Social Housing

Social Housing

Column Eike Becker, "Immobilienwirtschaft" 02/2018

For the social cohesion of society, my agenda for strategic urban development is as follows: Strengthen public institutions, draw up new urban development plans, adapt existing land use plans, generally build more densely and higher...

Who doesn't know the feeling of worry when looking for a place to live? Especially when finances are tight. How happy I was as a student to find accommodation in a former children's hospital in Stuttgart (intensive care unit, oxygen connections included), or in the Maison du Brésil in the Cité Universitaire in Paris (right on the Bouevard Périphérique) and a few years later in social housing in Brixton, London (opposite the fire station). In all three instances it was the social aspect that was the most important for my then landlords. For them, it was about low-priced housing without the profit expectations.

There is also a long tradition of social housing in Germany.

Some famous examples, such as the Bruno Taut Horseshoe Estate, are now part of the UNESCO World Heritage List. From the International Building Exhibition in the Hansaviertel in 1957, through the modern large housing estates of Märkisches Viertel and Gropiusstadt to the International Building Exhibition in 1987 ("Gentle Urban Renewal"), residential buildings for the needy were erected in all decades.

At some point in the 1990s, however, social housing in Germany died. In the slipstream of Reagonomics and global enthusiasm for market liberalisation, public institutions were declared the antithesis of the free economy; and the dream of a lean state alongside self-regulating markets, which miraculously balance supply and demand themselves time and again, was even dreamed of by left-wing parties. Like the Pied Piper of Hamelin, many followed the sounds of the Chicago School of Economics.

In Berlin, state subsidies for private housing construction had meanwhile also helped to bring to life a dull system of corrupt construction companies and fund managers, which barely achieved a cost covering rent of 18 euro/sqm.

The rents were already so low that there was no money to be made from them. For years, housing was not a field of interest for the real estate business. Demographic forecasts predicted shrinking cities even in 2008. Public finances were over indebted. Everyone had to tighten their belts.
For this reason, subsidies were further reduced in the 1990s until the Berlin Senate stopped social housing altogether in 2002.

In those days, the average rents were below 5 euro/sqm and there were over 100,000 vacant apartments. At that point in time, nobody could have imagined that there would be a shortage of basic housing.

That is why the Berlin Senate and its housing corporations sold more than 310,000 apartments since the fall of the Berlin Wall. More than half of the then 585,000 municipal apartments.

Cities such as Dresden rid themselves of their debts but had to sacrifice their entire housing stock at rock-bottom prices.

The non-profit housing companies that could not be sold became housing management companies. Housing was no longer the responsibility of the state.

Free market, please take over. You will do a better job of it. That was the hope.

A colossal mistake, because, surprisingly to most, things turned out to be very different. At first, everyone was still disbelievingly happy about the influx into the cities. ("Probably just a flash in the pan. Soon we'll shrink again.") Then the rents began to rise. ("No reason to panic! For rents over 10 euro/sqm you can build again.")

The mostly foreign corporations that had bought the formerly social housing companies optimised their returns. Then many took their profits by reselling and the new owners increased their yields yet again. Mainly with cheap renovations, inadequate repairs and rent increases.

At the same time, 100,000 dwellings per year shed the social obligation of low rents every year throughout Germany. The number of social housing fell from 4 million at the end of the 1980s to 1.4 million today, according to the tenants' association.

With rising prices, "high-quality" owner-occupied flat construction got underway at first. The combination of the lowest possible standard and the highest possible sales price ("generation of heirs") led to high returns.

As a result, insurance companies and pension funds reappeared on the market and made possible the first tentative new rental housing construction.

Everyone optimised their profits, expensive rents were surpassed by even more expensive rents, others followed suit and rents skyrocketed.

Even today, the housing demand of newcomers to the cities still exceeds supply by far. The free market takes care of the most profitable and high-priced market segments. It's like in the car industry: the more expensive the car, the higher the profit.
But who is there for the general population and for those who are not able to provide for themselves on the market? Who will help the young, the single parents, the elderly, the larger families, the perfectly ordinary citizens who can no longer afford the high rents?
In the past, about one third of socially bound housing was regarded as a prerequisite for a balanced housing policy. Today's cities are far removed from this.
In the large cities with more than 200,000 inhabitants, the municipal share is just 8%.

Now the remaining housing associations are to redress the situation.

They receive the remaining municipal properties and are to construct housing on these with all stops pulled.

By 2026, the number of flats owned by municipal companies in Berlin is to increase from currently 300,000 to 400,000. The six municipally owned companies are investing a total of 11.5 thousand million euros for this purpose. Just because it hurts so much, one of many examples: In 2004, Berlin sold the municipal housing corporation GSW with a portfolio of 65,000 apartments to an international consortium for 405 million euros. That is not even 6,300 euros per apartment!

But even this number of new flats is not enough in Berlin with 60,000 inhabitants being added every single year.

For the social cohesion of society, my agenda for strategic urban development is as follows:
Strengthen public institutions, draw up new urban development plans, adapt existing land use plans, generally build more densely and higher, qualify existing urban districts, agree basic rules for participation in urban development, deal more effectively with existing areas, develop housing and work in balance, prevent land speculation, establish models for cooperative development of building land, avail of the right of pre-emption expeditiously where appropriate, and, above all, designate further inner-city areas as additional building land for mixed quarters.
But most cities also have to grow outwards. New, dense quarters on the outskirts of the city have to be planned and developed.
A prerequisite for this is close cooperation in settlement and transport planning between cities and the surrounding areas. However, many communities are opposed to greater concentration in their areas. Supra-regional institutions with modified competences have to ensure consensus on this issue.

Urban planning is a marathon run and a joint task. It requires visionary action. Zigzag courses will inevitably lead into the ditch.

Housing is a basic need of humanity. A society that does not offer this adequately has failed in its mission.