A City of Renters Asks: Can We Ban Landlords Who Own Too Much?

Banners on Berlin's Karl Marx Allee protest the sale of apartments to Real Estate company Deutsche Wohnen Joachim Hermann/Reuters

As Berliners grow increasingly frustrated with rising rents, there’s a question making the rounds in local politics that could seriously shake things up: Should there be a limit to how much housing a landlord can own?

Following months of intense debate (and some action), the German capital is considering whether landlords with more than 3,000 units should be barred from operating in the city. Opinion polls show a majority of Berliners favor such a move, and activists are about to start preparations for a referendum on the subject. If voted through, the plan could give citizens the power to make Berlin’s biggest landlords break up their portfolios, in the hope that this could prevent galloping rent rises and provide tenants with better service.

The proposal is just one of several moves in a city that could be on the cusp of a housing revolution. Over the past few months, the German capital has been trying out several plans to keep housing affordable. In effect, these plans would transfer large sections of the city’s rental homes from private owners to the public sector.

First, in January, came an agreement from the city to buy housing stock from private landlords, something never tried before on such a large scale. Then came the call mentioned above to ban major landlords from holding very large numbers of apartments. And finally, renters’ associations and some officials in the city government are campaigning for the introduction of a five-year rent freeze, an idea that also enjoys popular support, but may still founder due to the legal limits of the city’s power.

Not all of this is sure a sure bet, but the trajectory is unmistakeable. For decades, the state has sold off much of its public housing. Now, Berlin seems to be deciding that its housing market is broken, and that the private sector alone will not fix it. In a city where the overwhelming majority of people don’t own the units they occupy—roughly 85 percent of Berlin’s housing stock is rented by tenants from a landlord—that fix will inevitably mean retooling the rental market.

A ban on mega-landlords

The movement began in earnest at the beginning of the year with a fight over apartments on one of East Berlin’s most famous avenues. That case has since snowballed into a wider campaign to rein in major landlord companies.

The spark came in autumn 2018, when rental tenants of 680 apartments on East Berlin’s Karl Marx Allee discovered that their homes were to be sold to a major rental company called Deutsche Wohnen. The street in question is a grand, mainly 1950s avenue built up with elaborately decorated Stalinist baroque tenements. It’s considered a highly desirable place to live, so many residents dreaded what was sure to come.

Deutsche Wohnen owns 110,000 apartments in Berlin, and has developed a reputation for raising rents sharply by finding loopholes in Germany’s fairly strict rental laws. In the meantime, the firm invests almost half as much as state housing companies do to keep its homes in good condition.

If the deal went through, many Karl Marx Allee residents feared they would be abruptly priced out of their homes. Tenants decided to fight, insisting that the city or borough should do something to stop the sale and ensure that their rents stayed within reasonable limits.

Remarkably, the city’s government has agreed. This month, Berlin’s senate said it would step in and buy three buildings, amounting to 316 apartments. Meanwhile, the local borough of Friedrichshain-Kreuzberg would buy a fourth building containing 80 apartments, meaning the majority of flats for sale will be converted to public ownership.

The authorities could do this through an existing law that allows them a right of first refusal over buildings for sale in areas that are undergoing steep rent rises. The law hasn’t yet been applied on this scale, and even though the city and borough will ultimately recoup the costs from rent, the buyout will require an investment of up to €100 million.

That’s already a major investment—but why stop there? The overwhelming majority of units that Deutsche Wohnen owns today in Berlin used to be public housing, and were sold off by the state over the past few decades. As galloping rents make daily life increasingly difficult, many Berliners are starting to regret such a shift. Sure enough, Berlin Mayor Michael Müller promised last month to buy back 50,000 of Deutsche Wohnen’s units for the city, along lines not yet fully clarified. Renters’ associations want to extend this proposal to all landlords with more than 3,000 apartments in the city, a wish that led to their referendum plan.

Planning a referendum—let alone winning one—is a major process in its own right. Anyone seeking a city-wide vote in Berlin must get verifiable signatures in favor from at least 7 percent of the electorate (currently roughly 170,000 people) over a four-month period. This is a high bar, but it has been reached for housing issues in the past. In 2014, citizens voted in a referendum against the ceding of public parkland at the former Tempelhof Airport for (largely unaffordable) housing development.

