Not sure how much of a real change this will make, but man, what a bad deal for taxpayers. They shouldn’t have allowed rampant corporate ownership in the first place, but now they’re going and spending public money on overpriced real estate.
Here in Berlin, the measure has large support and I don‘t know why. It‘s mostly because the measure is called „disowning“ corporate landlords, which seems to resonate with everyone being angry at the rents.
Had they called it „paying out the last decade of profits to corporate landlords to keep the rent of 5% of Berliners instead of building new housing to lower the rents of 95% of Berliners“ (which is what‘s planned), I guess it would have way less support. It‘s a populist market rigging measure just as futile as the failed rent control and I‘m not looking forward to the impact on the city.
I totally don't get it. Why not use that money to build more apartments instead. Why take on the liability with these apartments beiing asbestos contaminated and needing more money to get rid of this. Too me there is the stench of corruption but I don't have evidence. My Hanlons razor is not sharp enough to cut this here though.
It's obviously corruption. Corporate landlords get to offload their dodgy property to the government and run away with the cash, without the usual time and expense of selling each property on the market. By cynically cloaking themselves in populist language, they're able to easily manufacture the consent of the public.
Berlin doesn't care about money. Back when separated by the iron curtain, Berlin always got a special deal in federal/state finances because of its situation. After reunification, Berlin was pumped full of money because it was the new designated capital city and showpiece for unification. Nowadays, some of the special deals still remain, plus Berlin is awarded absurd amounts of money from the "Länderfinanzausgleich" (state finance balancing mechanism), meaning that the richer German states pay for Berlin's deficit.
So Berlin is in the comfortable situation of that one no-good family member on social security who will always find someone to pay their bills. Why change anything, why stop spending all that money, if more keeps coming without any effort in any case?
There are, but they can only audit and report. Change and punishment would need to happen politically, but that would need a majority of states. Two thirds of the states profit from Laenderfinanzausgleich (to various degrees) and will not change anything.
> To me the consent of the public is even more shocking.
Is there even consent? The referendum (Volksentscheid) hasn't happened yet. I wonder how this haphazard move by the current Red-Green coalition Berlin city administration is even legitimate when the referendum is only due more than a week from now. Unless this was done to pre-empt losing at the ballot box.
This is a complex issue. if you add apartments for the same number of citizens prizes should go down, but that's hardly the nature of the system we are working with here.
If you have a busy highway and add more lanes will traffic jams go down?
But this can happen with certain products, including housing, by driving new demand. Imagine your street has a great fruit store that caters to locals and is a bit busy but reasonably priced.
Three other fruit stores see the demand and open up, offering slightly different fruit and other higher margin products like pies and smoothies. People start coming from all over the city for fruit, and tourists come to try local fruit they can't get at home.
Now you have four busy fruit stores, and they gradually raise prices and focus on higher margin items instead of everyday fruits and veg.
This happens all the time with bars and restaurants, too, as a neighborhood gets trendy. And it can happen with housing, because upscale housing brings rich people to the neighborhood, which makes other rich people feel more at home, even in less fancy housing.
People who already own property don't want new apartments in their neighborhood because the fear is that those would drive house prices down. Plus they already got theirs, what do they care about anyone else?
Thankfully it's not really anything like most people who have this NIMBY attitude, just the loudest ones.
The research I've seen (e.g. [0] [1]) consistently shows a modest decrease in rent prices for existing renters when new housing is built. Are there studies showing the opposite that I'm not aware of? I understand that there are two competing effects at play (which [0] calls an amenity effect vs. a supply effect) but my impression is that empirically the latter seems to reliably outweigh the former.
I can’t recall the article I read about it - sorry. It probably didn’t cite thorough studies though. It took into account the fact that higher population increases wages (opportunity), which would rise rents. Similar to amenity effect, but iirc it applies to the city as a whole, not just the neighbourhood.
I don't get why he's being downvoted - although maybe too general of a statement, I can completely see how new development in an area could actually drive rent prices up - development also affects demand - from gentrification to things like opening business and infrastructure scaling making the area more attractive.
I've seen this happen in my city - there's a really renowned developer building high quality mixed residential-buisiness complexes - as soon as they started building a new site the surrounding prices went up, this happened in all of their projects I've looked into.
But they are the most extreme example. I'd guess that most of the neighborhoods that are seeing active development are increasing prices faster than the rest of the market.
But it's also a symbolic value, that something is fundamentally changing. 15000 apartments isn't that much for Berlin but a billion is.
Of course more apartments are needed and Berlin needs to grow in height and diameter. But also there is no point in landlords hardly putting any efforts in to keep apartments in good shape. Needed repairs and modern upgrades are labeled as luxury renovations which is just a total distortion of reality. At the same time there are small, non-corporate landlords which put in more effort, are more approachable but who in reality invested in a casino-like asset. IMHO real-estate makes only sense for institutional investors, private or governmental because any single error can be financially disastrous and needs to be averaged out.
That's why I backed the bill but I hope everyone is working towards something better...
If these corporations don't keep their end of the bargain (ie. they don't maintain the buildings), then sue them and/or fine them. No need to buy them out.
Sure, but it's more than frustrating to go to a lawyer for a service you are supposed to just get, even if you can get free consulting through an insurance. That's why most people don't jump through those hoops and work-around it themselves. (I.e. do nothing usually which is bad for both parties)
Also there has been a general official agreement so far that modernizations justify higher rents. Which is just nuts because why would a one-time investment justify a basically indefinitely going increased rent...
> Sure, but it's more than frustrating to go to a lawyer for a service you are supposed to just get [...]
Of course. In a healthy market (low transactions costs and sufficient number of participants leads to sufficient volume and price discovery, and thus competition, which eliminates economic rent seekers) you simply stop using the bad provider and switch to a good provider. Of course people hate moving even more than contracting an attorney.
And that's why advanced economies need consumer protection bureaus/agencies to counteract these inefficiencies. So they should bring the lawsuits to weed out the bad providers and incentivize keeping the terms of the contracts.
Unfortunately in the US these agencies are either non-existent or pretty weak, and their place was taken by class action lawsuits brought by opportunistic law firms.
> modernizations justify higher rents.
Well, a rental unit is like a field in a farm. Or maybe compare it to a greenhouse. If you replace the insulation on the greenhouse to something better now you can cultivate more/better plants, which means you make more money.
Investments (by definition) increase the capital value of the asset. More capital produces more output, so it can be exchanged for more money. For a housing unit the output is hedonistic value (aesthetic value, comfort value, better soundproofing, better plumbing, adding AC).
> Which is just nuts because why would a one-time investment justify a basically indefinitely going increased rent...
... it permanently increases the buying price of the unit. Just like with a house. If you renovate it you can sell it for more. If it's empty you can rent it out for more (in perpetuity).
The simple fact that there's a tenant doesn't change this.
Of course one must also consider amortization, but almost all rental agreements mandate that the owner actively maintain the unit, so its effect should be net zero, but if the market price of maintenance increases (because raw materials, plumbers, painters, etc. become more expensive) then it's not unreasonable for the rent to increase too. (And since the cost disease is especially affecting things manufactured/built/provided locally ... housing is getting a lot pricier. [0])
Also there's inflation. Which just by itself makes nominal rent increases a necessity.
The "disowning" part is somewhat different from the current transaction though. It will be decided by referendum if the "disowning" actually happens and at least the proponents say that Berlin should not be paying market rates for the apartments.
The article mentions a different deal that was struck separately without a referendum. I think there is not much support for buying back apartments for such prices.
Problem is, "not be paying market rates" will never happen. Market rates will be paid, because disowning anyone for the public good is only constitutional, if market rates are paid as restitution. There have been lots and lots of cases around disowned people lost by the state because of that.
There are often ways around that. For example the state can manipulate the markets, or offer an alternate choice, for example to never raise rents ever.
Lowering rents was part of the plan anyways, I think. Market manipulation through rent caps has been tried before and (in the Berlin version) declared unconstitutional.
It depends on how much they will pay. There are studies showing that it does not have to be that much. The Grundgesetz (German constitution) allows not paying market value in certain cases.
> Here in Berlin, the measure has large support and I don‘t know why.
This fits perfectly into the recent “eco, socially responsible, ev, wind and solar power, fridays for future, throw the baby out with the water green party support, take from the rich-give to the poor, 100kph Autobahn speed limit, we need to be the best example in the world at whatever cost” mental state of Germany. It doesn’t have to make sense. It is what it is.
Corporate ownership of housing is good. Every time I’ve rented from a corporate landlord, it’s been great. They’re organized, have staff, fix problems promptly. Every time I’ve rented from an individual owner, it’s sucked. They are undercapitalized, don’t know what they are doing, and hem and haw over every tiny repair expense.
Meanwhile, every time I’ve rented from a corporation the property management has been evasive and incompetent, punting issues down the road and fixing issues with as little effort as possible (often leading to lasting damage and more expensive repairs down the road). All of the private owners I’ve rented from have been incredibly helpful, quick to deal with issues, and willing to flex on move-in/out dates, month-to-month terms, etc.
Sometimes it’s about the personal touch, not “economies of scale.”
When I rented from a personal landlord, when the dishwasher was leaking water across the kitchen they told me it was my problem to replace it with a like model as it must've been my abuse. I barely cook so I have no idea what I could've done wrong.
When I rented from a corporation it was no questions asked, even when I was at fault. They were even proactive with things like filters for the heating/cooling.
That’s my experience in the US cities I’ve lived in — NYC and Denver. As discussed in another comment, the truth of the matter is probably closer to “neither private owners nor coporations are universally good or bad.”
What you are missing is that corporate ownership makes it much easier to raise rent. It is very hard for 100 000 individual small time landlords to collectively raise rent in normal conditions (i.e., with no housing shortage). Many will lower rent to get their properties rented faster. But if you have a dozen or so large corporate owners it happens almost automatically.
This is very simple and well understood economics. If you lower the number of providers of a good or service they gain bargaining power.
Large corporations work very hard to make sure there is as large as possible number of providers of every item they buy and every service they use. But somehow when it comes to ordinary people, we are supposed to pretend it is a good thing. No, it is not a good thing.
