Feargus O'Sullivan is a contributing writer to CityLab, covering Europe. His writing focuses on housing, gentrification and social change, infrastructure, urban policy, and national cultures. He has previously contributed to The Guardian, The Times, The Financial Times, and Next City, among other publications.
To ward off rent hikes and evictions at the hands of new building owners, the city will purchase about 700 homes the much-coveted Karl Marx Allee neighborhood.
In fall 2018, residents of East Berlin’s Karl Marx Allee—a grand Stalin-era boulevard lined with massive state-owned apartment blocks that have become desirable residences in this fast-gentrifying city—faced an alarming situation. About 700 homes were to be sold to a mega-landlord called Deutsche Wohnen; soon, they feared, poorer tenants would be evicted as their new landlord used legal loopholes to hike the rents beyond levels they could afford.
But then city leaders proposed a novel rescue plan: The city would step in and buy the apartments, barring the takeover and ensuring that the rents stayed manageable. This week, news came through that the city had acted on its plan. As of last Friday, the city is the owner of 674 of the apartments, making the Deutsche Wohnen sale impossible. As one headline put it, Karl Marx Allee “belongs to Berlin once more.” It could also be just the beginning of something even bigger.
The “once more” in that phrase is significant. Built during the Communist era (and the spark for a major uprising in 1953), the apartments along Karl Marx Allee were sold off to private landlord companies in 2004. This was a phenomenon across the post-reunification city—also in the West, where many buildings were also publicly owned—powered partly by faith in the private market, but more substantially by a hole in the nigh-on bankrupt city’s finances. The sales helped plug that gap, but ended up triggering another problem: runaway rent increases. Huge tracts of housing that had been hitherto managed as a public asset ended up becoming a cash cow milked by private companies until it bled.
Germany does have some legal brakes on galloping rent rises, however. In German rental contracts, the amount rent can rise per year is controlled, meaning at least that living costs couldn’t double overnight. But landlords who renovate their properties can avoid this. That work-around has turned luxury renovation into a tool for displacement, as The New Yorker recently detailed. A low-income resident might find their building newly equipped with balconies on its inner courtyard, or underfloor heating, then find their rent hiked beyond a manageable level, forcing them out.
It was fear of this process that led Karl Marx Allee residents to fight the Deutsche Wohnen buy-out. The city’s decision to step in, meanwhile, is not entirely unprecedented. Berlin boroughs can in some cases exercise the right to step in to prevent a building’s sale to a landlord they suspect of exploitative practices, buying the building itself or obliging the landlord who does so to sign a strict agreement on rent rises. While most Berlin districts steer clear of this practice, it has become common in the borough of Friedrichshain-Kreuzberg, where Karl Marx Allee is located.
What is entirely new, however, is the sheer scale of this buyout.
The purchase will cost an estimate €90 to €100 million ($101 to $112 million), an amount that will ultimately be recouped through rents but which is still an initial strain on the public purse. If a popular public campaign is successful, however, many more such buyouts will follow: Housing activists are pushing for a citywide referendum that would ban all mega-landlords in the city and return their housing stock to public control.
In a city where people of all classes rent, it’s a campaign that enjoys considerable support across the voter spectrum. The proposal recently passed its first hurdle, successfully hitting the required number of verified signatures on its petition. In the meantime, the city has already agreed to another radical housing fix—a ban on rent rises in all but newly constructed buildings for the next five years. Taken together, these reveal a city prepared to go further than any other in Europe to fight acute housing cost inflation.
This might make Berlin sound like a renters’ paradise. The reality, alas, is far different. Despite the city’s use of state apparatuses to fix its housing market, there is still intense pressure exerted on the system by private real estate investors—a pressure that’s become all but ubiquitous in major cities like London, Paris, and New York City that have become speculative playpens for the hyper-wealthy. As extreme as they might seem from a North American perspective, Berlin’s housing interventions may still prove insufficient to resist the sheer force of this speculative slash and burn. But in setting itself up as a laboratory for possible fixes to the global housing crisis, at least Berlin is trying.