Steal buildings from private owners – Reason.com

Faced with a lack of homes, Berlin voters have approved plans to confiscate some existing stock from its private owners.

On Sunday, 56 percent of voters in the German capital approved a non-binding ballot initiative that would require the city government to hand over landlords owned by 3,000 or more units. It will cater to about 240,000 units, which is about 15 percent of the city’s rental housing stock.

Organizers of the expatriate Deutsche Welle & Co. have announced that “the majority of Berliners have chosen to socialize the larger real estate group in order to vote, and thus against speculation about living space.” German waves. (Deutsche Welle is a large real estate company.)

The organizers of the referendum want the Berlin government to use a prominent domain article in the German federal constitution to seize the possession of Deutsche Welle and other large landowners, pay them “below market prices”, and then rent apartments at more affordable rates for current residents.

The immediate practical impact of the vote is low. It is not necessary for the Berlin government to consider an occupation law, let it be a pass. Nonetheless, it puts pressure on politicians to take this step.

“Ignoring the referendum would be a political scandal. We will not give up until the socialization of the housing group is implemented,” Kale Kunkel, an expatriate, told Reuters.

This is a symbolic victory for a particular leftist approach to solving housing affordability problems in large, high-value cities – which focuses more on redistributing existing housing stock than building new units.

Elected officials from Canada to California see this as an example to follow.

On Berlin soil, the occupiers faced several practical obstacles.

It is not clear whether the massive seizure of private apartments would be constitutional. In 2019, legal advisers to the Berlin House of Representatives said it would, reports German waves. But a real estate lawyer who spoke to the publication argued that the court would quickly overturn it and said that cutting 3,000 units arbitrarily and paying below market value would violate the country’s constitution.

The city’s incoming mayor, Social Democrat Francisca Giffy, said an occupation bill should be considered to respect the will of voters. But he doubts the law will be constitutional, and he thinks the policy is a bad idea.

“Forfeiture doesn’t help to build a new apartment or solve the big question of affordable housing,” he told a local broadcaster.

In addition to not creating any new housing, the plan will be very expensive. The Expatriate Deutsche Wellen campaign estimates that it will cost only € 7 billion ($ 10.5 billion) – about 34 34,000 per unit – to compensate current owners of the targeted property. But the Berlin Senate has estimated that the cost could be billion 20 billion, with some estimates reaching € 36 billion (€ 150,000 per unit).

Earlier this year, the city agreed to buy 14,750 apartments from two large landowners for 2.46 billion (or € 166,000 per unit), in line with top estimates. The city spent the same amount per unit to achieve 6,000 units of previous public housing in 2019. All of this suggests that top-line estimates of occupancy costs are more realistic.

And that money will come at the cost of new development for a city that is already suffering from a severe housing crisis.

The real estate company Guthman Estate estimates that there are about 205,000 units in Berlin. According to a study by the German Economic Institute, the country is building about 100 percent of its homes in line with demand.

A socialist critique of Berlin’s occupation plan would be that it would give billions of euros to private real estate companies to buy existing units when that money could be spent on building new, public housing for the city’s growth.

Meanwhile, a free marketer could argue that occupying 15 percent of the city’s rental housing stock would be a big disappointment for developers to build new, private units. They feared that the state would snatch their investment and not pay the market price for it.

The tenants of the newly occupied units will obviously benefit from the rent they receive from the lesser owners. Everyone else will be bad, because they will be forced to compete for a small part of the individual unit.

A brief trial in Berlin found that apartments built before 2014 stopped renting. But uncontrolled unit prices rise dramatically. (In April 2021, the German Constitutional Court revoked Berlin’s rent control.)

The number of controlled units in the rental market also broke down, when new lists for unregulated units were not enough to take the slack.

Rent control represents “a loss for a group of tenants: those rich or poor, who are already stuck in controlled apartments,” he wrote. Bloomberg Columnist Andreas Cluth in March. “At the same time, they are hurting all other groups – especially young people and people from other cities.”

There is strong evidence that new housing, even expensive new housing, makes cities more affordable for all. Berlin leaders should consider ways to increase housing production so that the city can continue to grow and prosper, instead of redistributing existing units for the benefit of a minority of incoming tenants.

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