"It is very hard for 100 000 individual small time landlords to collectively raise rent in normal conditions (i.e., with no housing shortage). Many will lower rent to get their properties rented faster. But if you have a dozen or so large corporate owners it happens almost automatically."
Yes, a 100,000-firm marketplace forces participants to be price takers.
Yes, a 1-firm marketplace allows the firm to arbitrarily raise rents.
Why do you think a dozen-firm marketplace "automatically" tends toward the latter?
A dozen seems like a pretty high number. Explicit OPEC-style cartels are illegal (I assume) under anti-trust law so we're talking about about some pretty implicit forms of collusion.
The way it works here, all the corp landlord have their rent prices track the housing market. So when average price of a certain class of home moves up 5%, so does your rent.
In 2004 the state of Berlin sold 65000 flats for 405 million euro. Now they are buying 14700 flats for 2.46 billion euro.
https://de.wikipedia.org/wiki/GSW_Immobilien . Back then they had the same coalition in power as today, the taxpayers money at work.
The important context here: The conservatives who were at the helm pre 2004 created a big banking crisis that brought Berlin on the brink of insolvency, which forced the state to sell a bunch of public property: https://de.wikipedia.org/wiki/Berliner_Bankenskandal (German only, sorry)
In the same period or a bit earlier, hundreds of thousands of apartments in Bucharest and other major cities were sold at preferential prices (read: heavily discounted) to the renters. It was a populist measure, people bought apartments and sold them a year later at 4-5 times the purchase price.
Also the old Communist era small apartments were cheaply build and without much value. 6000 euro looks low, but I bought in 1998 from the open market an apartment for $13,000 (the transaction was in USD). These days, that apartment is around 3-4 times more expensive (I don't have it for many years), but it is still small and poorly insulated. "small" means less than 50 square meters, one living room and one bedroom.
Back then the general sentiment was that Berlin was going to shrink. A lot of high-rises were razed in the eastern districts, others were converted into low-rise buildings as part of the "Stadtumbau Ost" program.
It's not good. It's better than awful. What a horrible way to decide how to structure society. Landlords are parasites that expect their tenants to pay >100% of their mortgage costs every month or they'll be heartlessly ejected into the street.
There’s a bit of a difference here, in that the landlord is also coming out the other side with an appreciating asset, not pure costs and the consumer coming out of the transaction with the asset.
The landlord gets 100% of the appreciation as well as 100% of the equity being built by the mortgage payments while the tenants are forced to pay for everything except the initial investment. It's extremely unfair and hurts the most vulnerable people in society.
Sorry but this is an ignorant take of someone who I presume does not own property. I would have thought similar until we bought a house. Some costs that a renter never thinks about: property taxes, home insurance, flood insurance, leaky roofs, flooded basements, mold remediation, HVAC system replacements, the list goes on. If you think a landlord buys a house and never has to put another dollar in, you are on crack.
If you are a landlord you face plenty of other risks - time between tennants, you incur all the expenses and none of the revenue. Ditto if your renter stops paying and it takes you months or years to evict them. Or your tennant does damage to your property that their security deposit doesn't come close to covering.
On top of all that, there are real risks of asset decline. Just because that hasn't happened recently in most places doesn't mean it won't happen. I can name 5 plausible scenarios under which my house ends up never being worth what I paid for it.
It seems to me that you and others claiming that being a landlord is free money just have zero idea of what it actually takes.
I don't understand how anyone can view this as unfair. It's as basic as basic economics gets. It is obviously the case that downstream consumers of goods and services pay more than upstream suppliers. The initial investment is an enormous risk for the landlord, not something to just shrug off.
I guess if you view housing as somehow exempt from market dynamics, then this view holds water. I'm sympathetic to that view, honestly.
Housing market dynamics are strongly influenced by federal policy and the National Association of Realtors is one of the biggest spending lobbyist groups in the country so I would say that by design the housing market is unique and I believe that landlords are abusing that situation, intentionally or not, in a way that harms vulnerable people.
Many markets are strongly influenced by federal policy and have enormous lobbying groups, and capitalism by its nature harms vulnerable people. I don't see what makes housing unique in this sense.
The restaurant isn't disassembled when you leave, when you eat a meal at a establishment you pay for the upkeep of a building that will grow in value over time and yet receive no upside. If you take an Uber, you pay the auto loan of the person driving you. I guess a pure service like housecleaning doesn't leave behind a productive asset, although the business itself is one.
Obviously you get a hard product when you get a meal. You get someone's labour when you ride and Uber and consume gas and car.
When you rent, you basically are buying someone else a house. You don't get any service in many cases, as the landlord can contract our 100% of maintenance and repair and still make massive amounts of money.
When you eat at a restaurant you are in the very same way also buying them a restaurant. That food will only satiate you for a few hours and eventually you will have to eat again, having nothing to show for the service. In the same way you can rent a house from someone, have shelter from the elements for a time and once that business has concluded have nothing to show for it.
I don't' advise eating out too much or renting long term if you can avoid it. I also don't advise living in a major city. You can more easily take the first two pieces of advice if you take the third first.
No, you're absolutely not buying them a restaurant. They are fundamentally making money because they provide labour in exchange for it.
A landlord is not providing labour. They are acting as a middle-man between you and the bank. They provide no service to society. A restaurant is, as they provide cooked food. One is a zero-sum game, the other is actually producing something.
Your advice is frankly shit on the societal level. There is no way for everyone to avoid long-term rentals unless we do things you are opposed to. Equally it's impossible for everyone to avoid living in big cities, the entire economy would collapse. It's senseless to punish people for doing things that are necessary for our common prosperity and interests, such as living in major cities.
‘ A landlord is not providing labour.’ All built structures undergo entropic decay so maintenance would count as labour being done in both cases, the apartment and the restaurant using the textbook definition. These costs would be packaged into the rent and the price of meals.
Plenty of landlords subcontract maintenance, actually. There is landlording, and there is maintenance, some landlords do both, many do no maintenance themselves.
So through market calculation we can deduce that maintenance is only a small part of rent, the majority of rent is derived from being a middleman with the bank.
This is not the case for a restaurant, you'll find that all of the value in takeout comes from the labour and the capital necessary to make that labour efficient.
Would any landlord sign an agreement stating that you would do all the maintenance and then allow you to live there for free? Of course not.
That's not what work done in lieu of rent means. Work done in lieu of rent will only replace part of rent. For example I might get annoyed that repairs aren't getting done and offer to do them instead of paying on month of rent as part of a yearly lease, but no one will allow you to only do maintenance and never pay rent.
Show me someone who, on the open markets, offers to allow you to live in a property in exchange for nothing else.
>no one will allow you to only do maintenance and never pay rent.
> Show me someone who, on the open markets, offers to allow you to live in a property in exchange for nothing else.
Property caretaker
A property caretaker is a person, group, or organization that cares for real estate for trade or financial compensation, and sometimes as a barter for rent-free living accommodations.[0]
That's only the "happy path" (for the landlord) story. I had a coworker who enterprisingly rented his old apartment to someone, who ended up squatting and forcing him into an expensive and drawn-out litigation. The tenant absolutely abused him and the California law which favors tenants quite strongly. He was a young guy in his 20's, not rich, and that woman really hurt him.
And of course there are other risks too; can you imagine being an entity that owns lots of commercial for-lease real-estate right now?! They must be scrambling to stop the bleeding, since Covid has sent demand into the earth.
My point is that being a landlord is not without risk, and it's not always an "I do nothing and make money by leveraging your fear of homelessness" situation (although, granted, this is the ideal state landlord's seek, which is itself kinda gross).
Around here, it's nigh impossible to get a place. Social housing has waiting lists for over a decade, private renting is more expensive than a mortgage, and buying a house requires you to overbid. There are (plenty) stories of folks overbidding 50k€ and still not getting the house.
If you can afford to buy a house, buy it, divide into subunits, charge 80% of mortgage to each of the 5 subunits.
Anyway, that's what tge housing market looks like here. So I'm guessing your experience is from elsewhere.
Perhaps you missed the word "commercial" - which means renting to businesses, rather than individuals. Covid has increased WFH a lot and many small businesses are going virtual, and even larger businesses are scaling back their physical offices. This has the net effect of driving down demand for office space.
It's a bit confusing since you discuss commercial properties between two paragraphs discussing housing rentals. It isn't specifically clear that your comment about low demand only applies to commercial properties.
> My point is that being a landlord is not without risk, and it's not always an "I do nothing and make money by leveraging your fear of homelessness" situation (although, granted, this is the ideal state landlord's seek, which is itself kinda gross).
Yep, that's the problem, at least in the US. Ideally we'd reduce risk on both sides. Rent control wouldn't have to hurt this - your tenant's rent doesn't go up much, but your mortgage isn't going up much either.
It's not like small landlords are in position to redevelop and increase density anyway, so I'm skeptical of arguments about housing stock if you limit the upside (and downside!) of small private landlording.
It's often pitched as the most productive investment strategy for the middle to lower-upper class. Get one property, leverage it into a second, leverage more rents into a third, etc. Even in tenant-friendly states! Yet it's literally just rent-seeking and landlords riding along a wave of demand that they help create (by leveraging their properties and rent to acquire more) to squeeze higher and higher rents out of people is not particularly economically productive overall.
Covid is the first real blip I can remember that's hit those landlords so hard, but the truth is many of these people are over-leveraged and were in a precarious position to start with given the risk. Let's say there were no eviction bans: they could evict all these folks not paying their rent, and ... try to rent out the units to the people that got evicted by other landlords? Because they couldn't afford the old market rate in the first place? Doesn't that just depress the rental market even more?
> That's not the economic definition of rent seeking.
It is. In fact, the general economic concept of rent and rent-seeking are generalizations of the inherent features of real property rents, which are the source of the name.
(EDIT: Fixed egregious touch keyboard vomit, clarified “land” to “real property”.)
If you want to collect land rents you would buy assets that are mostly land, e.g. empty lots, or even single family houses, not apartment blocks where you're paying more for the building than the land.
Just FYI, it looks like you might have a typo in your post. I usually enjoy your posts and think they're well thought out, so I felt the need to point this out.
