SHARE
COPY LINK

PROPERTY

OPINION: Germany’s rent crisis is fuelled by fear and foolish solutions

Germany is in the grip of a housing crisis, but no-one is talking about the real causes of it, writes Hamburg-based Brian Melican.

Cranes on building sites in Hamburg's HafenCity district
Cranes on building sites in Hamburg's HafenCity district. Photo: picture alliance/dpa | Daniel Bockwoldt

Barely a week goes by in Germany without an ill-informed spat about the topic of housing. Early in the German election campaign, for instance, right-wing commentators panicked by the Greens’ high polling alighted on their high-density planning policy in my Hamburg local authority, shrieking that the nasty “eco-fascists” wanted to ban detached houses (which they didn’t). 

In terms of shrieking, though, they have been outdone by the ill-tempered Berlin initiative for compulsory purchase, fulminating against “parasitic landlords” and arguing that bringing flats into public ownership will bring rents down (which it won’t).

Whichever side they’re on, what everyone shouting about excessive rents and/or regulation seems to agree on is that Germany has a housing problem – and the closer you get to Berlin-Mitte, the more this opinion is shared. After a few years of following the debate, however, I’ve come to the conclusion that Germany does have a housing problem – or indeed problems – just not the one(s) everyone thinks.

READ ALSO: ‘Housing is a human rights’: Germany’s rent activists step up pressure

The ‘build more homes’ myth

Firstly, the received wisdom is that property and rental prices in Germany have been going up because the country is not building enough homes, so only by building lots more can Germany stop the sharp increase in prices. This is relatively comfortable common ground for all sides of the debate because building homes puts money in developers’ and banks’ pockets, injects demand into the economy, and does slow price rises to a certain extent. 

There’s a big problem with this way of looking at things, however: the precept is false. Germany does have enough homes – more than enough, actually. It’s just that they are not necessarily where most people currently want to live and, importantly, not sufficient to accommodate the rising number of single-person households with ever higher expectations in terms of space and facilities.

Don’t get me wrong: I’m not suggesting that what follows from this is necessarily that everyone has to move to the sticks and share a bedroom for the rest of their days.

By the same token, though, the current mantra – i.e. that all we need to do is just keep building new flats in popular parts of Berlin, Hamburg, and Munich and, eventually, there will be enough to reverse the price-rises – is equally wrong-headed. After all, there are simple physical limits on the amount of space cities have and, until that long-awaited revolution comes, we are living in a market economy in which everyone has the freedom to try and live where they want (and to offer stupid sums of money to do so, if they have this money to spare). This alone will always lead to price rises in popular areas; more (expensive) new build simply leads to even more demand.

I’m not saying that governments should simply give up trying to keep homes affordable for as many people as possible. What I am saying, though, is that setting “build cheap housing for everyone in city centres” or “freeze rents now” as political goals is unrealistic at best and downright disingenuous at worse (yes, Berlin politicians and campaigners, I’m looking at you).

Posters by campaigners for Berlin's referendum to bring houses from large landlords into public ownership.
Posters by campaigners for Berlin’s referendum to bring houses from large landlords into public ownership. Photo: picture alliance/dpa | Christophe Gateau

READ ALSO: 

Here in Hamburg, we are blessed with more realistic housing policy: the Senate has not made any promises it can’t keep, but simply encouraged and facilitated development everywhere, stipulating – crucially – that all new-builds must have around a third social housing.

It’s important to realise, though, that even after a decade of this, all we have are rents rising more slowly than in comparable cities and slightly better chances of finding a flat. The land of milk, honey, and cheap, chic three-bedroom Altbau apartments for all is still a long way off. And in the process, Hamburg has inflicted considerable collateral damage on itself: street trees, parks, and allotments have all fallen victim to the development drive, leaving the city ever more vulnerable to the increasingly frequent heatwaves and downpours climate change brings with it.

READ ALSO: How did it get so expensive to live in Munich?

German tenants not moving homes

Then there’s our second unidentified housing problem: inflexibility in the rental market. Overall, there is consensus in Germany that it should be difficult for landlords to get rid of tenants without a compelling reason – and I think this is a very good thing. Countries like the UK which allow no-fault evictions at two-months’ notice create serious social problems. Yet the laudable pursuit of secure tenancies has actually led Germany into something of a vicious circle.

