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Against the Rent Madness and For a Nonprofit Orientation!
by A Helm, T Krebs and L Mayer
Monday Sep 24th, 2018 4:53 AM
The Alternative Housing Summit on Sept 21 inBerlin discussed alternatives to the market-based housing policy. Exploding rents and lack of affordable housing are the most burning social questions and drive people to the streets. More market is not the solution! Housing for People, not for Profits!

By Leo Mayer

[This article published on September 21, 2018 is translated from the German on the Internet,]

The protests against rent madness hardly left a mark on the German government. Over the weekend, German chancellor Angela Merkel (CDU) emphasized “We urgently need new apartments.” Horst Seehofer, Interior minister, declared the housing question is “the social question of our time. Let us act without delay so 1.5 million new apartments are built in this legislative period.” The SPD demands a short rent-freeze that quickly gives way…

Seehofer’s “Housing Summit.” A meeting of the Real Estate Lobby

On Friday (September 21), Seehofer organized a “Housing Summit” in Berlin. 11 federations of the real estate- and construction branches were invited. The German Renters Alliance, the DGB, social federations, homeless associations and environmentalists were missing. The list of participants shows the housing policy of the German government will be oriented in the desires of the real estate lobby and not in those dependent on affordable housing. “Renter federations are only planned as fig-leafs,” the Left Party (Die Linke) explained and said this round will not change anything in the exploding rents.”

Exploding rents and lack of affordable housing are the most burning social questions and drive people to the streets.

On April 14, “young parents with children, older couples, fleeing persons and students demonstrated under the motto “Resistance – Together against Displacement and Rent Madness.” On posters, they demanded “Housing, not Outer Space,” “Rents are not Citroens” and “We are expropriated when the rents climb.” 254 initiatives and organizations called to a counter-summit.

In Hamburg, 8,000 persons followed the call of 119 organizations and demonstrated for more affordable apartments in Hansestadt. Last Saturday, 11,000 persons demonstrated in Munich for affordable housing and against social exclusion.” Next Friday, thousands will protest before the chancellor’s office against the rent madness and the policy of the German government.

“2008 will be the year when the many impacted groups finally team up to give a cross-cutting dimension to the protest in great solidarity support by wide parts of the population. The political framework must be set on the national plane. An essential correction is necessary: “Away from the Market and to the Needs of People,” as it says on the Internet page of “Bizim Kiez.”

Alternative Housing Summit: Together against Rent Madness – Create a Policy of Housing for Everyone

On the day before the “Housing Summit” of the German government, a new alliance of renters, rental social movements, unions and social federations called to an Alternative Summit where alternatives to a market-based housing policy will be discussed. The nearly 200 organizations show a social breadth. A large majority in the country desire and urge a different housing policy.

“The market and the state fail,” the appeal begins. “Politics does not take the problems seriously and aggravates them by privatizing public land and housing companies. Speculation is given a free hand. Measures against higher land-, construction- and real estate prices are scarce commodities. Necessary legal rent improvements are rejected by the German government instead of effectively protecting renters in this market situation.”

• Strengthen rent brakes. Punish offenses with fines.

• Limit modernization cost increases to 4% of construction costs and cap it at 1.50 E/ QM a month within 8 years!

• Energy measures should be as rent neutral as possible!

• Prevent evictions! Improve protection against unlawful termination!

• Expand social and reasonably priced new apartments and introduce legal commitments! Make available incentives for at least 100,000 affordable apartments per year. Use the planning law for the common good!

• Regulate land prices and land use. Don’t sell public property for the top price!

• Strengthen owners and renters oriented in the common good and introduce new nonprofit housing!

• Push back the owner lobby and make real estate ownership transparent!

• Punish discrimination, create more barrier-free housing and prevent homelessness!

From the Call to the Alternative Summit

200 Academics: “Housing for People, not for Profits!”

Over 200 academics are involved in the debate. “Housing for People, not for Profits!” is their demand. In the journal “sub\urban zeitschrift fur kritische stadtforschung,” they warn: “Housing is a basic need. If it becomes unaffordable for a growing part of the population, this causes social division and threatens the social cohesion.”