> Demand for owning, yes. But for renting they create supply, not demand, in effect helping lower rents.
No supply is created by person A buying a rental building from person B. Person A paying a higher purchase price does nothing good to the rents charged in that building.
Yes, there is no lobbying or current manipulation of the government, but for small landlords it's often just a game of "I want to take advantage of population increasing over time to make more money over time" coupled with "I want to take advantage of other people improving the economy so that I can charge higher rents as incomes increase." Neither of those are productive, and the latter is hard to avoid calling parasitic. They don't have the ability to redevelop into higher density, or often even do much to change the condition of the property. So you get small mom-and-pop rentals in SF or similar places that charge far higher prices for far shittier units compared to those put on the market from larger developers or management companies in, say, Marietta, GA.
But if someone buys a house and rents it out instead of living in it, that creates rental supply.
In a free market, pushing up prices of apartment buildings would also cause more apartment buildings to be built. Of course many places like SF are not a free market because NIMBYs block most construction, which keeps supply down and prices up.
Rental supply is an idiotic concept. You are increasing rental supply by diminishing owned housing supply. You're not doing anything for housing supply, which is the only thing that matters.
And no, pushing up the prices of rents don't incentivize building. Building rentals is meh compared to just buying existing housing supply. While house prices are increasing, so will rental prices commensurately, because renting and buying a house are not isolated and independent choices.
In reality, there is no increase in construction, because the increase in housing demand is no different from someone buying a house, and the increase in property costs that follows it doesn't change anything.
> You are increasing rental supply by diminishing owned housing supply. You're not doing anything for housing supply, which is the only thing that matters.
They're two separate markets. Increasing rental supply does drive down rents.
If in one location, rents are very low but house prices are very high, then landlords would have incentive to take properties off the rental market in that location and sell them, perhaps using the proceeds to buy investments elsewhere.
They are absolutely not two separate markets. You can buy one and sell it as the other, and you can decide to sell the same housing unit as a rental or outright. It's the same market. There is no separation between the two.
Increasing owned housing supply decreases property costs. Decreasing property costs reduce the costs of renting, and they also make buying a house more competitive than renting, which is why increasing housing supply, not rental supply, drives down rent.
Beyond that, increasing rental supply alone will not decrease rent. It's perfectly viable for rents to increase despite more rental units if the alternative of buying a house got more expensive. See the recent increase in rents as property prices increased, despite no change in rental supply.
They've still gotta live somewhere. Overall housing supply has not been increased.
I actually think this case is worse for the overall economy than the rental building scenario!
Perpetual rentership is more economically precarious and less stable than ownership. But here we have the folks with assets and income sufficient to purchase properties buying up additional ones to pull ownership further out of reach for more people. So yay, we've converted a property that someone might've otherwise purchased as an asset to yet another rental.
I also don't agree with your claim that in a free market this would cause (much more rapid) increased construction in most cities, given current attitudes about small-landlordship. You can't build there without tearing something else down first, and small landlords are not often going about replacing ten unit buildings with twenty unit buildings! That requires a different level of capital. In SoCal can see this in neighborhoods in places where the current zoning allows, say, 5 story buildings, but those new five story buildings are still sparsely scattered amongst old two-story buildings that are simply too attractive to keep (the dream people are pitched that makes them become small landlords isn't "sell everything eventually to a developer, it's "passive income".) Small landlords made a lot of fuss about earthquake retrofitting, a much smaller expense than "kick out all my current income-generating tenants and rebuild it all." It's been much easier for developers to convert old low-density commercial or industrial property, since the market is more fluid there (and often with much more slack in it, in large cities).
I similarly don't expect a high number of single family lots to turn into four-plexes in the next fifteen years now that CA has changed zoning on them. It's definitely different at four units than two - where duplexes aren't selling for any more than SFH currently, since the qualitative demand for a true single family home is just that much higher - but I don't think it's enough different for a significant number of people to want to cash out or try to play developer.
(NIMBY's exist everywhere, too - acting like they're unique to big expensive cities is self-defeating. The way lower-cost-of-living cities have maintained those costs is a combination of less demand and more land to expand into. If you can build your new mega apartment complex on empty land, you don't have to convince those small-time landlords or property owners to sell all their separate buildings! Dallas County didn't increase in population much more rapidly than SF County because of rapid increases in density - just look at the Dallas city population vs the burbs.)
I've never tried in other states. But on an absolute scale I found it ridiculous how many gotchas they put in place to keep you out of court. I remember sitting there watching so many people get told by the judge "you forgot to file proof of service" or whatever and get their case thrown out. And it takes a whole day. How many tenants can easily get a day off?
If I were a landlord I'd keep every deposit no matter what.
"misfile" yes. But it's amazing how easy it is to do that. This isn't like the DMV or a passport where most people can get it right after a couple tries. You really need to be on top of your shit to win in small claims court.
Yes but looked at another way, this is taxpayers subsidizing real estate investment. The act of buying all the units by the government actively raises the collective price of real estate making it an even more lucrative investment.
The taxpayers should also gain from any appreciation of the housing stock, no? Seems like a reasonable, if very abstract, take on community ownership (on paper).
Short term, many people gain from artificially inflating the value of goods in a supply restricted market, but that is just market manipulation, no real value added. Those apartments will be demolished one day and the value will drop from $100,000 to $0 in a second.
So it moves from one landlord to another. In my experience (in Sweden) the communal landlords are no different from corporate, and most people don't even know if their landlord is communal or corporate.
I've never had a prompt and responsive landlord. But at least with an individual, you get the responsible party on the phone. With property management companies, you need to navigate the corporation in order to get work done, and some are quite skilled at putting stupid barely-legal obstacles in your way.
> Economies of scale are real.
Agreed. Try getting google on the phone for support.
Actually it depends on the line of business. It is quite easy to get Google on the phone for Google Fi for example. As for their "free" services, you are not their real customer but the product they sell.
You get the best of both worlds with housing cooperatives, where the tenants are also collective owners of the units. Those are pretty common in Berlin and the rest of Germany (at least Eastern Germany).
You have a large enterprise giving tenants the advantages you described, while also removing the incentive to rise rents on every possible occasion.
I wish there was more of this in North America. It’s either rent and own nothing, get soaked by a condo corp, or own a McMansion freehold out in the burbs.
Believe me, I’ve lived in both individual and corporate owned rentals. I fully agree that the latter are better organized, and economies of scale are real.
But I’d much rather nobody invest in housing, and governments handle scaled affordable housing - so that there’s accountability and no profit motive.
P.S. Please no replies claiming anything run by the gov will fail; those are boring and called whataboutism.
Government run housing can have its own problems too. For example in Singapore, there have been huge issues with gay couples being unable to rent housing. This can happen with some private landlords too, but at least in that situation there can be multiple suppliers and you only need one to rent to you.
While we’re using anecdotes, corporate owned housing can have issues too. They discriminate against renters with low income, unstable jobs, mixed-race families, etc etc - examples from “first world” Netherlands, where companies like MVGM own majorities of rental housing.
Shallow dismissal. Singapore discriminates against LGBTQ couples as a matter of policy. Just because it doesn't affect you doesn't mean it's an anecdote.
It's still an anecdote. Corporate housing discriminates against poor people and people of colour as a matter of incentive, which is no different in practice.
In any case, it doesn't change anything, if Singapore is oppressing LGBT people they will do so government owned housing or not.
Sorry but it’s just not an anecdote. It’s government policy, as you can easily determine by googling. It’s not like we have to take one person’s word for it that this is happening.
The argument is not about Singapore. You're making the argument that it's not a good idea to have government-run public housing (presumably in Berlin/US/UK) because one government somewhere they did something bad through that they could have done even with private housing.
It's an anecdote for your argument. If the argument was "did Singapore discriminate against people through housing" it wouldn't be. If the argument is "should we have public housing [here]" then it's an anecdote. You'd have to show that this would happen in the place in question. If you want to make a general statement, you'd have to make that clear and make the case that in such countries landlords wouldn't discriminate against you for being LGBT (which they absolutely do).
I’m not making any argument about whether it’s a good idea to have government run public housing. I think you have me confused with another poster.
Your definition of ‘anecdote’ seems way off to me. We’re talking about an objectively verifiable data point. Just because it doesn’t fully confirm some argument that someone’s making doesn’t make it an anecdote. Check the dictionary definition.
Anecdotes are objectively verifiable data points. The key is that they are a single data point and can't be used to make a general argument because of that. It's a single interesting story about an event. That is a valid definition of "anecdote".
It's completely legal for private landlords to discriminate against LGBT people in housing federally in the US, as well as many states, counties and cities. And it happens quite often.
There's also the Fair Housing Act exemptions, where small private landlords with fewer than about 4 units, or landlords that share buildings with their tenants, can ignore the discrimination limits imposed by the FHA.
It's all part of the same deal for people living in Singapore. They don't get to pick and choose which aspects of the government they want (democracy in Singapore is a farce.)
Sure, but that goes to show that "state ownership" simply means very different things in a democratic state vs a non-democratic state. Democratic state ownership is a kind of public ownership - the voters have some amount of control over the state, and through the state, over the owned resource. Non-democratic state ownership is a kind of private ownership - the dictator(s) have direct control of the resource, and the voters have no more rights to control state-owned property than corporate-owned property.
Indeed! As I acknowledge in the last sentence of my comment. Because of these things, I think the healthiest housing markets are those with a good mix of suppliers (both govt and private). Supplier competition comes with many benefits.
My point about MVGM and the rental corporations mentioned in the post, is that they’re massive and bordering on mono/duopolies. That reduces the “mix of suppliers” you’re talking about. Moreover, most corporations act similarly when driven by profit, so it’s a false choice.
The vast majority of public housing in Singapore is owned, not rented. However, government policy is that subsidized flats are only available to married couples, and thanks to colonial-era British laws still in force, in Singapore that means only a man and woman.
>and thanks to colonial-era British laws still in force
These laws could easily be repealed. The root cause of the problem is that Singapore is still a pretty homophobic society. (Also, did Singapore have same sex marriage before British Colonial rule?)