How so? Once they let to tenants, landlords are essentially locked in: the only grounds for terminating a rental contract are rent arrears or needing the property for your own purposes; and now, in areas where Mietpreisbremse (rent brake) controls apply, landlords can’t even increase rent to keep pace with inflation.

These protections have two unintended consequences: firstly, landlords have become exceptionally picky about who they give permanent rental agreements to – just ask anyone with a foreign-sounding name or, indeed, anyone foreign without a German credit history. Secondly, for many landlords, faced with an asset whose returns are legally set to fall in value from the moment a tenant signs on the dotted line, circumventing rent controls – e.g. by renovating the hell out of an already perfectly good flat or by only letting fully-furnished apartments on rolling short-term contracts – starts to look like a sensible course of action.

Lights on in homes in the German city of Frankfurt.
Lights on in homes in the German city of Frankfurt. Photo: picture alliance/dpa | Sebastian Gollnow

I can already hear the world’s smallest violin to swing into action: “Oh, poor hard-up landlords, forced to break the law just to make a dime…!” If, however, a sizeable number of landlords are going to considerable efforts to bend the rules, then the rules may be proving counterproductive.

What is more, any tenant in Germany in their right mind takes one look at the increasing paucity of equally secure tenancies on the market and thinks: “I’m staying put.” After all, for someone with a permanent lease on a flat anywhere in a major German city, the choice is between a rent now more-or-less set in stone and a huge price jump at potentially worse contractual conditions (let me just say Staffelmiete or graduated rent increases). The result is that even people who have far too little space – or far too much – are unwilling to move, which, of course, further lowers the amount of good lettings available.

Fear is the driver of Germany’s housing problems

The key issue on both sides here is, I think, actually rather simple: fear. Landlords of all stripes, from commercial organisations with shareholders to placate right down to retired dentists letting out a flat to supplement their pension, are terrified that returns will diminish as time goes on. This leads them to try and get the maximum rent from the safest-looking tenants. Tenants, meanwhile, are also terrified: that their landlord might opt for expensive upgrades as a legal work-around for rent increases (the dreaded Luxussanierung or luxury renovation), or indeed leave the rent – but also the building and its amenities – untouched; or that they might, for whatever reason, have to try and find a new flat in a market where only picture-perfect careerists with a lot of cash seem to have a chance.

Seen from Hamburg, Berlin is a cautionary tale about what happens when fear gets out of hand and leads politics to promise unrealistic solutions: talk of freezing rents achieved nothing more than spooking landlords into pre-emptively hiking prices or, worse, selling up to the very private companies whom the city’s scared tenants have now voted to dispossess – at enormous cost to an already stretched municipal exchequer and on uncertain legal grounds.

On hot summer days, I miss the shade from the three glorious chestnut trees that got lopped down round the corner – and the new-builds there are uninspiring at best. On the plus side, Hamburg’s rental market isn’t completely broken. Yet that doesn’t stop people from claiming it is, and the first stickers for a Berlin-style referendum on compulsory purchase are already appearing on lampposts…

READ ALSO: Why Frankfurt could have the biggest housing bubble in the world

Member comments

  1. I lived in Germany for 6 months and this is the only sensible take I’ve heard on this issue in writing or in conversation. I would love to see more pieces like this; ones that aren’t afraid to buck the popular narrative to get the truth out. I was going to cancel my subscription today but this article gave me hope for more sensible reporting!

  2. I have lived in Germany for 6 months and this is the only sensible take I’ve heard on this issue in writing or in conversation. I would love to see more pieces like this; ones that aren’t afraid to buck the popular narrative to get the truth out. I was going to cancel my subscription today but this article gave me hope for more sensible reporting!

    1. Hi Matthew, thanks for your comment. We always aim to publish interesting stories for our readers, whether it’s practical articles, news, features or comment pieces like this. Thanks for supporting us and hope you enjoy it.

  3. Having lived in Germany for a few years now, I am amazed that no one talks about barriers to alternatives to renting, such as buying. It is beyond obscene at the transfer costs/taxes that are charged in Germany, any sensible person would reconsider purchasing a home or apartment just on the closing fees alone. I have the money to buy a place and refuse as it simply lines the pockets of the agents, government, and notary’s. When sensing that 12-14% above the purchase price that simply facilitates the transfer of ownership seemed crazy high, I searched how the rates in Germany compare globally, of course they are among the highest in the world here. Why do people not recognise this as an additional contributor to the rent crisis in this country.