In their appeal, they urge “a real social housing policy” and “protection of existing rents, nonprofit orientation and democratization.”

“The market fails to create a socially-contractual housing supply. Therefore, the decisive intervention of the public authority is necessary. Housing may not make people poor. Reasonable existing rents must be protected from increases through the expansion of rent protection rights. Rent-hikes should be limited. Instead of canceling the rent brake, it must be applied more restrictively – and controllably. Living in cities must be possible for persons of all income groups. Therefore, more social housing to supply all needy persons and not less is vital. A sustainable and social urban development needs reliable partners and local communities able to act. For that, public and civil society, nonprofit-oriented supporters of nonprofit or cooperative housing are necessary. Local communities must again be able to control the local housing supply and urban development through public holdings” (excerpt from “For a real social housing policy,” Academics urge protection of existing rents, nonprofit orientation and democratization”).

Many concrete proposals for a social orientation of housing policy are “on the table,” they declare. These extend “from restraining rent profiteers, abolishing shifting modernization costs and (re-) communalizations of housing to democratization of planning procedures and communal housing companies.” The examples given by “project initiatives, self-organized housing groups, small cooperatives and foundations committed to social ideas could help as practical “experiences in implementing and organizing nonprofit housing and communal forms of accommodation.”


By Housing is a Human Right

[This call to action published on September 12, 2018 is translated from the German on the Internet,]

A “Housing Summit” of the German government will take place in the German chancellor’s office on September 21. A broad civil society alliance is organizing a “counter-summit” and a demonstration for affordable rents parallel to the “Housing Summit” of the German government.

End the Rent Madness! - Together against division, repression and homelessness. Affordable living space for everyone instead of more profits for a few.

Germany has a housing crisis.

Particularly in the cities, land-, real estate- and rental prices skyrocket absurdly. As a result, real estate wealth increases at a breakneck speed.

The profits for a few climb while thousands upon thousands of people live in fear of losing their apartments on account of rent increases, privatizations of their apartments and of not finding suitable housing. More and more income goes for rent. Wage increases are eaten up. In many places, housing has become a poverty risk. Homelessness grows. Social agencies often must reject people needing care. Discrimination and partly open racism aggravate the search for apartments. In the meantime, the housing market loses thousands of affordable units week after week through rent hikes, changes of residence, modernization and privatizations.

The market and the state fail. At least, 1 million reasonably-priced apartments are lacking. Despite the great need, the market does not supply any reasonably-priced new apartments. Instead, pseudo-luxury units are built and offered at exorbitant prices. Politics does not take the problems seriously and even intensifies them by privatizing public land and housing companies. Speculation is given a free hand. Measures against higher land-, construction- and real estate prices are in short supply. Necessary improvements in rental laws are refused by the German government instead of effectively protecting renters and housing applicants.

Together for a Different Housing Policy

Still, more and more people are resisting displacement, join forces as tenants or house communities and do their utmost for their neighborhood. Rationing public housing or social housing works, whether in energy-efficient building modernization or very reasonable new buildings. However, politics refuses the necessary framework.

Enough of this rent madness!

A broad union of non-parliamentary institutions, groups, associations, parties and unions demand a long-overdue change of course in housing- and rent policy.

• Strengthen rent-brakes, threaten with fines; drastically reduce normal rent increases!

• Limit cost-increases for more modernization to 4% of the investment!

• Prevent evictions! Improve protection against privatization!

• Expand social and reasonably-priced new apartments!

• Make available incentives for the Federal government and states so at least 100,000 affordable apartments can be built every year. Use the planning law for the common good!

• Regulate land prices and land use, do not sell property at the top prices!

• Push back the owner lobby, make real estate ownership transparent!

• Create more barrier-free living spaces, prevent homelessness!

• Adjust the costs of lodging and housing subsidies annually so they are just to reality!

Housing is a human right – no land for speculation!