The quasi-fascist PAP has ruled Singapore with authoritarian force since the 1950s. They have the uncontested power to change any old British law they wish. If they haven't, it's because they've chosen not to. If you want to point fingers, all fingers in modern Singapore should be pointed directly at the PAP.
A non-democratic state like Singapore is very different in discussions of state-provided services compared to mostly democratic states.
A democratic state is, ideally, controlled by the people who live under its rule. As such, services provided by the state are, to some extent, under the control of these people, who can use their political power to influence those services directly in various ways. In contrast, people don't generally have any right to change the way a private entity chooses to do business, as part of the basic definitions of property rights. Basically, people often want public ownership, and use the idea of state ownership as the mechanism to achieve that.
This difference though changes completely when discussing an authoritarian state like Singapore (and even more so in dictatorial states). The benefit of democratic control that is expected from state ownership in democratic states doesn't exist if there is no democratic control of the state in the first place (this is one of the reasons it is absurd to talk about the USSR as "socialist", when all economic activity was in fact controlled by a state that was in turn controlled by a ruthless dictator). In a non-democratic state, state ownership is just as much private ownership as corporate ownership.
Of course, the problems get even more complex when you have a quasi-democratic state that is nevertheless actively discriminating against certain groups of people.
The worst is: just a couple of years ago, in 2013, the (mostly) publicly owned BayernLB has sold 32 000 condos/rentals to a private owner for extremely cheap prices: around 77 thousand euro per rental.
In 2008 the state of North Rhine-Westphalia sold ~93,000 apartments for about 8,500€ each to Goldman Sachs. The reasoning was that the apartments were in bad shape and renovations would be expensive.
It's ridiculous how concerned politicians, especially conservatives, act now.
If you factor that in, it's ~38,000€/apartment, you got an extra 0 mixed in somewhere. Those debts should've never existed in the first place. It's public housing, it should not make profits and rather break even.
Nowadays the investor makes huge profits despite the 60 year rental agreements the state negotiated for the renters and the required 12.50€/m² per year improvements. How was the state unable to break even? It's a mystery.
Oh right, my bad, it's been 38k per apt. I've edited the comment. Indeed that's very cheap. As for debt never existing, it's pretty common to leverage in the real estate world.
They got 3x what they expected and still it didn’t dawn on them that they were missing something. At first sight this goes off the stupidity chart into evil territory.
This is exactly the kind of solution I favor in the states. Buy up properties, build or expanding housing supply, and then either continue to subsidize it or sell it back to the market while imposing land value tax.
Why? Because the problem is lack of political will. You can't expand housing supply if nobody wants to.
It's a piecemeal solution until we figure out something better or that society is willing to support public housing initiative. Otherwise, we would be waiting forever for entrenched political opposition to die or the situation to worsen over time.
Why not just let private developers build apartments. They have the capital, know-how and will to do it. All that needs to happen is government and councils getting out of their way with zoning restrictions and the problem will fix itself as if by magic.
I agree on the land value tax part of what you said, though.
The problem is not government and councils but all the homeowners who don't want any development. Buying them out incrementally is hopefully a way to remove political opposition.
The problem is councils and governments that are controlled by homeowners who vote in NIMBY restrictions. The reason there aren't apartments going up everywhere is that it's literally illegal to do it, not that a developer is finding it difficult to find eight adjacent single detached homes to buy up in one go.
Because private developers optimize for their profit, not creating high quality area of living. You can look at what the full fledged free market is doing to largest cities in Warsaw. It’s a shit show.
The BauNVO stipulates restrictions on building height and on floor area relative to land area. Are you sure it's legal to build a 30-storey apartment in a residential zoned area in Berlin without needing to get some special exemption or permit?
In the US and many other countries, the reason is definitely local government restrictions. Developers would love to build more high-rise apartments - it's very profitable to them - but they're not allowed to in many areas. In the area I'm living in, it is illegal to do it.
The incentive picture is not as you're portraying, and we can look to other industries for counter examples. If there's profit to make, the market will fill those shoes, even if there's "more profit" (which I don't agree is the case always due to volume) serving wealthier customers. Consider the market for low-margin cheap restaurants in poor areas, and the market for high-end dining in rich areas. These are both very well served markets. The market will almost always find profits where they're to be had, especially in an industry like real estate development.
>You can't expand housing supply if nobody wants to.
it's wrong to say "nobody" wants to. the problem is that the homeowner class holds all the political power, and so there is no greater political sin than decreasing the cost of housing (or "lowering property values" in homeowner terminology). if anybody cared what non-homeowners thought, there'd be plenty of will to build more housing. as long as so many people's net worth is tied to their housing, there will be no appetite for lowering the cost of housing.
Maybe this is just me being a filthy capitalist, but it also seems somewhat fair? If cities are instituting rent controls on properties that were previously market rate, that is a targeted form of wealth expropriation. To be clear, I'm not one of these "taxes are theft" people -- we do have to pay shared costs. But there's a continuum of acceptability: it would clearly be wrong to pass a law that raises taxes on one person by name. And it's clearly ok to raise taxes on everyone.
For me, instituting rent controls is towards the less acceptable end of this spectrum. If the city believes it ought to be able to set prices on an apartment, it should own that apartment first. Just my unenlightened gut feeling on this issue.
> it would clearly be wrong to pass a law that raises taxes on one person by name
What do you mean? There are innumerable such taxes, globally. You definitely need to tax various people & businesses differently, it’s the only real solution.
I am not aware of any examples where a country taxes a single individual at a higher rate than everyone else by law. If examples are innumerable, I'd be grateful if you could provide one.
> Where are you getting this strawman of taxing “single individuals”?
Could you please reread the section of my comment that you quoted and your response to it? I said, "it would clearly be wrong to pass a law that raises taxes on one person by name," and you said, "there are innumerable such taxes, globally." You very specifically did not say that classes of people or businesses are taxed differently. You said single individuals are taxed differently. (You might not have intended to, and if not, well enough, but I set up no strawman in my comment.)
I believe it, although at least then it's still targeting a class that others might enter. I do also believe that there's a fundamental difference between income taxes and wealth taking in this regard, in that one is retroactive and the other isn't.
Berlin has been a hot market for a long time, what's been built has been a lot of very expensive apartments. There is actually some leerstand but they are luxury apartments without renters. The biggest thing the market has achieved in Berlin is allowing landlords to rent out shitty apartments at abhorrent prices (25sqm at 600€) without incentive to actually provide good services for the renters
It would surprise me if Berlin is permissive with respect to permitting new housing. It would be quite unique among desirable western cities if it did. When the amount of new housing allowed is insufficient to keep up with growth in demand, obviously developers are going to tackle the most lucrative segment of the market, since they can essentially pick their buyers. If there were ten people who want new cars but you have one import permit, and your cut is 10%, are you going to import the luxury car or the econobox?
If you permit enough new housing to satisfy demand, that would also solve the problem. As long as insufficient new housing is being built, prices will go up on market rate housing. The lucky few who manage to get into price controlled housing will have better prices, but everyone else will face higher costs or be unable to live in a region entirely.
One thing is for sure: as long as any private housing ownership is allowed, rich people aren't going to be the ones left high and dry.
The amount of new apts would be dramatically high to curb prices and make them realistic again. And Berlin is probably also not able to magically create as much new living space as is needed in that short of a time frame especially given the developers unwillingness to build affordable housing. I think where we probably fundamentally don't agree is that not all things need to be provided through a market. (or I think my point is more so that we've at least observed it not reall working here, so we could at least try a different strategy or multitudes and see how far those take us)
> The amount of new apts would be dramatically high to curb prices and make them realistic again
I'm fine with short term patches to help with the acute issues, but fundamentally unless a lot of housing is built, there are going to be some people suffering in the housing market. Either it will be poor people paying a lot for housing, or it will be poor people who are unable to win lotteries to get into public housing who then cannot afford housing at all. Whether the housing is publicly or privately owned is just pushing sand around the sandbox. It just changes exactly who the winners and losers are, but not the number of people losing.
> I think where we probably fundamentally don't agree is that not all things need to be provided through a market.
I don't hold this belief. There is no fundamental disagreement on this score between us.
The problem is: who gets the cheap housing in communal ownership? Supply is limited. So if you don't pick the person who is willing to pay the most, who do you give the apartment to? Who gets to decide? Are you sure you want to live in that kind of world, where some political elite gets to decide your fate?
A number of public housing here in Berlin is reserved for people making less than a certain amount, having no job at all, or working/living in precarious situations. You can apply for that status at the local gov. It is not flawless, of course, but it at least avoids segregation.
I live in a district that was originally working class, and is being very fastly gentrified now (yuppie myself I guess), and it just sucks that people who've lived here all their lives have to move to completely new environments because this is now an area desirable desirable for rich people.
Same with small businesses, one of my favorite bars closed down recently due to some English billionaires wanting to turn the house into higher margin living. Vice did a documentary on it called "Punks vs. Billionaires". For the people living here, who live in small flats and still pay half their income to it, these "living room" bars, where you do not have to buy to be welcome were absolutely essential. But they all get destroyed now.
Almost all new private housing is for richer people, because they are the most profitable, and lots of them move over at the moment. The state needs to step in to make sure that normal people can still live a decent life around here, too, lest we become a horror show like London.
> Are you sure you want to live in that kind of world, where some political elite gets to decide your fate?
Whenever people say stuff like this, I wonder if they’ve ever taken a moment to look around themselves and see that it is already that way. The current housing problem is also orchestrated by the same political elite…
There is a difference between policies making your desired place more expensive, and being literally dependent on some corrupt government officials, who is handing out apartments as favors for allies, or just for bribes.
There is already communal property in Berlin and all over Europe. Its not some grim socialist dystopia. They serve under the same conditions as private companies just don't have to completely bend over to shareholders wishes. Vienna the city for example is the biggest landlord in Europe.
Obviously we need more housing but until then we also need to ensure that people with normal incomes can also afford to live _in_ the City.
How is it that there are "luxury apartments without renters", yet landlords get away with " rent[ing] out shitty apartments at abhorrent prices"? Why don't the people who can afford those shitty apartments move to the empty luxury ones instead?