  4. Not sure I agree with this article. In Berlin for example there is plenty of available land on which to build apartments in which people want to live. Berlin actually has pretty low population density.

Log in here to leave a comment.
Become a Member to leave a comment.

OPINION & ANALYSIS

Why the Greens are the real winners of Germany’s state elections

German state elections don't tell us everything about the public mood, but the past few votes have revealed some pretty clear winners and losers. While support for the SPD is flagging, the Greens are growing in stature by the day, writes Brian Melican.

Why the Greens are the real winners of Germany's state elections

It’s one of the peculiarities of Germany’s federal system that we’re almost never more than six months away from an election being held somewhere. Alongside the national elections (Bundestagswahl) usually every four years, each of the 16 states also hold ballots (Landtagswahl) on varying cycles; then there are local and mayoral elections, too. As such, rolling campaigning and more-or-less continuous election analysis are a part of life here: “What does Election X say about Government Y?” is a question you will always hear being asked somewhere.

Nevertheless, regional elections have a habit of clustering – and generally come at points when national governments would rather not have people poring over electoral data. And this year, after barely six months in office, Olaf Scholz’ novel tri-partite traffic-light coalition has already been faced with three regional elections – in Saarland (27th March), last week in Schleswig-Holstein (8th May), and yesterday in North-Rhine Westphalia (15th May). On a regional level, the popularity of the Social Democrats (SPD), Greens and Free Democrats (FDP) has already been thoroughly tested. 

Understanding state elections

The key thing to remember about German regional elections are that they both are and aren’t about national politics. Firstly, here’s how they aren’t. At a basic level, these regional elections are simply about voters choosing a government to deal with state-level remits (mainly health, education, and housing). They will vote first and foremost on these issues.

Personality politics are also important: long-serving German state premiers frequently garner the unofficial honorific Landesvater or Landesmutter –  literally: ‘father/mother of the state’ – and benefit from high personal approval ratings, allowing them to withstand changes in mood at national level. So it is by no means infrequent for voters to return completely different parties in regional than at national elections. By way of example, while Olaf Scholz, SPD, remained a popular Landesvater figure in Hamburg, Merkel’s CDU still won more Hamburg votes at national elections.

READ ALSO: EXPLAINED: Why Sunday’s state parliament vote in NRW is important for German politics

Then again, regional elections also are about national politics. That’s because they never take place in a vacuum (except for in Bavaria, of course, where everyone always votes CSU). Even the most beloved of state premiers faces an uphill struggle if their party is currently making a hash of things in Berlin. What is more, the larger and the more representative the Bundesland, the more results of its elections can show swings in voter mood which may be of national relevance.

The Greens’ slow ascent from their mid-2000s funk to their current swagger began in Baden-Württemberg: winning control of this state populated by 11 million people and many of Germany’s top industrialists showed that voters trusted them to be part of a government. That set the ball rolling and by the time of last year’s national election, the Greens were already in power in half of federal states. Incidentally, it is often overlooked that state governments make up the Bundesrat, the second chamber of parliament, which can accept or refuse laws made by the Bundestag. So shifts in power here can be of national relevance.

This dichotomy has the predictable effect that, in the aftermath of every Landtagswahl, the losing parties usually claim that it was simply a regional ballot with nothing to say about national politics while the winning parties play up the significance at federal level.

Olaf Scholz and Thomas Kutschaty

Chancellor Olaf Scholz (SPD) congratulates Thomas Kutschaty, SPD candidate in North Rhine-Westphalia, after the party wins 26.7 percent of the vote. Photo: picture alliance/dpa | Kay Nietfeld

An SPD disaster 

This is why it is very bad news for Olaf Scholz and the SPD that their only victory in spring 2022’s three Landtagswahlen was in dinky little Saarland, a state whose population is smaller than that of a major city like Cologne and whose local politics are so marked by rivalries and infighting as to have little-to-no relevance nationally. Despite winning an absolute majority in the regional parliament at Saarbrücken (a rare feat in proportional representation), there was no way the SPD could claim a national bearing – and, to its credit, didn’t try to do so either.

