of public discourse. It’s been a top story around Germany for quite some months. All the political parties have had to take a position on it. A federal real estate industry group is trying to fund a $1.2 million euro campaign against us, so they are definitely scared of the ramifications of this campaign.
Our campaign broke the record for signatures for a referendum in Berlin. We submitted about 350,000 signatures, which shows not only the grassroots support for the campaign but also the desire for radical change among the public. Having successfully collected hundreds of thousands of signatures, they have won the right to put this bold proposition to a referendum in September
I would also say the polls have swung in our favour following the overturning of the rent cap. We saw a huge inflow of signatures in this period and, today, polls indicate that we almost have a majority of voters in favour of our proposal, roughly 49% in favour compared to 43% against.
Questions: Federico Fuentes for Green Left
