Housing policies matter: Post-Neoliberal housing versus Investment
“What do you love about your neighbourhood?” reads in German on a sign pasted to a tree.
Drawn by Berlin’s unique allure as an international, trendy capital, a prospective renter in Berlin has to navigate a volatile rental market marked by low supply and high demand, possible energy refurbishments, and uncertainties surrounding the rent cap.
Post-neoliberal housing policies have been common in Berlin with the rise in rental housing prices and a young, politically left, and socially-oriented population. Post-neoliberal policies are characterized by ensuring affordable and democratic housing. However, this mandate is often difficult to reconcile with investment needs. Berlin’s housing policies have not escaped this tension — especially the city’s rental cap.
Berlin’s rental cap was a legislative coup by the left coalition government running Berlin. Shocking German and international investors alike, the center socialist party leading the red and green coalition government froze rents at their 2019 levels for five years to ensure rents remained feasible in light of high demand. However, many homeowners swore to fight against what they perceived as unjust and unconstitutional enforcements and sued the Berlin government. Consequently, the German supreme court — the Federal Court of Justice — ruled to overturn Berlin’s rent cap. Berliners were enraged, and on the 27th of September, Berlin held a non-binding referendum: 56% of Berliners voted for the expropriation of major landowners.
In the past decade, Berlin rents more than doubled as gentrification and migration to cities decreased affordable housing. 85% of Berlin’s population rent their apartments; thus, fear of ever-increasing rents threatens livelihoods as the city becomes hipper and draws migrants from all over the world willing to pay higher rents.
The federal constitutional court struck down the rent cap under the principle that Berlin’s government had overstepped its competencies as federal housing law supersedes state-level decisions. Many Berliner tenants felt betrayed, especially as the constitutional court left it open whether tenants would have to pay back landlords for the one year that the law was in place. In fact, landlords had previously included “shadow rents” in contracts that listed the actual price that would have had to be paid without the rent cap if the constitutional court decided on retroactive payments.
Besides Berlin’s tenants feeling betrayed, what further issues came from these post-neoliberal policies? One of the main issues with post-neoliberal policies, in the context of socially and environmentally sustainable housing, is investment. The European Green Deal and German commitments to energy transition necessitate large public and private investments to refurbish and future-proof the housing stock. These
investments range from ensuring energy efficiency gains — by improving insulation and installing energy-efficient appliances — to fixing solar panels on roofs. If the homeowners were to live in the buildings themselves, they’d be more likely to invest: lower energy consumption would balance out the investment. In reality, most Berliners do not own their homes, so the actual owners care not about the tenant’s monetary savings and only consider their costs of investing in the energy-efficient technology. Furthermore, as other German cities have not implemented a rent cap, private investors have been put off from investing in the Berlin rental market as returns have been lower than in other German cities.
“With the lifting of the rent cap, companies in the social housing industry can return to their original investment plans as soon as the questions of additional rents have been sorted out.”
“With the lifting of the rent cap, companies in the social housing industry can return to their original investment plans as soon as the questions of additional rents have been sorted out,” said a board member of Berlin’s housing association Maren Kern in a statement. But who wins and loses when this sustainable investment continues? The sustainable investment will go on at the expense of low-income families. Destitution is growing in Berlin, with almost half a million people living below the poverty line. Once homes are refurbished, the price of homes will increase, crowding out low-income families going hand in hand with gentrification. As supply-side inflationary pressures are growing, living costs are rising with the looming threat of a Russian oil embargo. Low-income families will find it even harder to find affordable housing in Berlin, pushing them out of the city and threatening their livelihoods.
Nevertheless, Berlin is determined to ensure that social housing remains available by incentivizing large housing monopolies to provide public housing under social policies and buying back land — in 2019, the city spent one billion Euros buying back apartments. As such, perhaps both the targets of better environmental, energy-efficient buildings and affordable housing can be dealt with. However, the question remains whether the social housing stock and poor communities will have the same access to refurbished facilities that benefit from lower energy consumption, better insulation, and more livable conditions.
Following the German federal elections, Merkel’s center-right coalition government was replaced by a socialist, green, and market-liberal coalition government. As such, discussions of a nationwide rent brake will surely come up, building on the German-wide rent brake installed by Merkel’s government in 2015 that capped rent increases at 10% of the average region price to ensure affordable housing. However, this will only serve to, on a large scale, discourage German and international investors from investing in German property markets as other European housing markets are easily accessible through the single market.
Will the post neo-liberal trend in policy-making continue for Berlin? It remains to be seen how the Berlin housing market develops and whether the new government can balance incentivizing investment into “greenifying” buildings with affordable housing. A policy is needed to combat growing wealth inequalities and ensure cities and buildings lower their climate impacts while withstanding environmental changes.