In Schleswig-Holstein, the SPD wasn’t expected to unseat the CDU’s Daniel Günther, a likeable and well-liked premier coming to the end of five years at the helm of a surprisingly successful Jamaica coalition with the Greens and the FDP. Here, too, the national relevance was relatively low: Schleswig-Holstein has only 3 million inhabitants and few large towns and cities. Nevertheless, losing over half its seats while the Greens and CDU gained by the same amount was not a good result for the SPD.

What was disastrous, however, was last night’s result in North-Rhine Westphalia. With a population the size of the neighbouring Netherlands (17 million) and everything from Germany’s largest urban conurbation down to isolated mountain regions, NRW is often considered a microcosm of the country as a whole. As something of a swing state, parties which succeed here often go on to win the next national election (if they aren’t already in government).

READ ALSO:

What is more, unlike in Schleswig-Holstein, NRW was the SDP’s to win. Until last year, its premier was the luckless Armin Laschet (remember him?), who plumbed popularity depths in his failed bid to become Chancellor. He then left a badly-damaged CDU-FDP administration to Hendrik Wüst, a successor whose profile, if he had one at all, was defined by various low-level corruption scandals (including a regrettable incident where he sold slots with the then-NRW premier, Jürgen Rüttgers, to high-paying commercial lobbyists…).

Hendrik Wüst (CDU)

Re-elected NRW state premier Hendrik Wüst (CDU) celebrates his victory. Photo: picture alliance/dpa | Rolf Vennenbernd

Even if Wüst proved to be an unexpectedly good campaigner and the SPD’s Thomas Kutschaty remained oddly faceless, the fact that Olaf Scholz himself got involved and that the SPD still ended up with its worst showing in NRW ever is nothing less than a serious defeat for both the Chancellor and his party – one which, in my view, underlines how Scholz has not yet lived up to expectations.

Nevertheless, he is in luck. Firstly, the electoral cycle means that this upset is occurring at the beginning of his term; there will be time to recover. Secondly, although Wüst gets first crack at forming a government, the Greens are his only real potential partner – and will take a lot of courting. NRW Greens are on the more left-wing end of the spectrum and will play the field, potentially trying to usher in a mini traffic-light coalition in Düsseldorf if it looks feasible later.

READ ALSO: OPINION: Scholz is already out of step with Germany – it’s time for a change of course

Growing support for Greens

So after the post-Merkel rout, the CDU has scored an important and much-needed victory, but harnessing it to get momentum nationally may yet prove difficult. Indeed, it’s the Greens who have come out of the last two weekends with a new swing in their step. Following a disappointing national election last year, they have once again hit their stride, due in no small part to the Ukraine reminding voters of why renewable energy is important on the one hand and the impressive figures cut by Robert Habeck and Annalena Baerbock in government on the other.

For the FDP, things are not looking so good. Despite negotiating a disproportionately high amount of their manifesto into last year’s agreement, they are suffering the fate of many a junior coalition partner: a lack of profile. On strictly regional terms, they lost votes to the popular Daniel Günther in Schleswig-Holstein (perhaps unavoidably, despite a good record as part of his coalition) and to the not-yet-popular Hendrik Wüst (following lacklustre performance in government in Düsseldorf).

Greens party posters NRW

Posters featuring Greens candidate Mona Neubaur highlight the link between fossil fuels and Russia’s authoritarian leadership. Photo: picture alliance/dpa | Roberto Pfeil

Worryingly for Christian Lindner, however, this may be harbinger of history repeating itself. Essentially, FDP voters tend to get enthusiastic for a business-friendly go-getter type who promises to lower taxes and slash regulation, only to later turn their back on him when, once part of a coalition government, he proves unable to deliver the small-state free-for-all promised. That’s what happened to Guido Westerwelle in the 2009-2013 administration, in any case.

There is, however, one bit of unadulterated good news for all parties and indeed our country as a whole: the AfD lost vote share everywhere. The populist outfit didn’t even make it into parliament in Schleswig-Holstein and only just scraped in in NRW. It would seem that, in times of crisis, voters don’t want to add to the list of potential disasters by putting populists anywhere near power. This is a hypothesis we’ll be able to test in just under six months’ time, by the way, when Lower-Saxony goes to the polls on 9th October. 

SHOW COMMENTS