The proposal to ban large-scale landlords appears to have widespread support. A recent poll found 44 percent of Berliners in favor, versus 39 percent against and 17 percent abstaining.The popularity of the idea, which has taken even its proposers by surprise, could well see the end of large-scale landlords controlling any of Berlin’s housing stock.

Many Berlin apartments, like these overlooking the site of the Berlin wall in Kreuzberg, have seen their rents double over the past decade. (Markus Schreiber/AP)

Boroughs take back control

It’s not just mega-landlords who are facing a challenge. Some Berlin boroughs have been buying buildings at risk of sharp rent hikes for a few years now, many of which belong to smaller companies and individuals.

The system used—called Vorverkaufsrecht or “pre-buying right”—works as follows. To prevent displacement of lower-income residents, German cities are allowed to place protection orders on neighborhoods where rents are rising at an unusually fast rate. These orders give local authorities the right to step in to buy any building within the order’s limits and convert them to public ownership, if the borough thinks a new landlord will greatly increase rents.

Buying every building at risk might prove expensive, but it isn’t always necessary. The borough can also agree to hold back from buying, provided the new landlord signs an agreement promising not to raise rents above inflation, or to sell individual flats on for owner-occupation, for the next 20 years.

The Berlin borough of Friedrichshain-Kreuzberg is the most active in this process, having bought 15 buildings for the borough since 2016. It has also gotten landlords of a further 25 apartment buildings to sign agreements. District Councillor Florian Schmidt, who heads the borough’s Building and Planning Department, insists it isn’t an attack on all private ownership.

“There are certainly are good landlords around,” he told CityLab. “The problem is that when they die, their property is sold off to the highest bidder, who isn’t always the best bidder.”

Schmidt’s vision—which depends on ongoing political support from the Green Party-led borough—is to push until half the district’s homes are under some form of public or community control. This is perfectly possible, he insists. Already since the policy began, the borough’s public housing stock has risen from 25 percent of all homes to 26.

“Say we want to increase the number of publicly controlled apartments by 30,000 over the next 20 years,” he says. “If we buy half the buildings and [get contractual agreements] for the other half, that means we need money to buy 15,000, or 750 a year. We can do that. This year, we have already agreed to buy 460, and it’s only February.”

This policy wouldn’t just increase the housing stock, it might also deter buyers. For Schmidt, this isn’t a fear—it’s a goal.

“If we make life more difficult for private investors, it could have the effect of driving down the price,” he says. In the U.S., actively expressing a wish to drive down real estate prices would be sacrilege from any public official. In Berlin, it’s an attitude that has widespread approval.

A rental freeze

For many in Berlin, measures currently in play simply aren’t enough to stop displacement and living costs from galloping out of control. Accordingly, the Center-left Social Democratic Party (SPD), which governs Berlin in coalition, has proposed the most radical idea yet: In areas where rents are rising especially fast, the SPD wants to introduce what they call a “rental lid” that would ban any rent rises whatsoever, both for new and existing rental contracts, in the five years following its implementation.

The area chosen could potentially cover the entirety of Berlin, with exceptions made for new buildings in order to encourage fresh construction. The idea of a freeze is not just to keep rents manageable, but to give the city breathing space to pursue its policies of new housing construction, so that when the restrictions lift, they do so in a city with altogether more housing available.

The public mainly seems to like the idea. Indeed, it’s telling of the current atmosphere in Berlin that such a radical move has widespread popularity. In a recent poll, two thirds of respondents said they supported the move, a result that included majorities in favor among voters for Merkel’s center-right CDU party and the extreme-right AfD.

That support may not count for much, however. According to an opinion given by the German Parliament’s Scientific Service, which provides apolitical guidance to parliamentarians, the introduction of a city-wide rent freeze does not lie within the power of Germany’s regions, and could only be approved by the national parliament.

The limitations of the city’s power still don’t erase the significance of a desire for such a freeze. In one of Europe’s largest cities, voters are leaning in favor of scrapping major landlords, of stopping rent rises for five years, and of renationalizing real estate—and their representatives are increasingly backing up their wishes with action.

It may come slowly, but it seems likely that a total overhaul of how the Berlin housing market works is underway.

Feargus O'Sullivan

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.

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