BERLIN, 06.04.2019

Organisers of #Mietenwahnsinn (rental madness) estimate that around 40,000 people joined the demonstration against rising rental prices in Berlin today. Starting at Alexanderplatz, the protest headed east along Karl Marx Allee where renters since 2018 have hung red flags out of their windows in protest against the sale of the imposing socialist-style buildings that line the infamous boulevard to Berlin’s largest real estate owner, Deutsche Wohnen.

Germany is known as a renting country, yet the tight rental market and predictions that it is unlikely to abate anytime soon are set to potentially change this long-established cultural trend.

With around 85% of Berliners renting in what used to be one of the cheapest cities in Europe, protesters argue that the sale of apartments to investor-owned companies has pushed many long-term residents out of their once-affordable homes onto the streets or out of Berlin altogether.

As a city that brought about the fall of the Iron Curtain and where memories of life under socialism still remain strong, it’s no surprise that residents of Berlin are leading the fight against nationwide rental price hikes, with protests growing in size every time they take to the streets. 

According to a study by the online real estate portal Immowelt, Berlin’s rental prices increased by 13% in 2018, exceeding even those of the Bavarian capital, Munich, the city with the highest overall rental prices and a starkly different culture to that of Berlin.

Demonstrators blame rental price increases on investors, who, they argue, are using rental prices to increase profits, driving speculation on the property market. The renovation of old apartments is inevitably followed by rental price increases, they say, even though the renovations are in many cases unnecessary.

Deutsche Wohnen is the single largest real estate owner in Berlin with 115,000 properties, which account for 70% of its business profile and 6% of the overall rental property market in Berlin. However, according to Guthmann Estate, around 70% of Berlin’s property market is in the hands of private property owners such as Deutsche Wohnen and Vonovia, with 18% owned by public housing organisations, and 12% by cooperatives. Demonstrators claim that Deutsche Wohnen, as the largest single investment property owner, leads the property market in determining prices, influencing the smaller so-called “rental sharks” in the drive to increase rents for profit.

Deutsche Wohnen says that it does not speculate with rental prices, but in 2018 alone it increased its profits by 5.6% to €1.9 billion, according to Finanzen.net, increasing its maintenance and refurbishment investments by 25% to €416 million, a third of which is passed onto renters through a modernisation charge, which is legally capped at 11%.

Property shortages are a chronic problem across Germany’s big cities, but the market in Berlin is especially tight due to historical factors and an ever-increasing population, which is expected to continue to climb alongside steadily increasing economic growth. Between 2011 and 2015 alone, Berlin’s population grew by 200,000 (equivalent to 125,000 new households), with predictions that the city will grow by a further 250,000 by 2030. 

Deutsche Bank predicts that the property market will continue to be tight for at least the next decade, due in part to the time lag between the issuing of permits for the construction of new apartments and their completion. Accordingly, it also predicts that Berlin could become the most expensive rental city in Germany, with property prices also expected to continue to increase as renters seek to buy in order to exit the cramped and overpriced rental market.

Demonstrators argue that the solution lies in renationalising housing stocks, with companies that own more than 3,000 properties forced to sell their stocks to public housing organisations in order to limit the incentive to sacrifice housing affordability at the altar of profit.

In an effort to address rising rental prices, lawmakers in Berlin introduced a “rental price cap” (Mietpreisbremse) in 2015, which aimed to stop unjustifiable rent increases by limiting them to 10%. However, according to anecdotal reports, landlords have been able to exploit gaps in the law, making it ineffective in keeping rents down. Investors have also argued that since Berlin needs more housing, limiting rental prices could have an overall adverse effect on the investor incentive to build housing to meet the city’s growing population.

As other cities in Germany and around the world struggle to balance urban growth with housing affordability, eyes will continue to be on Berlin to see if it can lead the way in developing a socially and economically viable solution to what is a critical component of creating a liveable and sustainable city. Whether the renationalisation of housing stocks or a mix of targeted government incentives to boost property development and investment in a range of housing options according to income level is the solution, remains to be seen.

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