Because they're not on the rental market, but are mostly used as a value store by owners that don't live anywhere nearby, and have multiple properties.
The argument of the empty apartments in Berlin comes up all the time, but it is a myth. Maybe in London it is different, for various reasons, but in Berlin, that is not the reason for the issues. [1]
Even if only new luxury apartments are being built, it is more housing that takes pressure off the market. The wealthy people can move into those apartments, freeing their old less luxurious apartments for "poorer" people.
And there is no "free market" for housing here - it is very difficult to build, with lots of regulations.
And who wants to invest, when the government will seize your assets as soon as you are successful? Last year they introduced a hard cap on rents, that applied no matter how much you paid for the house you wanted to rent out, and no matter where it was located.
In two weeks, there will be a public vote to seize thousands of flats at "way below market value" (quote from the voting sheet) from corporate landlords. These are not conditions where a "free market" can do its thing.
As a matter of fact, only big companies have the means to build under such conditions, it is much too risky for smaller entities.
But then, sure, blame the evil capitalists for the issues your socialist government has created.
> Even if only new luxury apartments are being built, it is more housing that takes pressure off the market.
Luxury housing construction can help, but can't really fix the issue on its own because it is also a relatively inefficient and expensive method of increasing the housing supply (since each added unit has high costs.)
This problem is one that a large number of municipalities have failed to solve. It seems very difficult to get the regulatory and tax incentive structure setup just right to get sufficient affordable housing built in large urban areas.
> As a matter of fact, only big companies have the means to build under such conditions, it is much too risky for smaller entities.
I would think that governments have the scale to take on those risks as well. At some point, I think it makes sense to stop struggling to get privately build affordable housing and do it publicly.
> you could simply allow private entities to build housing.
London is the poster boy for exactly why you don't do this.
The result is builders and landlords buying up land, "delaying" (often indefinitely) building the homes to artificially drive up the prices of existing housing, or building tiny, tiny, apartments in huge hive-like blocks and towers, with insane prices.
There’s always real estate developers willing to build. The problem is that they never want to build affordable housing, only massively profitable housing. Also, an underlying problem is usually lack of land - a limited resource by nature.
If they build luxury apts rich people take those freeing up crappier apts for middle income people and so on. Silicon valley millionaires dont want to spend 2.5 million on shitty 50yr old homes, but they cant get new ones built
If you give real estate developers too much of a free hand, they will plaster over every bit of common space with cramped flats or other abominations. There's even a word for it in Polish - "patodeweloperka". It's most prominent in Cracow (alleged ties of real estate companies with local officials), also in Warsaw and its suburbs. In Gdańsk, it's suspected that many old unused buildings in attractive areas had an "accidental" fire.
I looked at some of the new construction in Wroclaw (arguably not Cracow) and it seemed fine to me.
If I could sustain my work from abroad, I would be tempted to move to Wroclaw, actually. Unfortunately I need access to cheap shipping to Czechia, which means being in Czechia or at least going there pretty often.
Define “fine”. People want to start the family, but private real estate developers build shitload 40m^2, 1 bedroom flats (as they’re the most profitable). I’d argue the current housing market is definitely not “fine” for them.
You need to realign incentives. You can't do that now if homeowners and investors don't want to allow housing.
Resetting taxes to LVT means that improvements on land won't be disincentivized. Buying them out means they get a lot of cash and won't be so opposed to you lowering the value of their owned property.
Also, the government will be able to afford to focus on cheap housing, not what makes them the most money, since their focus isn't private profit.
The prices are spiraling out of control everywhere that’s even moderately desirable. In a city in the BW part of Germany which has ~20k inhabitants and is nearby another city with ~200k inhabitants there’s new 3 room apartments for sale for around 400.000+ €.
The sales prices in BW and many other areas of Germany are simply ridiculous.
And they are building: a few dozen lots are being offered by the city and there’s dozens of takers per lot.
Which city can easily add thousands of parcels of land for building houses? There’s significant administrative effort and those extra houses would put pressure on all local municipal services. This has to be thought out and done incrementally.
This is one of the reasons why all new housing is in the luxury category in Germany as well.
Building codes have become so strict that it's not worthwhile to build affordable housing for private investors. Especially since the government pays incentives (or rather gives out very low interest loans) to build houses of the highest energy standard.
Why build a "cheap" house when you can build a more expensive house with subsidies that has a lot higher resale value later?
Note that there is a lot of lobbying involved in the building code. An example:
What if a kid ran into a balcony glass and broke it, hurting or killing itself? Better demand that balcony glass be reinforced (and more expensive, to a great delight of the glass factories!) just in case. Even in old folks' homes.
No one wants to be known as the child killer, so here is a new demand making the construction a bit more expensive.
That seems perfectly reasonable to me. I expect balcony railings to be sturdy, they exist precisely to prevent accidents. As long as there is no regulation mandating railings be made of glass, I don't see any problem. I've only ever seen glass railings on the houses of people who can afford to pay someone else to clean them (i.e luxury housing) so I don't see how that makes it harder to build affordable housing.
"overpriced" is accurate. People complaints of rising rental prices, but property prices have skyrocketed to a much faster pace.
A realignment is going to be due at some point in the future: either rental price will have to catch up faster, which would fuel more discontent, or the real estate will have to "collapse" ...
What will happen, I think, is a large amount of inflation. Prices of everything else (including wages and rent) will increase substantially, but house prices will stay (nominally) about the same.
That way, they cease to be overpriced but the owners avoid negative equity.
One of the problems of 2021 is that money printers went brrrr with such intensity that some people are losing faith in future purchasing power of their local currencies and stick any free money into bricks and mortar.
Also, where I live, the official inflation is now like 4 per cent, but gosh, so many things are massively more expensive than before (food in restaurants maybe 40 per cent, some construction material even 100 per cent more expensive than before), that it makes people distrustful of official figures.
Just like cars depreciating eliminated privately owned car rentals.
Oh, wait, no it didn't. Housing is the only thing miraculously protected from depreciation because making it depreciate would hurt chances at reelection.
I’d be really happy with communal non-private rental housing. Corporates already do a bad job, I don’t see why they should make massive money from limited land resources.
The only way for housing to keep rising at its current speeds is for buyers to spend a greater share of income on housing and for interest rates to fall.
Interest rates are near zero and individuals are spending very large portions of their income on housing. Continued expectations for high returns on housing will lead to hard landings/defaults or pathological cases where renters don’t pay rent and can’t be evicted.
This is based on assumption that average property user income will not rise and that the possible profits are almost maximized. Berlin is growing fast, creating lots of new jobs, often well-paid ones (above national average) filled by immigration, so demand is growing faster than construction of new apartments. And prices are still below Munich or other big cities. That said, this is an indicator of liquidity showing that property is indeed a secure and reliable asset, but this is not the reason for investment by city.
Many people’s view points are influenced heavily by the 2008 financial crisis, which was a exceptionally rare and historic event. Demand for housing was artificially inflated due to fraud. Do you think demand is being inflated now? If so, by what, and what would cause demand to shift back?
One possible answer is interest rates being low. However, the trend in interest rates towards 0 / negative has been going on for over 100 years. I don’t see them going up significantly ever again.
Yeah, it's completely bad timing, like the situation took them by surprise. Doesn't the state employ economists and planners to handle these situations properly and timely?
If so, what were these economists thinking? What is the profession even worth if it brings a false sense of knowledge and security?
If rental income dries up in rent-controlled properties in Berlin, this will be a sign of such an enormous macroeconomic shift, that losses from this deal will be insignificant compared to everything else.
Seriously, this is unrealistic scenario.
I am all for big businesses moving into buy to rent. There are far too many amatuer landlords in the UK making a living by renting out poor quality housing.
My office landlord also has two small flats above (think glorified bedsits) and his partner also rents out a tiny cottage. This is their living (aprox. £3k a month), neither works or has any other business, all from a 'portfolio' of properties that maybe cost £150k twelve to fifteen years ago.
As an example of market inefficiency, multiply this across the country and it's not hard to argue that the housing market is severely broken.
A lot of comments in this thread about corporate buy-to-let seem reasonable, but only under the nihilistic assumption that prices cannot fall and home ownership must be perennially out of reach for the median earner.
What about instead of shifting from private parasitic landlords to corporate parasitic landlords, we just let people buy the homes they live in (by enacting one of many possible policies to limit the profitability of BTL and thus reduce competition for homebuyers)?
It just doesn't seem to make any sense to try and apply free market principles to housing. There's absolutely no benefit.
If we wouldn’t have a centrally planned monetary system that is trying to avoid deflation at all cost, I would agree with you. So for now, it seems that assets won’t be allowed to go down because it would blow up the debt based system that we have built. Central planning begets more central planning.
I too have no issues with large business getting involved with rentals. As long as it is clear for everyone involved that housing should be low margin business. That is very low, but relatively safe returns and mostly not from appreciation of assets.
Yeah, the shouldn’t have allowed rampant corporate ownership. Now is a great time to remedy that. Given the city’s continued growth, in ten years that real estate will look like a great investment.
Yeah, the shouldn’t have allowed rampant corporate ownership. Now is a great time to remedy that. Given the city’s continued growth, those purchases are a solid investment.
In Berlin property market is heavily regulated. Same property under different legal conditions may have 50% spread in price for which it can be sold. City is currently buying at a price not available to ordinary investors in order to offer rents significantly below the market. And it is still an ok deal for sellers, which purchased it much cheaper.
At average price of approx.160 000€ per apartment it can be a good deal if financed with debt. Market value for those apartments is likely much higher and city-owned property firms can borrow very cheap. The only question is, whether this debt should be used to fix a short term problem with increasing rents or to invest in building more city-owned apartments. Besides, this deal may discourage investors, which may see property market in Berlin as low margin due to artificially limited returns.
is this necessarily a bad deal? Governments can normally raise capital at significantly lower interest rates than the private sector, so if the private sector was making a profit on this, then the public should be able to do too, and then re-invest that into public services
It has provided quite a few high rise buildings that are used by a lot of people. That will keep happening as long as it is allowed, making it possible for more people to enjoy the city.
