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Indybay Feature
A Social Change is Overdue
by Christoph Butterwegge
Monday Nov 18th, 2019 3:13 AM
Social rental houosing construction which has been increasingly restricted since the 1980s must be resumed on a grand scale and rapidly promoted to offer low-income earners, single parents and large families a place to stay. A revival of public housing construction would stimulate the activites of cooperative and municipal housing construction.
By Christoph Butterwegge

[This excerpt from Dr. Butterwegge’s new book published on November 13, 2019 is translated from the German on the Internet,]

[Social rental housing construction, which has been increasingly restricted since the 1980s, must be resumed on a grand scale and rapidly promoted to offer low-income earners, single parents and large families a suitable place to stay. A revival of public housing construction and a re-establishment of housing non-profit status is needed to stimulate the activities of cooperative and municipal housing associations.]

The market doesn't fix it. Especially not when it comes to housing and reasonable rents says our author. The poverty researcher Christoph Butterwegge has dealt with the growing inequality in Germany in his forthcoming book "The Torn Republic". An excerpt in advance.

A rift runs through the Federal Republic, dividing it into rich and poor, but also into socio-spatially prosperous and dependent regions, municipalities and urban districts. While the low-income, low-income earners and recipients of transfer payments are pushed into the high-rise neighborhoods on the outskirts of large cities, the materially better-off move into good or closed residential areas (gated communities). A parallel world of the privileged emerges here and a parallel world of the underprivileged there, undermining social cohesion.

Protest in Stuttgart: against vacancy and rent madness.

The socio-economic inequality is not only reflected in the class and stratum structure but is also reflected in the urban, regional and spatial structure of our society, although it is broken by local traditions and some peculiarities and modified by other influencing factors. The socio-economic or class situation of a person is also manifested in the way in which he or she lives and the environment in which he or she lives. It is not merely a question of a person's standard of living, consumption possibilities, geographical mobility, and professional flexibility, because income and wealth determine what he or she can afford; on the contrary, the neighborhood in which he or she lives also determines his or her chances of advancement.

A neoliberal location policy that follows capital logic creates glamorous shop windows of consumption ("spaces of the winners") on the one hand and neglected residential quarters ("spaces of the losers") on the other, which have little to do with each other. There can be no question here of serious efforts to "create equal living conditions" (Article 72 (2) of the Basic Law), which has formed a constitutional mandate since unification after the "uniformity of living conditions" had even been maintained beforehand. East and West Germany, South and North Germany, city and country, as well as the big cities themselves, are drifting apart in a way that is detrimental to the development of prosperity and democracy.

If the infrastructure of many villages decays, young people move from there to the cities and old people hardly find doctors' surgeries, shops, and bus lines, while the metropolises are booming, then this form of growing inequality also has to do with production and distribution conditions. If companies on the periphery are closed because the returns they generate are insufficient for large investors, purchasing power dwindles in the regional context as well as due to falling real wages, lower access pensions than in the past or a lack of public investment, which has the consequences described above.

Causes of housing shortage and explosion in rents

The current housing plight and "rent madness" have not fallen from the sky, nor have precarious employment and low wages, but rather have been generated by political decisions in favor of capital owners, real estate companies and major investors. The CDU, CSU, and FDP, for example, abolished the Residential Community Act on January 1, 1990. By the end of the 1980s, for example, the state had granted certain tax advantages to cooperative housing associations (exemptions from corporation tax, land transfer tax, trade tax and wealth tax, as well as reductions in property tax), but had obliged them to limit them to a cost rent and to limit profit distributions. Previously price-linked housing stocks then entered the real estate market, which was primarily concerned with high yields.

The red-green coalition exempted profits of corporations resulting from the sale of subsidiaries and blocks of shares of other corporations from corporate income tax shortly after the turn of the millennium - one of the biggest tax gifts ever given to companies. This decision enabled groups such as the steel giant ThyssenKrupp, which was formed in 1999 through the merger of Friedrich Krupp AG Hoesch-Krupp with Thyssen AG, to dispose of all company housing tax-free.

