Nationalization and supervision: the new coalition in Berlin will fight the landlords

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But not the party that initiated it. In the local elections held in Berlin about a month ago, the left-wing party Die Linke – which was behind the reform as a junior partner in the coalition that was in place at the time – became the most popular among voters in the German capital, with close to 25% of the votes. At the end of last week, she announced the success of the initial exploratory talks with the “Greens” and the social democrats on the way to forming a government in Berlin, this time being headed by her.

This is an unprecedented achievement for a party that is deeply rooted in the left, and which is actually part of a reincarnation of the party that ruled East Germany in its last years, and holds extreme positions on security (against the German army and NATO), immigration (in favor of voting rights for asylum seekers, for example) and also harshly criticizes Israel (defining what is happening in Gaza as “genocide”) and faces the problem of anti-Semitism in parts of it.

Necklace with the “Cover for Rent” logo

Now, the party is expected to renew what it defines as the “most important struggle” for which it was elected and which gave it the electoral success – lowering rent prices in Berlin.

The initial agreements of the new coalition that were announced last Saturday, after tense negotiations, are already frightening real estate investors who own apartments in Berlin. At the press conference where she announced the agreements, the person who should become the next mayor of Berlin, Alif Eralp, wore a necklace that also starred in her election campaign, on which was written Mietendeckel (“rent cover”), the nickname of the rejected reform.

The first step that the party promised to its voters is the “nationalization” of large housing corporations, huge companies that own more than 10,000 apartments in their portfolio. Currently there are five companies: Vonovia, Adler, Heimstaden, Covivio and DVI.

A referendum that was held in Berlin in the past ended in support for the nationalization of each company that owns more than 3,000 apartments, and the management of the inventory by the municipality itself, according to social considerations and not just the rules of the free market. But the referendum was not binding and successive governments ignored it. Now, “De Linka” and its partners have announced that they will “buy” these giant companies for a maximum price of 16 billion euros.

This is a complicated step, the likes of which has not been done so far, and most of the media in Germany estimated that it will not be implemented soon. But it provides the parties with the opportunity to present a war for the tenants. The federal government has promised to block it by legislation, it is not clear if companies can be forced to agree to the price ceiling, and even Aralp said at the press conference that it is possible that “the current legislative period will be devoted to preparations for the move”. The goal is to add about 160,000 apartments for municipal management, out of about two million properties in the German capital.

But there are other measures that the coalition has agreed on, which are expected to have a greater impact on private landlords who own apartments in the city. Among other things, the parties decided to rush and complete Berlin’s “contract registration database”, where the municipality will hold all the leases, and will make sure that the apartment owners do not take rent beyond the municipal inspection price (Mitchfeigel).

This rate, which is between 7 and 9 euros per square meter for average apartments, is much lower than the prices currently charged in the illegal market which is conducted with the consent of the apartment owners and tenants. They sometimes pay 15 to 20 euros per square meter just to get a place to live. The agreement states that the lawsuit in Berlin will enforce the ban, and as previously enacted, a loophole has been closed whereby it is allowed to rent furnished apartments at inflated prices. Also, the lawsuit will follow short-term rentals against the law.

Apartment owners with a “medium” number of properties are expected to be obliged to give a certain proportion of them to the population of low socioeconomic status (WBS). The same goes for projects to be built by the municipality. This measure will be enacted by the middle of next year. It will be prohibited to increase rent in apartments owned by municipal corporations by more than 2% per year. The municipality’s ambition according to the new agreement is to grant building permits for 100,000 apartments, many of them under achievable conditions. But such promises were heard in the past both at the city level and at the federal level, and did not materialize due to legal and planning difficulties.

The financing question: a deficit of 68 billion euros

The big question is where all this good will be financed. Berlin already has a deficit of €68 billion. The federal government has forced it to cut about €1 billion from its budget every year. Other regional states, such as Bavaria, actually finance life in Berlin by billions every year in “balancing funds”. The answer is still unclear. According to the calculations presented by the new coalition, it lacks about five billion euros in the budget alone, without taking into account the funds for the nationalization of the large real estate companies that are said to be taken as huge loans. They stated that the amount will be achieved by “consolidation” and “re-prioritization” of budgetary policy, as well as by taking new loans. As a tangible step, the coalition intends to raise about 400 million euros per year through Increasing taxes, but it is not clear which ones. It was previously mentioned that “Di Linka” demands an increase in the real estate purchase tax from 6% of the property’s value to 8%.

The parties will now begin detailed coalition negotiations, in the style of German politics, in which all commitments will be put in writing, including deadlines for implementation.

Berlin’s real estate market saw the results of these elections coming, and has been completely paralyzed – according to media reports and conversations with brokers – in recent months. There is a large supply of apartments for sale, some of them with existing and binding contracts where the tenants pay more than the regulated price and the apartment owners fear the consequences of the new municipal supervision. Apartment prices have already fallen in Berlin by 20% in the last two years. As was the case with the failed reform, the message Berlin is sending For international investors, it is because they are not really welcome in the city. The new mayor of Berlin, who is proud of this message, is only expected to reinforce it.