(more rich people). Average people are not living there and they are getting increasingly squeezed. But if that's your goal, I guess we fundamentally disagree then.
As another commenter notes, housing is unaffordable because marginal demand is greater than marginal supply. We can either decrease demand, or increase supply.
Housing demand is pretty sticky, so that leaves us with one option.
Without regressing to another ad-infinitum housing discussion, real estate involves two markets: rentals/living, and ownership.
Some people want to own their own home and live in it (owner occupiers); these people however compete with investors who are seeking to rent it out. While investors don't directly affect the rentals market (as you'd expect an owner-occupier to not be a renter), they do push the price of housing, because housing becomes more of an investment (competing against everything else with zero / negative interest rates).
Progressive taxes on investors can mitigate this and make home ownership more affordable. First property, no tax. Second property, 1% of its land value charged annually. Third property: 2% of its land value, etc...
You’re forgetting investors who don’t want to rent property. They just by new properties, keep them empty and pristine and profit of the rising market value of the asset. Sounds crazy but it’s definitely a thing in London.
It should attract very high taxes to make it unviable but of course it doesn’t.
These evil bogeymen are something people believe are very common, but I can't find any solid data on their prevalence in London. People also claim these guys are ruining NYC real estate, but our vacancy rates are below 5%, and most of the places that are vacant are not long term vacant.
The evidence is all circumstantial because it’s difficult to definitively prove someone owns a property with absolutely no intent to live in it or rent it.
Further, the properties held purely as assets are generally very expensive ones. The effect ripples down, well heeled people move into cheaper housing and those people moving in turn.
This is nearly 8 years old, but generally describes the issue with some specifics:
> The evidence is all circumstantial because it’s difficult to definitively prove someone owns a property with absolutely no intent to live in it or rent it.
Vacancy rates are extremely low. That puts an upper limit on the amount of people that could be doing that. Is it not easy to tell if a home is vacant?
Yeah, I have noticed lots of commercial vacancies in NYC. My understanding is that this is because the leases are so long and thus the prices are not as adaptive.
Makes a body wonder why buildings don't just sell their ground floor real estate to get it off the books. There must be some reason, otherwise they would, but it seems like a neat solution to the problem.
Yeah. I was looking to rent a NYC luxury apartment recently and noticed that any reasonable deal gets snatched up very quickly. These apartment complexes do feel empty because the residents tend to be childless, so maybe that's where the confusion would come from. It's sad to see more and more people these days are in denial of basic economics. It's strictly better to rent an apartment out because otherwise you're getting nothing from paying management and taxes.
>It's strictly better to rent an apartment out because otherwise you're getting nothing from paying management and taxes.
Renters can choose not to pay rent, can cause untold damage to the property and can use it for illegal purposes to name but a few reasons why it might be rational not to rent a property out, specially if it's an appreciating asset.
I suspect that the majority of these empty properties are owned by wealthy people from countries like China or Russia.
This is a conspiracy theory that financially illiterate people love to parrot. There is no benefit to keeping a property vacant on purpose. It incurs opportunity cost, which is the cost of rent. The only reasons a property may remain vacant is
either due to regulations, incompetent management or maybe money laundering (an actual crime) in which case collecting rent would impose a burden on the money laundering operation. By no means is this common, it is an extreme exception and bringing it up in these conversations is a goofy platitude by people who know nothing about real estate. It'd be like talking about the supply of automobiles and bringing up "but what about cars destroyed at monster truck rallies or used on movie sets? it's limiting the supply of automobiles!"
This goes right back to supply. Real estate prices don’t exist in a vacuum; ultimately someone will buy said property who wishes to live there and will have decided so due to it being the best of all options.
It's common in my city as well. The reason is tenants can stop paying and are protected by law enforcement from being evicted. That's not even talking about straight up squatters. This makes renting out often non-economically viable, when adjusting for risk.
It surely is already very expensive to leave an apartment empty as it is. There also seem to be special circumstances and laws in London.
But lets assume the worst, that it is all just pure evil capitalist speculation: even that is not necessarily bad. They try to anticipate future demand. So they anticipate that in the (near) future, somebody will need that apartment even more urgently than the people looking for housing right now. So it is better to keep it available for those people in the future. Think about keeping ICU units ready for future Covid patients for an analogy.
So what if the speculators are right, and the future buyers really have a higher need than the current ones?
Also I think if there really is just speculation, especially foreign investors, why not build cheap houses and sell them to the speculators for a lot of money? Nobody will ever live there (according to the anti-capitalists), anyway. Seems like a good way to make money for a country.
This idea is slightly better than a land value tax but implementing it is a financing nightmare. You'll have to spend the entire government budget on buying all private plots of land.
That should work to lower prices but will also increase costs for home owners. If the goal is to increase home ownership rates then giving them an advantage in the market can help.
You could distribute the money raised as either tax cuts to income tax, or just as a flat dividend to every citizen. If a person owns an average house and pays $10k in tax, their dividend would return $10k - so no loss.
If they own 5 average houses and pay $10k per house in tax, they'd pay $50k and their dividend would return $10k, so would have to pay $40k more
> Progressive taxes on investors can mitigate this and make home ownership more affordable
In Germany home ownership is not seen as strictly positive in the same way it is in the US for example. Many, perhaps even the majority, of Germans go their whole lives as renters.
I don't follow your logic. In both cases, home ownership or rental, you need one house per interested party. Why should one be more expensive than the other?
And why should politics decide for people whether they should rent or buy, I mean, why push them in one direction or the other?
If you make residential investment more expensive (through taxes), you will have less interested investors. This reduces the number of interested parties for home ownership, which means that the remaining parties (i.e. owner occupiers) pay cheaper prices.
Taxes are often used to discourage behaviour society believes to have negative externalities. For example: tobacco excise taxes; and also in the other direction (e.g. concessions for long term capital gains; which is supposed to encourage 'investment').
Yeah in this case investors are punished for investing into space inefficient single family homes. Multiple apartments on a plot reduce the tax burden of the land value tax. So big investors will primarily invest in multi family housing.
In general taxes are regressive and people want to avoid them. If you tax regressive behavior the most, people will stop doing it.
That may be technically true, but it misses the fact that the demand pool is larger than it should be - it consists of many other actors than just people who want to live in a given location. Those other actors tend to have more money.
Investors who do not rent out locally - including those renting out to tourists, those keeping empty homes for occasional vacation use, those keeping empty homes because they're playing financial shenanigans (moving money offshore, money laundering, keeping some properties empty to prevent depressing rents from nearby properties). Probably some other groups I'm not even aware of.
Point being, it's not true that all supply of homes ends up being used by people to live in. A lot stay empty most, or all, of the time. People owning those tend to have more money than locals looking for a place to live, so the latter get priced out.
Buying the apartments is a short term solution to take pressure off of low income tenants. This is not about supply and demand. Increasing supply is a mid to long term solution.
By the way, land is also limited in Berlin and therefore expensive. Makes building cheap apartments difficult.
> By the way, land is also limited in Berlin and therefore expensive. Makes building cheap apartments difficult.
This is the other reality of free markets and scarce resources: if there is only so much land in Berlin, and lots of people want to live in Berlin, then it means some people won’t be able to. That’s just the reality. Unfortunately that means people who can’t afford have to move. As sad as that is, we don’t have a better system for allocating scarce resources sustainably.
The number of apartments per square metre is limited by political reasons (ban on high buildings, minimum size etc)
20 years ago when I moved to London I'd have loved to find a tiny self contained Japanese style 10 square metre apartment[0], which is cheaper (in actuality, not just inflationwise) and far nicer and featureful than the HMO I ended up in.
> Thankfully, some clever design elements allows the micro apartment to be a very functional and cosy home.
Does anyone who has lived in Japan and abroad think there is anything "cosy" about Japanese housing?
It's cramped, of poor quality, and manages to be colder than the outside in winter and warmer than the outside in summer. I've seen some crap properties in London but Japan takes the biscuit.
A dingy bedsit with a shower in one corner, a sink in one corner, a bed in one corner and a door in one corner, with a shared toilet down the hall. That cost me £520 a month in 2003 (similar places are £800 today)
A Japanese micro apartment for less than half that price [0] would have been far better.
Same with hotels. I still go to London fairly frequently, in fact I had 3 nights there this week. I turn up to the hotel, sleep in a bed, have a shower, then leave, maybe with breakfast. For that I'm charged £90 plus.
I'm not sure how your comparison of personal experience against prices you pulled off the internet makes the standard of Japanese building any better?
You can find cheap rooms in either city, you can find bargains in either city, what you won't find en masse in Tokyo (nor any other city in Japan as far as I'm aware) is housing with walls that seem like walls and not paper, with insulation, and you certainly won't find central heating.
Demand for _homes_ is sticky. Demand for property ownership is not at all! It is influenced by speculation and rent-seeking. We can easily cripple both those things and reduce housing cost.
(Edit: I do agree with your conclusion though. We need more homes)
Yes but there are 2 main types of demand in there. Demand coming from institutional and extremely wealthy investors and demand from regular folks. Who do you think is more likely to be the responsible for such an increase in price?
So i disagree with the solution you propose. The better solution is to reduce the type of demand that is responsible for this failure in housing prices.
> Who do you think is more likely to be the responsible for such an increase in price?
They of course are contributing factors and if you want to regulate that, fine, go ahead. But they absolutely are not driving prices higher. Investors have tons of alternatives to invest in if prices are too high. People don’t have alternative forms of shelter, so they will tend to pay whatever the price is. And society facilitates and exacerbates this through well meaning efforts like “affordable housing” policies that artificially reduce interest rates and drive demand higher.
The bigger issue is that housing and property should never have become a de facto investment class. You should not earn inflation adjusted returns for owning a house. But of course, most wealth in the world is due to housing. And the next generations just increasingly get screwed over.
Berlin's population hasn't increased significantly since the end of WW2. There may be desirable areas that are experiencing demand spikes but the price increase seems city wide. Why is supply more of an issue right now? It is a question of (money) supply.
Commercially backed mortgages. The reason it doesn't work the way you're describing.
Supply and demand do not exist in a vacuum.