At the same time, tenancy law was liberalized several times and the traditionally relatively strict protection against dismissal for landlords in Germany was relaxed. The red-green coalition and the first grand coalition under Angela Merkel created the legal conditions for new business models, which led to a "rent monopoly" in the real estate sector and a class struggle on the housing market. Since 1 January 2004, hedge funds established in the USA shortly after the Second World War and, since 1 January 2007, REITs (Real Estate Investment Trusts), which were introduced in the USA in 1960, have also been legally permitted in Germany. These were tax-privileged real estate corporations whose business model further increased the privatization pressure on public housing portfolios. Questionable real estate transactions were also facilitated by the possibility of share deals, in which pro forma company shares are sold rather than apartments so that the new owners do not have to pay a real estate transfer tax.

Large cities such as Dresden, obeying the neo-liberal zeitgeist, have partly sold their entire municipal housing stock - often at rock-bottom prices - to US investment companies, international financial investors and listed real estate groups, which - if they were held at all for a long time and are still in their portfolio - today make high profits with it. Since 2015, the real estate giant, renamed Vonovia by Deutsche Annington, has been one of the 30 most valuable groups in the German Stock Index (Dax). The company generated its exorbitant profits through luxury renovations and increases in the value of its growing real estate portfolio, rude methods of "de-letting" and legally permitted rent increases of up to eleven and eight percent respectively after modernization measures.

As numerous investors feared further bank failures and stock market collapses after the global financial, global economic and European currency crisis, "concrete gold" became more and more popular. Asset managers and financial groups such as BlackRock & Co. have also contributed to the explosion in rents in German cities as owners and landlords of large apartment complexes. From now on, financial investors were particularly keen to speculate in real estate and subjected this area of life, which is of vital importance to the entire population, even more strongly to their profit logic.

Social housing, on the other hand, suffers from a politically induced consumption: With the federalism reform that came into force on September 1, 2006, the federal government has withdrawn from this area. Although it gradually more than doubled the compensatory funds promised to the Länder for a transitional period in the wake of the "refugee crisis" of 2015/16, it did not prevent considerably more housing from falling out of the housing register than was newly added.

Before a social change in housing policy?

Nowhere else does the capitalist economic system fail so blatantly as in the provision of housing. Since the market has proved incapable of ensuring adequate housing for all sections of the population, it must be seen as a public task and must be guaranteed by the state, for reasons of social responsibility for its citizens, that no one is left behind because of his or her small fortune and low income.

Once advocated a fundamental right to housing in the Constitution: Frank-Walter Steinmeier. Once advocated a constitutional right to housing: Frank-Walter Steinmeier.

The sometimes downright scandalous conditions on the rental housing market should be a reason to think about a social change in housing policy. As eviction suits, forced evictions and housing emergencies are on the increase, the anchoring of a "fundamental right to housing" in our constitution is overdue, advocated by today's Federal President Frank-Walter Steinmeier (SPD) in his legal dissertation "The Police Regime in the Peripheral Zones of Social Security. A Jurisprudential Study on Tradition and Perspectives for Preventing and Eliminating Homelessness". Steinmeier demanded at the time that the state and the authorities should be obliged to "build and maintain reasonably priced housing for broad sections of the population" in accordance with the Basic Law, and that no flat should be vacated, for example because of accumulated rental debts, before "reasonable alternative housing" is available.

With a half-hearted "rent brake" for partial housing markets, as introduced by the second grand coalition under Angela Merkel on 1 June 2016, the problem of housing shortages for the low-income could not be solved. Housing subsidies, as a measure of "subject promotion", ultimately help less needy families than the owners of the houses in which they live for rent, and are therefore a state misguided subsidy. The fact that the Federal Government is expecting a noticeable reduction in poverty through an increase in housing allowances, an increase in rent ceilings and allowances from 1 January 2020 and its dynamization from 1 January 2022 documents its inability to get to the root of the problem, i.e. to combat its structural causes.

The so-called object promotion would be more effective: Social rental housing construction, which has been increasingly restricted since the 1980s, would have to be resumed on a grand scale and rapidly promoted in order to offer low-income earners, single parents and large families a suitable place to stay. What would be needed would be a revival of public housing construction and a re-establishment of housing non-profit status, which would stimulate the activities of cooperative and municipal housing associations. Ultimately, the municipalities must be enabled to build more themselves, as has been the case with the Viennese municipal buildings in the Austrian capital for almost 100 years.

The text is an edited preprint from Christoph Butterwegge's book "Die zerrissene Republik. Economic, Social and Political Inequality in Germany", which will be published by Beltz Juventa on 20 November. 414 pages, 24,95 Euro.
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