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Choosing Stagnation Over Capitalism

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Choosing Stagnation Over Capitalism

Berliners approve a radical referendum that won’t solve the city’s housing crisis. September 30, 2021
Politics and law
Economy, finance, and budgets

Last Sunday’s German elections saw the success of a radical attempt to stop a housing crisis. In Berlin, the city’s skyrocketing rents and left-wing politics came together to produce a referendum, approved by 56 percent of the city’s voters, that calls on the city’s governing body to socialize much of its housing stock. Coming on the heels of the failure of a city rent-control law that went into effect in 2020 but was invalidated by Germany’s highest constitutional court only months later, the latest measure will likely cause severe collateral harms and provides a worrying sign of how many voters will choose stagnation if the alternative is capitalism.

According to a website set up by organizers, the “Expropriate Deutsche Wohnen” (referring to a major real-estate company) referendum calls for Berlin’s government to socialize about 240,000 apartments belonging to large real-estate firms, amounting to 12 percent of the city’s total rental housing stock. “No more fat dividends for stockholders paid out of our rents,” the organizers promise. “We can only end the housing crisis if we once again administer living space for the common good.”

The newspaper Zeit gives more detail. The referendum was supported by two of Germany’s six major parties: the hard-left party Die Linke and, conditionally, the more moderate Greens “as a last-resort measure if other attempts to cool the rental market fail.” Referendum organizers estimate costs of between 7.3 and 13.7 billion euros, based on the dubious premise that the apartments could be legally acquired far below market value; they also claim that socialized apartments could be rented at a price of 4.04 euros per square meter per month, less than a third of the citywide average market rate.

The rents triggering such drastic measures are, in absolute terms, not that high. A report by the real-estate listing service wohnungsboerse.net estimates that an average Berlin apartment of 60 square meters (about 650 square feet, a typical size for a one-bedroom) cost 12.83 euros per square meter per month in 2020, or about $900 per month in total—quite low compared with American cities such as New York, or with many other European capitals. Average rents in Paris, for example, are about 35 euros per square meter. But Berlin rents are still far higher than in the recent past: wohnungsboerse.net reports that in the last ten years alone, rent prices in Berlin have doubled—a far faster increase than the national average.

The underlying cause, as many German commentators have noted, is the legacy of a massive shortfall in housing production. Emigration to West Germany after reunification in 1989 left Berlin in the 1990s with a surplus of dirt-cheap apartments that drew bohemians from all around Europe. But the influx of new Berliners, combined with sluggish construction, has since overwhelmed the existing housing stock. A report by Berlin’s urban-planning ministry finds that only about 4,000 new residences were built per year in the 2000s, with a nadir of 3,200 in 2006. For a city with a population of about 3.5 million, this is a far lower rate of new housing construction per capita than that achieved over the last decade by every major American city except Detroit.

The pace of construction in Berlin has picked up in recent years, with 19,000 completed apartments in 2019, but still not by enough. One report from an independent economic-research institute suggests that Berlin would have had to build 80,000 more apartments per year over the last five years to keep pace with demand. A 2019 article by Jens Sethmann in the magazine of the Berlin Tenants’ Association called Berlin’s construction boom an Aufholjagd—roughly, a scramble to catch up—and argued that other measures such as rent control, then being sharply debated, would be necessary at least in the short term.

Berlin’s housing shortage has a few locally peculiar causes. Sethmann notes, for instance, that land speculation has delayed the start of many projects with legal approval: once a parcel of land receives a construction permit, its value sharply increases and it becomes an attractive object for speculators.

But one big reason will sound familiar to Americans: longtime city residents are defensive about keeping their neighborhoods from changing. A 2018 story in the Berlin newspaper Der Tagesspiegel, for instance, reported on a protracted fight by residents of Ilse-Kiez—a neighborhood of sparsely laid out mid-rise buildings, five miles by direct train from central Berlin—to stop construction on the area’s open fields by Howoge, a city-owned development corporation charged with building apartments for rent at below-market rates.

Berlin’s left-wing leanings give much housing opposition an environmentalist tinge, especially as the politically dominant strand of German environmentalism is still the hippie-ish anti-industrialism of the 1970s (the Green Party, for instance, wants to shutter Germany’s nuclear plants). The Greens’ Berlin leader, for instance, has proposed conserving an undeveloped field near the city limits for small-scale urban farming rather than housing. Berlin supporters of Die Linke and the Greens are also less likely than supporters of other parties to endorse partial redevelopment of the former Tempelhof Airport, currently a square mile of barren land used as a park.

Indeed, two aspects of Berlin’s housing politics parallel left-wing opposition to new housing in the United States: dubious environmentalism and a demagogic insistence that housing problems can be solved by sticking it to a handful of capitalists. Not long ago, for instance, Alexandria Ocasio-Cortez co-signed a letter opposing a proposed development in inner Queens with a laundry list of left-wing rhetoric—including complaints about the project’s insufficient climate-friendliness (though any new buildings in Queens are more environmentally friendly than the practical alternative of buildings in the suburbs). Likewise, it has become a common left-wing talking point that homelessness could be solved simply by redistributing existing vacant houses to the homeless, rather than by letting developers profit from new housing. (As Darrell Owens, a housing activist in California, points out, this argument misinterprets housing-vacancy statistics: a majority of houses listed as vacant in Census reports are simply empty for a short time between renters and sellers, and many of the rest are derelict houses, often in impoverished remote areas.)

Berliners need only a two-hour flight north to see the results of heavy rental regulations combined with construction shortages. Stockholm has a rent-control ordinance so strict as to make housing functionally socialized: getting an apartment requires applying to a government office and spending years on a waiting list. (Wait times average nine years, going up to 20 in some neighborhoods.) Rent control works out well for native Stockholmers, but at a severe cost: the free-housing market in Stockholm is so tiny and expensive that workers who move there often find long-term stays in hotels cheaper. And housing scarcity not only has deterred innovative businesses from setting up in Stockholm but also has been recognized by the Swedish government as a barrier to immigrant integration.

Moving housing from market to bureaucratic control may reduce housing burdens for insiders, but it reduces the openness to outsiders that makes cities dynamic in the first place. The success of Berlin’s expropriation referendum and the applause that it has received from left-wing activists outside Germany are troubling.

Photo by Sean Gallup/Getty Images

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