There's no _immediate_ response to people not being willing to pay a certain amount.
Owners, and especially individuals or companies that own large amounts of housing, will refuse to lower prices, regardless of demand dropping. Be it actual demand, or people staying away because the price is too high.
Where store spaces have not been rented out for sometimes a decade, because owners consistently refuse to lower prices. Just refusing to lower rent, for years on end, and being empty that entire time.
And if you ask why, the answer is: commercially backed mortgages.
It's simply: you take a loan with a bank for, say, 10 million USD. You're required to pay this loan back over a period of 10+ years. The bank, meanwhile, sells this as an investment product. The bank uses their own funds to guarantee the profit this loan is going to generate, and attracts investors to take a part of it. Thus gaining them a % increase after X years.
However, this means that you can't ever lower the amount you have to pay back, if the value of the physical good your property is based on, drops.
Price isn't dynamic in a pure sense. There's a person on the controls and if they refuse to move them, even if you think it's illogical to do so, they're not going to budge.
Because they have a loan to pay back. Over a finite amount of years. And lowering rent means longer time to pay back the loan, meaning breach of contract.
There are far more systems in place than many are even willing to consider. For it assaults their idealized worldview.
Be it shop or regular housing, this is a system that artificially stops prices from dropping.
Yes and no. Yes, property investment and speculation and inflate prices beyond their consumptive utility.
But no in the sense that commercial real estate investors are a small chunk of the global RE market. The vast majority of residential property are owned by the tenants. We have turned housing into the largest retirement fund and don't have a way of undoing that. And we have exacerbated this by deciding to push interests rates artificially low so that all sorts of people who otherwise would be priced out of home ownership, are now part of the demand curve competing against the same supply curve.
>Because they have a loan to pay back. Over a finite amount of years. And lowering rent means longer time to pay back the loan, meaning breach of contract.
I don't get it. Refusing to rent out the property means even longer time to pay back the loan, doesn't it? It can't be the reason.
Only if you think that the demand for real estate is mostly driven by housing needs, and not speculation & monopoly style hoarding artificially driving prices higher.
Without a doubt, it is not mostly driven by those things. Investors have lots of choice about what to invest in. People don’t have any choice about needing shelter. They will pay whatever the price is.
I get that wealthy investors driving up housing prices gets people angry and is a good rallying cry. But it’s such a small piece of demand.
But also being in NYC during COVID and watching the real estate market react, it feels far from an efficient market, as one side has more information, resources and time.
- "Normal" people working in Berlin can afford it (e.g. prices are still below e.g. Munich but you ear much more in Munich).
- You are not forced to spent so much money on housing that you not can't really afford anything else.
- We are speaking about apartments available now, there are a lot of people with older rental contracts which as such still pay much lower rents. (I.e. the price of entering a new rent contract is basically always noticeable above the average rent price, often as much as legally possible).
You can totally have "unaffordably" priced housing and high occupancy, because housing is in general not a think people can choose to "simply not have".
Also if you decrease the supply of "affordable" housing and make the remainder more expansive you totally can have an effect where occupancy stays high and people and up on the street (decrease the supply => convert rented apartments to owned ones, which don't count into "rented apartments occupancy").
So what you see is:
- More WGs i.e. people sharing a apartment and the rent, and this is not just young people.
- A lot of "natives" moving away from Berlin.
- A lot of rented Appartments being converted to owned ones, some being actually used other not.
- A lot of people with non-high wage jobs spending so much money on rent that they have no money left to put aside for emergencies and potentially even have to cut corners in their daily live.
- Some more wealth people coming to Berlin.
One major difference to some of the more expensive cities in Germany is that people people tend to earn
much less money and thinks like "moving to a cheaper metro area around Berlin" are often not really viable (as there isn't that much to move to, it might actually be more expansive then living in Berlin it also is legally seen another German state and commute times can become a problem, too. I mean they can be a problem in-side of Berlin, it's a pretty wide city.)
I understood, but the claim "unaffordable" makes no sense because obviously, there are enough people that can afford it. But yes, low-income households have more and more difficulties making ends meet when the prices rise.
The issue is that Germany does not have a housing crisis, there are at least 600k uninhabited housing units. Yes, those are mostly rural and especially in the former GDR. Usually you get a commission if you FIND somebody willing to rent long-term.
People are drawn into cities, especially Berlin has become "hip" - even though the job market is not even close to Munich or Stuttgart. So I think (and most people I know who moved there) people move for the lifestyle. I am pretty mad at the Berlin government now using taxpayers money to buy back pricy appartments - especially since Berlin is one of the poorest states in Germany and heavily subsidied by the other states (through "Länderfinanzausgleich"). And this will in no way help with the high demand/low supply problem, that actually exists.
> "unaffordable" makes no sense because obviously, there are enough people that can afford it.
Doesn't mean thinks didn't become unaffordable for other people. If a lot a people which grow up do or are considering leaving because they can't afford rent it's a social problem.
> The issue is that Germany does not have a housing crisis, there are at least 600k uninhabited housing units.
Just because there are housing units in some places doesn't mean there is no housing crisis. Because what point are housing units in the wrong places.
Because what point is a housing unit in a area where there is no work, no hospitals (close by), no supper market (close by), no public transport (which goes frequently), no restaurants, bars or people to meet, probably bad internet, etc.
I mean if that places would be nice countryside nature places it might be interesting, but they often aren't even that. They often are areas where in the past there had been a lot of manual work (car industry, coal mining, heavy industry, etc.) and it went away, as well as small villages.
> People are drawn into cities
Often out necessity, due to the points mentioned above.
> One major difference to some of the more expensive cities in Germany is that people people tend to earn much less money
I don't know. According to a somewhat recent study[1], Berlin is pretty average, only 10-20% below e.g. Hamburg, North Rhine-Westphalia, Bavaria and Baden-Württemberg (where the rents for comparable flats in the larger cities tend to be much higher than in Berlin, and not just 10-20%, while cost of living (utilities, meals, services) is generally 10-20% lower in Berlin).
It's true that the current prices do get obscured by looking at averages, especially in Berlin where old contracts are absurdly cheap. Comparing the usual real-estate sites in Germany (granted, most markets aren't exactly showing many offers, so it's always a small sample, but it remains the same over time), you'll find that Berlin's rents are still considerably lower than those in Hamburg, Munich, Dusseldorf etc. Berlin is in a very special situation in Europe in that the capital of the country is not anywhere close to being the most expensive population center.
As for "natives" moving out of Berlin: not so sure either, many Berliners weren't born in Berlin, but that has been going on for the longest time (it's been a thing a hundred years ago, has settled during the GDR, and has been reignited in the last two decades; today, slightly over half of Berlin residents were not born in Berlin). It's a city where young people move to study and party and then stay for the life style and lower cost of living. Coincidentally, these are often the same people complaining about the high rents and asking for collectivization.
Of course, the only unaffordable price is one which the market will not bear. Any price at which a market transacts is by definition affordable.
And herein lies the issue: everyone wants to live in Berlin, but not everyone can live in Berlin. Price is the mechanism by which we determine who values living in Berlin most.
You might not think it’s fair, but this is the reality.
The issue is that actually the prices are transparent and fair - at least I know and understand why I don't get an apartment that I can afford. The issue with government imposed rent control/caps is, that now instead of 50 applicants for an apartment which is priced at market rate, there will be 250 applicants to an appartment with capped rent - and there is no way for me to understand why I didn't get it. Do I need to be in the right party as the owner? Do I have the wrong skin color, gender, religion, country of birth to please the landlord?
High prices are only unfair at first look, but actually allocating scarce resources through market prices is a very fair and transparent mechanism.
Please stop saying this - house prices in Australia have recorded record growth in the same year as record low immigration due to covid restrictions. The primary driver is low interest rates enabling cheap debt, not "supply".
Many HN posters are California based, and apply the weird nuances of that market with everyone.
The demand side of capital is underrated because it’s hard to see. Normal folks don’t realize that managers of large funds are doing previously impractical things like buying suburban subdivision homes because they have access to unlimited capital and can offload/distribute risk.
Thanks for mentioning interest rates as well. Though I don't know that it counters the original point. Things can have multiple causes. Both limited supply and low interest rates can be major contributing factors.
Undoubtedly? I've never seen any real proof of it. It's just kind of a mantra. Housing pricing continues to be a problem in every first world country's urban center. Do they all have the exact same "zoning?" And why now? Did this evil zoning just get enacted now for presumably pointless evil reasons?
"Zoning" to me seems to be a modern version of "kulaks" for neoliberal types that just can't grok that there is something fundamentally rotten in the entire system. And have no real practical solutions to fix it.
It's not surprising that every major urban centre has inflated property prices. Restrictive zoning laws such as the ones studied above are more common than not. San Fran, London, Australia, Berlin, what have you. NIMBYism is the default. Homeowners aren't going to willingly vote away their profits.
Not only is there solid empirical evidence, but it makes evident sense. There is no cap on supply due to the ability to build vertically. Rapidly inflating prices significantly above cost over a multi decade time frame makes zero sense in a market economy without an artificial cap on supply. Gold would be cheap (at cost) if more supply could be invented/constructed, irrespective of how many people wanted to invest.
The prices in Australia are based on forecasted demand. Since there is almost a 100% chance that the population of tomorrow will be greater than today, that means you can buy on higher prices than current demand. Unfortunately that means houses can be considered worth almost infinite dollars since the population will keep going up.
Let's not forget the Liberal Party recently throwing out the fairly-newly-enacted loan suitability consumer protection laws, so that the mortgage brokers could reduce compliance and go back to the boomtime days of being the legal human shields (plausible deniability buffer) for the banks to allow larger and larger liar loans, which are 1 in 3
source... abc.net.au and anectodally, I subleased my office from a mortgage broker for years, saw how much they fiddled the figures for people to get MASSIVE loans they will never pay off.
I also recoded a lot of their compliance CRM for them when these now-discarded consumer protection laws first came into effect..
and was shaking my head in disgust at Frydenberg... no wonder Hayne would not shake that man's hand...
Instead of buying what they sold two decades ago for practically nothing, they should have built more supply.
