Fearful of rising rents, the municipality is asserting its right to block investors from buying apartment buildings. Other cities across Europe are sure to watch how this plays out.
To stop landlords from hiking up rents, one Berlin borough is taking drastic action: blocking the sale of a building and buying it up for the government. Earlier this week, the inner-city borough of Friedrichshain-Kreuzberg announced that it wouldn’t allow a privately-owned tenement to be sold to an international investor. Instead, officials are directing the sale toward a state-owned independent housing association committed to affordable rents.
The move came after tenants campaigned to block the sale, fearful that the prospective buyer, a shell corporation registered in Luxembourg, would raise rents beyond a level they could afford. The borough’s move—blocking a building’s sale simply because it fears potentially extreme rent rises—would be illegal in some places. In Berlin, it’s possible because of national “neighborhood protection” laws that give boroughs a right of pre-emption if the sale of a building in an area of high housing stress risks displacing its tenants. The move is not just possible, in fact, but increasingly common.
Berlin boroughs have exercised a right of pre-emption of a set of buildings containing 45 apartments and six commercial units since September 2016. And while Germany’s rental and real estate laws are more stringent than those of most countries, this is not just a German phenomenon. Paris instigated similar laws last year designed to inhibit economic ghettoization in the inner city by demanding right of first refusal to properties in a number of wealthy districts where public housing levels are especially low. Should Berlin’s and Paris’s plans prove popular with voters, affordability-driven buyouts of private real estate could become more common in many European cities.
In Berlin, the verdict seems to be so far, so good. In a city where most citizens still rent, the move to buy private property for the state is not an inherently controversial one. Another part of the “neighborhood protection” laws (called Milieuschutz, in German) is a ban on luxury renovations, a ploy commonly used by landlords to get around rules limiting rent rises. The overall intent is to maintain some social mix in gentrifying areas and to prevent swift transformations that can break communities.
Laws like these ones aren’t new—they have actually been available to German municipalities since the 1970s—but their current extent is unprecedented. Berlin’s first districts covered by neighborhood protection were designated 15 years ago. By 2015 the city had 18 such zones. As of April this year, it had around 40. Forty percent of the Friedrichshain-Kreuzberg borough is covered by the laws, and the administration’s intention is to push this up to 60 percent. Neighborhood protection laws are thus moving from a small-scale tinkering with the property market to becoming a central part of any municipality’s armory.
So can laws like these really do much to halt neighborhood change and preserve affordable housing?
They might seem redundant when Berlin already has some laws in place to restrict rent increases (even if they’re of debatable effectiveness). Berlin’s existing rental laws are not about freezing rents, per se. They concern themselves instead with stabilization, evening out any rises over a longer period so as to lessen the potential chaos of gentrification and displacement.
Currently, these laws require neighborhoods to be overseen by a rental board (called a Mietspiegel or “rent mirror’ in German) which calculates the average rents of local homes, separating them into bands according to size, condition and quality. No new rental contract can charge more than 10 percent more than this agreed average rent. The rule doesn’t prevent rent rises, but it does keep costs from doubling overnight.
This wouldn’t do much to protect the tenants of the building in Friedrichshain-Kreuzberg. The borough, which straddles the east-west boundary and has a sizable population of Turkish heritage in its western section (called Kreuzberg), still contains the most deprived neighborhood in the city. Despite lingering vestiges of a counter-culture that was very active in the 1970s and ‘80s, Kreuzberg has experienced ongoing waves of wealthy incomers, attracted to its handsome early 20th century tenements and central location.
The building in question lies within the area’s most desirable section, a micro-neighborhood with a daily market, sidewalk cafés and many cobbled streets that should become even more sought after if plans to pedestrianize it go ahead. Such is the rise of rents in this area that newspaper Berliner Zeitung estimates that the building’s owner could have charged up to 15 percent more over three years without breaking any laws.
The affordable housing provider taking over the building, called WBM, should help current tenants to stay there, as it has promised that rents will rise by no more than 2 percent a year. This security will be bought at a price—WBM is paying €4.4 million ($5.2 million) for the building, which is no small amount, even if it can ultimately be recouped through rent.
What greater significance does a move like this have? It seems unlikely that exercising occasional rights of pre-emption would do much to halt rent rises if it’s just a case of buying one or two buildings here and there. What it could do, however, is prevent gentrifying areas from becoming entirely uniform in the background and economic status of their residents. It’s for this reason that Paris has adopted similar right of pre-emption laws, to ensure that some people with lower incomes live even within the wealthiest sections of the city.
This benefits wealthier residents who don’t want their arrival in a neighborhood to create a monoculture, but it still risks being somewhat tokenistic, saving a clutch of lower-income residents from a process of displacement that still carries on for the majority regardless. Political representatives in Friedrichshain-Kreuzberg nonetheless hope that moves like this week’s building purchase could help create a tipping point.
Wary of legal challenges and hold-ups in areas covered by neighborhood protection, they could become more inclined to sell their properties on to affordable housing providers like WBM, or even to groups of rental tenants who want to found building co-ops. It’s impossible to say if this optimism is well-grounded, but it’s clear that some representatives in Berlin are seeing the Kreuzberg building purchase as a mere chrysalis out of which an entirely new way of managing city housing could emerge.