Berlin Housing Crisis- How to Fix it

Berlin has the fastest house price growth in the world, according to the latest research.

While this may be good news for foreign investors, it’s not so good for residents who are in need of an affordable home. The city’s population is growing by around 40,000 every year, but the number of new apartments to buy or rent isn’t, which has created a massive shortfall of homes and inflated the market price. Around 85% of Berliners are renting, and since 2009, rents have increased across the capital city by 46% with 50% of households entitled to rental assistance. We are at crisis point, which has led to politically supported rioting on the streets and squatters occupying empty buildings. Even the left wing press are making jokes about our politicians’ lack of enthusiasm for progress. The focus is on protecting the status quo and existing tenants rather than granting planning permission to build new homes or looking after those moving to Berlin.

Now, the Berlin Senate has finally decided that the transfer of urban land to its municipal housing companies be speeded up to ease an overheated market. So, why has it taken so long to adapt to the market and what else can we do to create more affordable housing?

Discrepancy between the prices of sale and rental properties

From our perspective as an international team that looks after both private and commercial buyers and sellers, what’s happening in Berlin is inevitable, a result of gentrification and we are merely catching up with the rest of the world. There are two critical issues which make Berlin different from other capital cities:

1.   The massive discrepancy between the prices at which properties are being sold and let today and the low rents in old rental contracts. Berliners have been paying below the market rent for decades often on long tenancies, and they don’t like change, but cheap rents and great jobs aren’t compatible. We’ve had a massive amount of people moving here, and generally, they have excellent jobs and are used to paying a certain amount to rent or buy property. Of course landlords will want to capitalise on the city’s popularity and charge new tenants more. These are the market conditions, and it’s happening across the world so why should Berlin be an exception? We have varying levels of income in the same areas and this isn’t sustainable – it needs to be levelled out.

“I know a woman who is paying just around 600 EUR a month for her large 3-bed and 110 square metre flat near the proposed Google campus in Kreuzberg, where some of the riots have been taking place. It’s in terrible condition, but she won’t move even though she is on an excellent salary and owns several multifamily houses because there’s no better deal on low rents for her. Many people are moving to that part of Kreuzberg. So, she lives in a cheap but well located flat for less than 15% of her monthly net income and strongly believes that Berlin should not change and that investors should not buy any property in Berlin at all,” says Achim Amann, co-founder of Black Label Properties.

2.   How we manage the process of change. Berlin is a progressive city and stands for new beginnings, and we should embrace and encourage that mindset rather than fighting against it. There is still plenty of land and room for Berlin to expand, so the question is how do we want to manage the process of change? So far, our politicians haven’t been doing a great job. The current perception is that they are dragging their heels over development and this is causing anxiety and an overheated rental market.

“Berlin’s politicians are avoiding the construction of new apartments even if they say the opposite; their performance is a complete disaster. Try to obtain a planning permit or to buy an affordable plot of land to build flats – it’s impossible. Mainly government-owned developers continuously complain that the Senator and administration slow down, delay or prevent building projects and use planning law to stop the construction of new houses. They even wrote an open letter questioning the lack of support from the Senate and have been forced to build on the outskirts of the city, which has led to vast urban sprawl.

“So because of a lack of transparency about housing plans we have conspiracy theories flying around, comments in the newspapers about the ‘document of horror’ (the housing construction report) and rioting in Kreuzberg and Neukoelln because people are angry and fear they are being exploited. The dark mood and current situation are at odds with Berlin’s reputation as a progressive city open to change, innovation, and a substantial immigrant population. It has also had political implications, which is worrying. More tenants are now considering voting for either the far left or far right-wing parties.

Solutions to the housing crisis

As agents, our job is to provide accurate information about the market. We don’t create it, and our goal is for transparency and change and bringing more people into home ownership so they don’t stay renters for life. “The only solution is to quickly build more houses, grant more planning permits and motivate developers to sell to first time buyers, owner occupiers and to think about tax advantages for young families buying their first home. One way to create more affordable housing is to bring back the tax breaks for developers to build in the city again rather than the suburbs. This scheme worked well in the past, and there’s no reason why it can’t again.”

So that cooperatives and private companies can finally build as much as they would like next to public companies, we need affordable building land and changes to the administrative structure of Berlin to speed up the process of housing construction. We also need to create an open and welcome culture for progress in the spirit of what Berlin stands for. Life would be much easier for us, other agents and our current and future residents if we had more affordable housing to market! The new proposals are welcome but well overdue, and much more can be done to ease the housing market.