Men work on the roof of a luxury apartment building in Berlin. REUTERS/Thomas Peter

The city hopes to preserve a mix of social classes and slow down gentrification. But there's a risk the changes will encourage speculators to expand to new areas.

From this week onwards, Berlin is putting a brake on new condos. On Tuesday, the Berlin Senate voted through measures to effectively ban the conversion of rental apartments to owner-occupied condominiums in a large area of the city. The protected area covers 160,000 homes and houses around 300,000 people (a large number in a city of 3.5 million) and may well be extended to a wider area in the near future. The goals of the move—to preserve a mix of social classes and slow down gentrification—are ambitious. As city planning senator Andreas Geisel put it: “Everyone should have the possibility of living in any part of the city.”

Right now, it’s the parts of the city where everyone wants to live that are coming under the microscope. Looking at a map of Berlin’s new no-conversion zone, it might almost come from the back of a real estate catalog detailing the city’s up and coming neighborhoods. Forming a crescent around the east of Central Berlin, the areas in question are mainly filled with streets of mietskaserne, stocky but attractive pre-World War I tenements whose once mostly working class courtyard apartments have become very fashionable. These areas already have a good deal of protection under nationwide “community defense” laws which, among other things, ban luxury upgrades that could allow landlords to hike their rents beyond what existing tenants can afford.

These aren’t the only desirable parts of the city, as Berlin’s wealthiest residents typically live around the forests and lakes on its far western edge. They’re just the areas where the number of apartments being cleared of rental tenants is highest. In the increasingly fancy Prenzlauer Berg area, for example, 1,500 apartments went from rented to owner occupied in 2013 alone. While the new law hopes to put a halt to this, there will be some exceptions. Sales in progress will be exempt, while landlords will also be allowed to sell apartments to tenants who have been residents for seven years or more. If a landlord can prove that an apartment is very difficult to find a tenant for, the city may also approve its sale as a condo.

Men work in a 19th century house being converted into a luxury apartment building in Berlin. (REUTERS/Thomas Peter)

While the plan is bold, it isn’t exactly obvious. These apartments aren’t being taken out of circulation, after all. Some may indeed be bought up by wealthy absentees who are only occasionally in the city, but most will still be used as primary dwellings. The problem is that Berlin’s supply of rental homes is dwindling. This matters to most citizens in a city where over 80 percent of residents rent and many don’t have the means to afford to buy. Berlin is building homes at a rate of over 12,000 a year, but such is the rental drought that many areas now have more flats available for holiday let than regular rent. With such a large majority relying on the rental sector, plans to keep rented flats in circulation aren’t particularly controversial.

The limited scope of the new measure might be an issue nonetheless, as it risks moving the problem down the road rather than actually solving it. I can see, for example, that while my old street in Kreuzberg is now protected, some only slightly less attractive blocks nearby are not. There seems a high risk that the new laws will just displace conversions to condos a few hundred yards down the road, possibly hastening the speed of gentrification by encouraging landlords and speculators to expand to new areas.

Berlin has an answer ready for this, however. If an area next door to a controlled zone ends up under similar pressure, the city can extend the zone. New protection zones are already in the pipeline, with a fresh one announced less than a fortnight ago—in a sign of changing architectural fashion, it’s the first to be set up in a post-World War II district, East Berlin’s elegant 1950s neoclassical Weberwiese. And while the laws are unlikely to be welcome among real estate professionals, they’re not inherently bad for landlords either. One reason why Berlin property has risen in price recently is that already strong tenant protection laws have helped give Germany a reputation for being essentially bubble free, a place where price rises are likely to hold.

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