Berlin, Germany. A roof for all!

The German capital calls for the implementation of the referendum on housing expropriation. An expert committee submitted its final report, which confirms the legal feasibility of land socialization after the referendum’s victory towards large real estate groups expropriation.

By Carolina Menéndez Trucco

The final report of the expert commission, which was set up after the referendum won to expropriate large housing groups, sees no obstacles to the socialization of real estate companies. In autumn 2021, around 60% voted in favour. Parallel to the federal elections in September of that year, more than a million Berliners spoke out in favour of the expropriation of real estate companies to regulate the market and thus be able to lower the excessive rents. This clear majority supported the state incorporation of more than 230,000 homes, applying the measure to companies that own more than 3,000 properties.

In short: First, the referendum was successfully carried out in the last federal election, then a commission of experts was constituted in the Senate, which spent a year debating the best way to implement it. And as a result of this, the latest submitted documentation was achieved, which provides a framework for the future land expropriation law and referendum compliance. In other words, Berlin chose a roof for everyone. And now it’s politics’ turn.

Towards the common good

The expert’s commission report provides the necessary substance to promptly present a legal framework on this basis. After the favourable result obtained in the plebiscite (59.1%), and after the committee saying that it is feasible, expropriation in fact still requires certain jurisprudence in its execution. And for the referendum to be implemented, the initiative had to go through the Senate[1], since to move forward with the transfer of real estate to common property, there must be a law that establishes the economic compensation of the expropriated companies.

The Berlin Senate, or rather the current government coalition of Social Democrats (SPD) and Conservatives (CDU/CSU), are called upon to introduce all the necessary measures to draft the rules that support this purpose. The initiators of the referendum, the popular initiative for expropriation “Deutsche Wohnen & Co. enteignen” (DWenteignen)[2], as well as the Left (Die Linke) and recently the environmentalist Green Party (Bündnis 90/Die Grünen), want a quick start-up.

Who owns the city?

In fact, Berlin has become the capital of tenants: Four out of five Berliners rent. In addition, the concentration is such that 81.5 percent of the entire market is managed by a few large companies. Of the 1.9 million properties in the entire metropolitan area, 1.5 million are flats that they rent out. And as if that weren’t enough, in April 2021 the Federal Constitutional Court overturned the decision to impose a rent cap on the city, i.e., the maximum rents set by the State. To this unfortunate fact was added another bad prognosis: the projection for 2030 of at least 200,000 new properties needed to face the housing problem.

After all, the real estate crisis has worsened in recent years. Berlin went from being one of the cheapest cities to live in, to one of the most expensive, mainly thanks to the rapid and exponential monopoly concentration and the consequent sector’s financial speculation. The Berlin Senate is therefore pursuing the goal of expanding the municipal housing stock through new construction and purchases to slow down the rise in rents in the city, through its state-owned associations such as Degewo, Howoge, Berlinovo, Stadt und Land, among others.

The mathematics of socialization

How much would it ultimately cost to convert the housing stock of large for-profit corporations into common property? A question that is not so easy to answer. What must be contemplated when determining the amount of compensation, that is, when indemnifying expropriations, is what a property is really worth outside speculative price spirals. There are several methods to determine this market value. Following the fair rent model proposed by the Berlin citizens’ initiative “Deutsche Wohnen & Co. enteignen”, the large housing groups would receive commensurate compensation, which could be in 40-year repayable bonds, but considering the interests of the tenants and not just those of corporations. Said roadmap foresees that, by socializing the flats, the increase in rents can be stopped, and affordable amounts can be secured in the long term. According to Senate forecasts, compensation costs could amount to between 29,000 and 36,000 million euros, while the DWenteignen expropriation initiative, on the other hand, expects between 7,300 and 13,700 million.

Along the same lines, a study recently published by the Rosa Luxemburg Foundation analyses owner groups in the real estate market, comparing the earnings of listed companies with those of state-owned ones. In it, you can see an adequate reference for calculating compensation: how high a non-speculative rent must be to be economically viable. In any case, the project should be framed in a new law.

After the expert committee’s final report became known, “Deutsche Wohnen & Co. enteignen” called on the current Berlin black-red coalition of conservatives (CDU/CSU) and social democrats (SPD) to briefly present a legal framework. According to this, the State of Berlin has the legislative competence and would act correctly if it pushed ahead the implementation. Experts are also convinced that fair compensation is possible. Still, not everything is rosy.

Pros and cons of expropriation

As was to be expected, both the right-wing extremist party (AfD) and the liberals (FDP) were against it from the first minute. For their part, defenders of the right to housing are calling on the governing coalition in the capital to implement the 2021 referendum and introduce a law on socialization to solve the housing crisis. Although the Greens (Bündnis 90/Die Grünen) have long been unable to agree on a common position, have given mixed signals and even considered that such a step would only be possible as a last resort, they now appear to be providing tentative support for the campaign. Instead, the Left Party (Die Linke) defended the referendum from the start and thus, like the efforts of the tenants’ movement, took a confrontational course for affordable rent rather than big profits.

Collective ownership

The commission, consisting of 13 experts, spent more than a year dealing with legal issues related to the interests of the common good. This final report can now be presented as a model for a real socialization law. Because according to article 15 of the Basic Law of the Federal Republic of Germany, to carry out the transfer of residential real estate to common property, a legal framework (Vergesellschaftungsgesetz) is required, which also defines the type and amount of compensation.

In German, there are two terms to differentiate the types of transfer: while expropriation proper (die Enteignung) is directed at individual assets, socialization (die Vergesellschaftung) aims at transferring companies and entire economic sectors to the common economy. According to the Federal Agency for Civic Education, it is an economic form whose most important purpose is to cover social needs, not be oriented to private profit. The point of the state appropriation of flats then is to avoid excessive rents. Therefore, the course of action would be to take housing out of the free market economy so that socialization would remain as a priority.

A roof for all!

The public debate about the expropriation of the big real estate groups considering the exorbitantly increasing rental and purchase prices for private homes makes it clear that the mere prospect of success of this change represents a challenge. Not only in Berlin, but also in the rest of Germany and the world. But beyond the difficulties and the new legal framework required for its implementation, the first step has already been taken. It is a triumph of the social mobilization, which gathered the signatures for the referendum, pushed it, then won it with a strong campaign, marches and other pressure initiatives, and now continues, so the expropriation takes place.

Many have high hopes for social housing to create more living space. In addition, it is about transferring houses that came from large real estate companies and not private individuals into the hands of the State. The point is that expropriation cannot be reduced to just the legal act of a change of ownership. The main goal should be to bring important areas of society under democratic sovereignty.

[1] The Senate is the executive branch of Berlin, made up of the governing mayor and eight senators. The German Bundesrat is called the Federal Council.

[2] “Expropriate Deutsche Wohnen & Co.” are the initiators of the referendum, the popular initiative for expropriation. In contrast to DW, one of the big real estate companies.