Come to the Alternative Housing Summit on September 20, 2018 and protest with us the next day before the German Chancellor’s Office.


by André Holm

[This article published on March 24, 2016 is translated from the German on the Internet,]

André Holm on the housing supply and the housing shortage in Germany. He is a co-worker at the Institute for Social Service s of the Humboldt-University in Berlin. Gentrification, housing policy in international comparison and European urban policy are three of his research themes.

What are the reasons for the housing shortage in certain metropolises and regions in Germany today?

André Holm: The housing shortage threatening in some cities has different causes. Besides demographic effects and the strong migration gains of some cities in the last years, there are economic and political causes that led to the current problems. Reducing the insufficient apartments to the imbalance between strong population growth and stagnating or even declining construction activity would be too simple.

One cause is obviously that investments in new affordable apartments are not economically attractive enough for the majority of private market actors. This has more to do with the growing profit expectations of investors than with the high construction costs. No great interest in building new apartments will arise as long as high profits can be realized by speculating on strong rent increases. Even if lobbyists of the construction industry refer again and again to the cumbersome licensing procedures in construction projects, building was not prohibited in Germany,

The trifling building of affordable apartments despite increasing population numbers show the much praised market mechanisms are not effective. That local communities nearly everywhere are withdrawing from building new apartments can be added to this market failure. Unlike earlier decades, market failure is not balanced by state investments. Renters pay the bill for this double failure of the market and the state with rising rental prices and the apartment-seekers who are entirely excluded from the housing supply.

What kind of living space is lacking? In what cities and regions is this lack of housing particularly great?

André Holm: Affordable apartments for households with low and medium incomes are lacking above all. There is no housing shortage n the luxury realm where the prices are even falling. The lower the income, the harder is the housing supply. Individual studies show low earners often spend 50% or even 60% of their low incomes for housing. Not much is left for life. The situation in the growing big cities and in many university tows is very drastic. Monopoly positions of suppliers benefit from the growing population numbers. The paradox of the current situation is very clear here. Because the housing markets are overstrained and prices rise, there are few incentives for building new apartments since high profits are already amassed. The problem can only be solved with substantial restrictions on possible profit expectations.

What role did privatizations of the German housing stock play in the past and what role could public housing play in the future?

André Holm: The extensive privatizations of the last 15 years contributed to a market radicalization. Most big portfolios were sold so privatization was interesting for institutional investors. Far more than two million units are more or less directly privatized by banks, real estate funds and other financial market actors. Privatization was the door-opener for the growing influence of financial market logics in the housing supply. This has very different consequences for renters. While profits are realized through dis-investments and savings in personnel in relaxed housing markets, speculation pressure increases in cities with strong demand. Junk real estate and luxury upgrades are two sides of one and the same coin. For cities, this is particularly bitter because the possible actions for local communities have narrowed with the growing problems in the privatized realm. The greater the public stock of a city, the greater the supply and the effects on the housing market. Public ownership in housing is actually very effective compared with other housing policy instruments. Without public housing, housing companies could be forced to economize as can be unfortunately observed in many cities.

Would expanding social housing help?

André Holm: Yes, expanding social housing would at least increase the number and the share of reasonably-priced apartments in the short-term. But the current incentives of the Federal German government, territories and local communities are not sufficient to compensate the withdrawals of earlier periods. While the incentives increase, the number of available social apartments continues to decline. The incentive systematic of social housing faces three great problems. Building apartments is very expensive. The systematic increase of rental prices by reducing incentives makes rents increase and social housing is limited in time. A large part of the incentive funds was given to private housing companies which made available social housing at halfway reasonable rents for usually 20 years. After the incentive time-periods, the social bonds end and former social apartments are subject to normal market conditions. This leads to higher rents and to displacement of low-income residents. Incentive funds should contribute to the permanent supply of social housing.

You urge the re-introduction of non-profit housing construction. What do you mean and why is this sensible?

