Gentrification, Displacement and the New Housing Bubble in Berlin

Carl Legien Siedlung in Berlin (Built: 1928-1930; Architect: Bruno Taut)

Carl Legien Siedlung in Berlin (Built: 1928-1930; Architect: Bruno Taut)

By Ares Kalandides*

You probably feel tricked: Before moving to Berlin your friends told you that finding a place to stay would be a piece of cake. But it turns out to be a rather unpalatable one. You’re still looking and still staying at that dump? No worries. Thousands of other Berliners are in the same state of affairs. Nobody tricked you. In the past few years the city just went from plenty to scarce. But why?

Berlin has traditionally been a city of tenancy. Until not very long ago, almost 90% of all households lived in rented flats, the majority of which belonged to larger state-controlled corporations. Owner occupancy was – and still is – rather the exception than the rule. Young people did not aspire to their own home and why should they? There was a well-functioning welfare state and housing was viewed as a public good. With the privatization wave that started in the late 1990s Berlin privatized its housing corporations, at the same time ending the century-old social housing system. Housing went from being a basic social right to being a commodity.

With Berlin’s population growing steadily, albeit at a slow pace, affordable housing is getting scarce. Thousands of young people leave crisis-stricken countries to look for their fortune here; hipsters come to experience the ultimate urban kick. On the other hand, construction for affordable housing has come to a halt. Alternative forms of tenancy are at their peak: building cooperatives (“Baugenossenschaften”) are as popular as ever; “Baugruppen”, a contemporary variant of the former, spring up like mushrooms all over the city. In order to subsidise construction costs for affordable housing, Berlin is planning to sell off state-own land at a low price; in a similar way “modular construction”, an elaborate form of pre-fabrication, is meant to keep construction costs down. The only problem is that it’s demand, not construction costs that define the price of housing.

Scarce commodities have their price. New construction is almost exclusively about luxury flats ­– the ones that bring the highest return on investment. Since the financial crisis of 2008, investment in real estate has turned out to be one of the least risky ones. Accumulated capital is pressing for an outlet, but also bank interest is at a historic low. It has never been so easy to invest in buildings and that’s what people do if they can ­– often prepared to pay prices higher than the local market. Yet, who is going to pay for this luxury in the long term? The vast majority of all Berliners have seen no increase in the real income for the past 15 years. This is a bubble that is bound to burst. A displacement of lower income groups towards the periphery, where housing is still affordable, will drive Berlin towards social segregation.

If we want to avoid this – and there are many good reasons for it – there are several things that we need to do:

a) return to the concept of housing as a public good;

b) encourage different forms of cooperative housing (including the more traditional Baugenossenschaften and the more contemporary Baugruppen);

c) control rents, introducing again rent caps and maximum rent increases; and finally – maybe the most important:

d) offer municipal affordable housing (a particular form of social housing) in the city centre.

Even though housing in Berlin is more than affordable in relation to most European big cities, most people’s income has been stagnating for so long, that decent housing is becoming a luxury. We have an obligation not to allow this to happen.

______________

*This article was originally written for the EXBERLINER magazine, but was never published.

About Ares

Ares Kalandides holds a PhD in Urban and Regional Studies from the National Technical University of Athens. He is the founder and CEO of Inpolis, an international consultancy based in Berlin, Germany and has implement several projects around the world. Ares teaches Urban Economics at the Technical University in Berlin and Metropolitan Studies at NYU Berlin.
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5 Responses to Gentrification, Displacement and the New Housing Bubble in Berlin

  1. The Place Brand Observer says:

    Good points and definitely, there is a need to reign in on gentrification in Berlin just as anywhere else. I wonder, do you have any research on how the Berlin situation might compare with other cities of comparable size? There probably is a gentrification or housing ‘life cycle’ that we could learn from, and which would show us where the journey is going..

  2. quovadis says:

    Good summary of the situation in Berlin. What needs to be mentioned yet is the prohibition of using apartments as holiday rentals which was introduced lately in some boroughs.

    Further measures could be:
    – prohibit that homes are left empty for speculative reasons
    – prohibit that rental apartments are sold as Eigentumswohnungen
    – stronger resistance against rising rents (e.g. rent strikes as in Liverpool 1972: https://www.youtube.com/watch?v=0anu9hlQ9iA)

    When it comes to Baugruppen my opinion is split. The costs of such projects are usually too high to be called affordable. Even when a group buys a house with the aim to take it off the market (via Mietshäusersyndikat for example) the property and renovation costs are so expensive that resulting rents exclude lower income groups and have a negative impact on the Mietspiegel.

    Spon has written about one such project in Potsdam where tenants now pay 11€/m – hardly a bargain:
    http://www.spiegel.de/wirtschaft/unternehmen/baugruppen-szene-boomt-besuch-in-potsdam-bei-23-riesen-a-1002792.html

    The situation also affects businesses. Finding affordable office space is a pain as well and sooner or later people will simply have to demand higher wages in order to keep up with rent hikes. It would be great if a wider resistance would emerge against the mob-like behaviour of the property sector.

    • Ares says:

      I definately agree with all the points made above. I am only afraid that the prohibition to use flats as holiday rentals will have a very limited effect. Although there is a high concentration of those in some areas, all in all, holiday flats make up about 1% of all the housing stock in Berlin. Nonetheless it is a measure I totally welcome.
      We recently researched the situation of businesses around Nollendorfplatz, which are increasinly being displaced because of rising rents. What we see is something that has been very well documented elsewhere: in certain historical phases (e.g. crises) land rent tends to absorb an ever larger portion of all created value.

      • quovadis says:

        Yes, you are right – holiday rentals are probably not the main problem. I would also welcome a discussion on the aesthetics of “investment-architecture” in Berlin. A lot of it is so bland and poorly designed I wonder why people throw money at it.

  3. Ares says:

    Interesting question. My guess is that quality architecture is not relevant to the value of the investment. Several architectural symbols of exclusivity (materials, forms, colours etc.) probably are.

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