The city of Berlin has finalised a deal, after months of negotiations, to communalise a major portfolio of housing to add to its city-managed stock. The deal will see three state-owned companies taking control of 14,750 apartments and 450 commercial units from the two DAX-listed housing companies Vonovia and Deutsche Wohnen, in a transaction valued at €2.46bn. This is the largest such deal in the capital for many years.
As part of the ongoing negotiations between Vonovia and Deutsche Wohnen with a view to their own full merger, and to smoothing out any political objections to the two companies' mega-fusion plans, the two companies had originally offered the state of Berlin 20,000 apartments. The existing red-red-green Berlin governing coalition in the Senate (parliament) is now actively pursuing a policy of expanding the city's municipal housing stock through new building and buying existing property assets. The plan is to gain more control over the city's tight housing markets, and to slow down the rapidly-rising level of rents.
According to Finance Senator Matthias Kollatz of the SPD, the housing purchase is "exemplary for a social Berlin. The 30,000 tenants affected will now have the security that their apartments will permanently be in the low-price segment."
The deal amounts to both housing companies giving up about 10% of their housing interests in Berlin. More than 10,000 of the apartments are coming from Deutsche Wohnen, with the other 4,250 coming from Vonovia. The number now of municipally-owned apartment units in the city will rise to about 355,000, which is a good fifth of all the 1.67 million apartments in Berlin.
Howoge, Degewo and Berlinovo - the three municipal housing companies who are buying the apartments - are financing the purchases with bank loans, while at the same time rejecting any suggestion that this additional financial burden would in any way negatively affect their ongoing building programmes. "If anything, we might even increase our level of new construction", said Howoge's managing director, Ulrich Schiller.
The apartments being sold are located across all of Berlin's twelve districts, and would generally be classified as 'small' with an average size of 68 sqm. Many were built in the 70's and 80's, while others are even newer. Given the penchant for including asbestos boards in floor coverings in the older units, and a maintenance backlog for later-built units, the capex estimated by the three housing companies for the next few years is put at about €380m.
The deal includes a number of well-known housing estates, such as the Falkenhager Feld in Spandau, the High-Deck Siedlung in Neukölln, and the Thermometersiedlung in Lichterfelde, as well as smaller groupings.
A number of the units had previously been in communal ownership, until Berlin took the decision about twenty years ago to sell off about 200,000 of its city-owned housing units at what are now seen as ridiculously low prices.
Finance Senator Kollatz said the average purchase price of the units in this latest deal is about €2,400 per square metre, putting the average price per apartment unit at €163,000. This is the 'income value', which is well below the actual market value in Berlin's current housing market, and allows them to be valued as "affordable housing stock", according to Senator Kollatz.
Rolf Buch and Michael Zahn, the CEOs of Vonovia and Deutsche Wohnen respectively, marked the deal as proof of their goodwill and that their companies can be viewed as 'reliable partners' of both politics and society in helping to resolve the problems on the Berlin housing market. They referred again to their recent commitment to both freezing rent increases on the Berlin market until 2026, and to themselves building a further 13,000 new apartments to ease the tension in the market.
Both companies have been striking conciliatory notes in their public utterances for many months now, as they struggle to get their mega-merger finally over the line after a number of setbacks, and in advance of the coming election on September and its parallel referendum to expropriate all housing companies owning more than 3,000 apartments in the capital.
In Berlin, asking rents have indeed risen faster and further than in any of Germany's other biggest cities, and the issue of affordability in a city which still has below-average income compared to many German cities has been increasing pressure on landlords and politicians for several years now.
It is not yet clear what will happen after September 26th should the referendum on expropriation be passed. A new survey, commissioned by the housing association BBU Verband Berlin-Brandenburgische Wohnungsunternehmen e.V. and carried out by law firm GreenbergTraurig, makes it clear that, from a legal standpoint, the expropriation of large Berlin housing co-operatives, which have been providing safe and subsidised housing for Berliners for decades, would also have to be included in any such expropriation. In a statement, the BBU CEO Maren Kern warned Berliners to bear this in mind when ticking their boxes in the vote on 26th September.
Expropriation would affect 29 traditional Berlin cooperatives, each with more than 3,000 apartments, and who collectively have a total housing stock of about 140,000 units. Their 226,850 members would be directly affected by expropriation. Kern said, "The amount of Berliners thus derived of their co-operative shares would be equivalent to the population of large cities like Magdeburg or Freiburg."
Not all voters are fully aware of this, as the original plan to expropriate the large landlords specifically excluded the co-ops. However, this was amended in June 2020, and was replaced with a long list of 'undesirable' characteristics of landlords, such as 'being driven by a profit motive', lack of enthusiasm for "collective ownership by the tenants', - in other words, a 'general absence of public-spiritedness' and 'co-operative fervour'.
A successful expropriation referendum would not only be a severe blow to Berlin's cooperative tradition, said Kern. In addition, the number of expropriated flats would increase by 140,000 from the current 240,000 to around 380,000. Correspondingly, the sum to be paid by the state for compensation would rise from €36 billion by €21 billion to then €57 billion. "In other words, the state's debt burden, which currently amounts to around €59 billion euros, would double in one fell swoop in this way."