André Holm: The non-profit orientation can be described as a fiscal tax benefit for developments that serve the common good. A new non-profit housing project would have the goal of the permanent supply of reasonably-priced apartments. Businesses must be subject to a profit-restriction and to reinvesting profits in social housing. All revenue would then be reinvested in social housing. Such a revolving principle would solve the problems of social housing. A supply of social housing is unquestionably in the interest of the general public. As explained, we cannot expect any lasting contribution for social housing from private investors. This social blindness of the market is the nature of a profit-oriented economic mode and not an evil will of individual actors. The re-introduction of a non-profit orientation should strengthen the non-profit sector in the provision of housing. The development of a non-profit sector offers a necessary and possible alternative since the market fails and the state cannot comprehensively socialize the housing supply. This requires nothing less than the breach with the profit logic in the area of housing supply.
[This article first appeared in WiSO-Info, 1/2016.]


By Tony Kreb

[This article published in August 2018 is translated from the German on the Internet. Tony Kreb is a professor of macro-economic economic policy at the University of Mannheim.]

The advisory board of the German economy wants to lessen the housing shortage in the cities by deregulating market forces. This recommendation is based on a flawed analysis. Actually, wise public housing could reduce inequality and simultaneously improve economic growth.

In Germany’s population centers, housing space has become a scarce commodity that many people can no longer afford. Therefore, the German government not surprisingly is intensively engaged with the theme “affordable housing.” What can politics do to relieve the housing shortage in the cities?

The Proposal of the Advisory Board

The advisory council in a new export opinion proposes reducing public housing and rental brakes and instead increasing housing subsidies for needy households.

Deregulating markets is proposed that was followed intensively in the US and led to partly disastrous results – and to a rethinking.

The proposal of the advisory council is radical and has a certain charm. However, the recommendation of this council is based on an incorrect analysis that does not consider two theoretically grounded and empirically verified facts. Firstly, the supply of development areas is only limited so rent allowances force up the rents without increasing the number of affordable units. Secondly, housing space is a production factor that influences access to the labor market and the productivity of working persons. This connection between place of residence and productivity means pure free enterprise solutions lead to misallocations with negative effects on total economic production.

The advisory council scores its own goal with its analysis of the German housing market that ignores important economic connections. The deregulation of market forces is a proposal that was followed intensively particularly in the US and led to partly disastrous results and to a rethinking. The current housing policy in many large American cities emphasizes the production of socially-balanced districts with mixed use and is not limited to awarding housing subsidies for needy households as the council recommends.

What Wise Public Housing Can Do in Germany

In contrast to a pure market solution, wise public housing, socially-balanced housing in population centers, can simultaneously increase economic growth. Current research shows the considerable positive effects of successful housing promotion on affected persons. But, how can the Federal government carry out these expert insights in practical politics? With Martin Schheffel, I grappled with this question in a study for the Bertelsmann foundation.

In this study, we proposed an investment offensive of the Federal government and German territories permanently increasing the spending for public housing 5 billion euros per year (for 100,000 new apartments per year). We assume a gradual implementation of the program so the complete spending outlay will not occur until 2021. The additional funds will only be used for housing projects contributing to socially-balanced housing, as practiced successfully for several years in Hamburg and other German cities.

What could be the aggregate economic effects of this investment offensive? In our study, we answered this question with the methods of modern macro-economics. We summarized the conclusions of our analysis as follows:

• The public housing offensive creates good work and increasing prosperity;

Our calculations forecast 100,000 additional jobs and an increased GDP of 20 billion euros. Simultaneously, the number of working persons in the low-wage sector would shrivel and the number of unemployed would fall by 815,000 persons.

• The public housing offensive strengthens equal opportunities and lowers poverty…

• The public housing offensive improves public finances. Contrary to the frequent argument, stable state finances of public investments are not a contradiction. On the contrary, our calculations show a public housing offensive is fiscally sustainable. In the medium- to long-term, it finances itself through higher growth, more employment and increases state revenues. After 13 years, the investments would even realize fiscal surpluses contributing to liquidating debts.

Next Steps

Current research demonstrates wise public housing for all is worthwhile. Policy in Germany now needs innovative concepts how the state can realize the necessary offensive in public housing effectively and transparently. One promising option is the creation of a public investment fund that promotes building socially-balanced housing in close cooperation with communities and the construction industry. Other options are conceivable and should be discussed. Unfortunately, this is not true for the proposals of the advisory council.
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