Apartment building
There has already been a hail of criticism levelled at Germany's ruling Social Democratic Party for its proposals to grapple with the soaring costs facing tenants across the country.
The SPD - the largest group in Germany's three party coalition government - is likely to face hefty opposition even from its coalition partners with its calls to limit the maximum rent rise permissible in 'tight markets' to 6% over a three year period, instead of the 20% permitted now (15% in particularly tight sub-markets). It also proposes a blanket freeze to cover the rest of the country.
The Government's own coalition agreement envisaged lowering that rate to 11%, but in the light of Germany's worsening housing situation, the SPD now feels that is not enough. Hence the revised bundle of measures they're now trying to push through.
The SPD's own internal document also addresses the question of indexed lease agreements, which have become a problem, by being tied to the prevailing rate of inflation, has seen many rents jumping sharply because of the rise in prices, largely as a result of the war in Ukraine which has fuelled inflation. This has seen rents in part rising by more than 10% annually. Instead, the SPD want to couple indexed rents not to the overall rise in prices but to the rise in net 'cold' rents, or in any event to introduce an 'effective cap' on rents, less fixed on the prevailing rate of inflation. It also proposes a stricter crackdown on landlords who sidestep the rules, such as renting an apartment as 'furnished', and push through illegally high rent through other means.
Justice Minister Marco Buschmann of the coalition partner FDP, the liberal democrats, has long been against legislating against index leases on the grounds that the problem is not a shortage of regulation but a shortage of available accomodation. If the government wants to send out a signal that private capital is urgently needed for residential construction, it's not helpful to indicate that there's a lot of new regulation ahead, he said.
Buschmann's FDP colleague, Daniel Föst, the party's spokesman on construction and housing, pointed to the €15bn the government had already allocated toward social housing, but stressed the need to focus on "fighting the construction crisis before our construction industry collapses... Only when we build more, faster and cheaper will we create enough affordable housing.”
Another aspect the SPD want to tackle in their new proposals is high acquisition costs. In future, a potential buyer should only be liable for paying the broker commission if he or she has actually engaged the broker in the search for the property. Notary costs should also a fixed sum, instead of a proportion of the purchase price.
It hasn't taken long for opponents of the SPD's proposals to voice their objections. Economist Veronika Grimm, one of the so-called "Economic Wise Men", said in a media interview, "A stop on rent increases would throttle housebuilding even further and heighten the degree of uncertainty among investors. If investors have to fear that returns will be slashed just to appease the public and pander to voters, then they will invest less, or even elsewhere," she said.
Dirk Wohltorf, newly-elected president of national housing association IVD, also weighed in with criticism of the SPD's proposals. ""The expansion of the housing supply, by the constructing of new apartments, is the only effective means against housing shortages and rising rents. If the SPD has its way, new housing construction will now be completely cut off. The unflinching continuation of the spiral of rent regulation is an affront to all those who want to build but cannot," he said.
And ZIA, the umbrella lobby group for the real estate industry, pulled no punches in countering the SPD's planned reforms. Dr. Andreas Mattner, president of ZIA, commented: "The federal government must finally find suitable answers to the housing catastrophe. In any case, further capping of rents is no solution."
"The supply of housing is so scarce that only one thing will help - building, building and building again. Any regulation, any cap will only lead to not a single flat being built in Germany. Everything will become more expensive. And in such a mixed situation, politicians take it for granted that wages will also rise. But the rental properties have to be kept in good shape. We, like everyone, have to deal with inflation and increased costs for property maintenance."
"At the same time, many of our members are not only landlords, but also build. Housing construction is also financed from rental income. If the money is no longer available, housing construction will continue to collapse."
Germany must reduce the state's share of the cost of building a dwelling, stressed Mattner. "The state share of 37 per cent in the costs of new housing is far too high and urgently needs to be lowered. We need 700,000 new apartments, and building programmes stripped of a great deal of bureaucracy, KfW loans, a waiver of taxes and also the degressive AfA demanded by Federal Minister of Building Klara Geywitz," he insisted.