Open Google Maps and check Kreuzberg, a district of Berlin. South of it is Tempelhofer Feld, 355 hectares (a third of Kreuzberg), a discontinued airport next to the city only used for people to bike and do barbecues. It's an old airport so it looks bland and there are smaller parks right next to it offering the space to do barbecues and play with your dog. It's been a decade that this airport is not being used yet it's still in that state.
Paris' housing crisis is mostly due to the road surrounding it (le Périph') but Berlin doest not have that yet housing is getting more expensive extremely fast, faster than in Paris actually.
Tempelhofer Feld is a green space where people can meet, exercise, and enjoy their free time without being expected to spend money. Berlin's green spaces is one of its strongest assets. Don't let that city turn into a concrete hell.
I'd much rather see Kleingarten disappear than public spaces.
Tempelhofer Feld is for the most part an abandoned field, if half of it were used to build housing a problem would be solved and no damage would be done.
The issue there is the usual weird coalition between landlords that don’t want more residents (if they live there) or more competition (if they rent their flat) and the fringe of the green/left that is worried about urbanisation, gentrification economic activity.
If somebody reading this has never been to Tempelhof, I would recommend (please allow me) to think of it as a Park. It is a big area for leisure, with some portable stands for coffee, community gardens, small sport courts, bbq area and grass. And the old airport runways right in the middle of it to run, skate, ride the bike, etc.
On one side it also has the actual airport building. They have very interesting historical tours there.
You can see a couple of representative photos here.
It’s not abandoned. It’s an incredibly heavily used park. People skate and kite board on the old runways. The are community gardens. Portions of the fields are breeding sides for locally threatened bird species. The list of things that happen there goes on and on.
Tempelhofer field is one of the jewels of the city.
It's not abandoned. I was there earlier and it was full of people having fun and exercising.
People need the space. It's not fair to force a whole city to live their lives entirely in 25m2 apartments, if more apartments are built, there's a chance more will go to speculators. I, and a large portion of Berlin, would rather force speculators out.
My issue with it is that it won't help with the problem at hand. Sure, it might help tip the scale of rent prices, but lack of units or even rents are not the issue in Berlin. Sure, it's way more expensive than before, but rents are still payable.
The issue is that it's very difficult for individuals to acquire housing units. My apartment costs about 1500x its monthly rent to acquire (€400 vs €600k min). Which means it's now a lousy investment for people wanting to live in it (since they won't be saving any money unless live to be 150 years old), and for people wanting to buy a small number of properties to rent (same deal).
Since real estate is traditionally kind of a "future insurance", for old people not to have to rely on pension to live, it also makes the future a lot grim and uncertain for people who'll have to rely on public pension for a place to live.
Getting more units in the market will only make things worse for those people: rent prices will make it impossible for them to own, and won't make sense for them to own to rent.
Individuals not being able to acquire apartments also has the side effects of things like crazy rental terms (not difficult to see the best apartments with limit of 6 months rental) or even empty units because they're used for commercial renting only. Across the street from me there's a 50-unit condo that's fully empty. I know that because I used to live there and for a while I was the only tenant. It costs about €2000 a month vs my €400.
I don't know what's the endgame of speculators. Maybe they're waiting to own everything so that they can jack up the prices? Maybe they're merely taking opportunity of the low interest rates to pay for those things in 100 years? Is that investment companies buying it to force people into private pension?
I don't know. I just know that the issue is a lot darker and I don't see "the market" solving it by itself without creating even more problems. I know this is a very sensitive matter to some people but I just don't see "the market" doing anything positive if left by itself.
EDIT: As user probably_wrong put below, "the losses would be socialized (namely, the park) while the benefits would go to the wealthy."
They also have the power to acquire anything new showing up, which is exactly what happened in the last ten years. I can't explain their end game as it doesn't make sense to me, but what Berlin needs is not more units, but rather more units that are affordable to non-speculators.
As user probably_wrong put it below, "the losses would be socialized (namely, the park) while the benefits would go to the wealthy."
Speculators as an aggregate voting block want less supply. This might seem counter intuitive since it is simultaneously true that a new development is an investment opportunity.
What we need is more units. The affordability to non-speculators follows from that, which is just supply and demand playing out. If you double supply via high rise apartments, the value is guaranteed to drop significantly. Increasing supply by removing regulations around apartment construction also reduces the incentive to buy to invest. Who would want to invest when the supply is liable to increase?
That's a fine opinion, but I and others in Berlin would also prefer not having to have high rises just because there are speculators. The issue in Berlin is not really lack of units, this is not San Francisco. The problem here is purely the rampant speculation.
I don't follow the same economical dogmas you do. In my opinion it's not about supply or demand, but purely about a certain group of investors fucking up everyone lives. I'd prefer to attack this problem head-on rather than having bandaids that involve destroying Tempelhofer Feld or removing the Kleingarten, like other people suggested.
And this is why house prices are high in every urban centre. We see this same unexpected alliance everywhere between the environmental left that wants to preserve as much greenery as possibly via zoning rules, and the crony right who just wants to cynically increase property prices. The end result is a lot of human suffering and nothing to show for it.
Property investors really aren't the root problem because they lease the property back onto the market and that supply doesn't vanish.
This is not dogma. Quite the opposite. The impact of supply caps due to zoning has been studied to death by economists.
The "preserve greenery" perspective is just a highly privileged one and a false choice/false dilemma to boot. You can build vertically without sacrificing greenery or destroying your parks and bushland. Why not just do that and solve the entire problem? Oh wait that is illegal...
Nobody said "property investors who lease back" are a problem anywhere... The problem is merely a small group of entities with too much purchase power distorting the market and making the city worse for everyone. Maybe this is something that your favourite branch of economics likes to pretend doesn't exist, but, again, different people have different opinions.
Suggestions on this thread were to use half of Tempelhofer Feld and all Kleingarten to counteract what are the effects of speculation.
All I am saying is that those areas are not "useless" by any means.
I'd rather attack speculation head-on that have band-aid solutions.
I also don't believe that removing those areas will make any difference regarding speculation. Again, as user probably_wrong put below, "the losses would be socialized (namely, the park) while the benefits would go to the wealthy."
There's plenty of development which could happen in Berlin without touching Tempelhof.
From my perspective, the worst use of land in berlin is the Schrebergarten[1]. These are little free standing "houses" with a garden which some families own and spend time in during the summer. I live close to a canal on the south-east side of Berlin, within the ring, and there are several patches of these within 10 minutes biking from my apartment. This is very well-located land, and from what I can tell it goes completely unused 6-9 months per year, and at best sporadically during the summer months.
I understand that this is very traditional in Germany, but the idea that some of the most desirable land in Berlin is being used for some families to use a handful of weekends per year is just crazy. At least Tempelhof is public and serving hundreds or thousands of people every day.
I'd rather they build in my backyard than on Tempelhof. I live far from it, close to a lot more green space. We should keep Tempelhof because I consider access to such green spaces a necessity, even for city dwellers.
They wanted to build just on a small stripe on the side of it, it is not as if they would have to fill the whole place with houses. But even that was shot down via "Volksentscheid".
I think the referendum against building in Tempelhof saw right through the project and understood what its end goal would have been: it would have created apartments that those being priced out of Berlin wouldn't have been able to afford. The losses would be socialized (namely, the park) while the benefits would go to the wealthy.
For those unfamiliar with the situation I found this article [1] which, biased as it is, I think accurately reflects the opinion of the common Berliner at the time. If the plan had proposed 100% social housing, I bet the story would have been different.
Honestly one of the things I like most about living in Berlin is the fact that local politics manage to represent the public good effectively. I'm a well paid tech worker, so I would be fine either way, but I'm happy that my neighbours who are hairdressers or hand workers can also enjoy a good quality of life here. I would hate for it to become a playground for the rich like London or Manhattan.
But that is nonsense - apartments are apartments, even if wealthy move into those apartments, it would free the apartments they previously lived in. Also, it would be money for the city.
Also it is not just social cases who have problems with high rents in Berlin. You suggest the majority of people in Berlin want only more social housing, implying most of them are social cases themselves?
I think most Berliners would read your comments as "it is a good thing that we give a part of our public park to the rich because they'll give us their less-desirable apartments in return. Like trickle-down economics, but for apartments". And if the current situation is any indication, those rich people will keep their old apartment and rent it, or sell it to foreign investors. Either way, say goodbye to ever owning a place in the city where you grew up.
As for the second part: Berliners feel that the city should belong to those that lived there when no one wanted to, and recognize that those people are probably not rich. Kicking the hairdresser that lived there for 40 years to make room for the tech bro is not generally seen as a positive development. Social housing would ensure that the city remains in the hands of its citizens.
The park would not be "given to the rich", presumably the parts open for building would have been sold to "the rich", with the money benefitting every Berlin citizen (ideally - but we know our government her is composed of very good people, right?).
Also what does it matter if the "rich" rent out their old apartment? What is needed is supply of apartments. Per supply and demand, more supply means lower prices.
Do the people expect to live in luxury apartments for little money?
And it is very touching that nobody wanted to live here 40 years ago and the people held on. But then they could have bought their living places for very little money. Also the whole place was subsidized by the USA as a stand against the Soviet Union. The people staying benefitted a lot.
There already is a construct for the place where you live belonging to you: it is called "buying your own place to live". If you choose to rent instead, you signal that you don't necessarily want to stay forever.
While I’m sure there’s something better that can be done with the Tempelhofer Feld site than currently (even trees in the grass between the runways would make it better, IMO), the large number of green spaces — including Tempelhofer Feld itself — is one of the things I like about Berlin.
Separately, given the large mostly empty expanse of Brandenburg surrounding Berlin (and the really low house prices I see there on immobilienscout24), I think improved transport connections are more critical: improving connections to the surrounding area makes the surrounding area more available for commuting. For example, there are routes from Eberswalde or Frankfurt an der Oder to parts of Berlin which are faster than reaching those parts of Berlin from elsewhere in Berlin, so improving existing routes would enable lots of the existing room outside the current city to become more city.
I have no idea what the political issues with this might be, not just with “would people like this?” (I can’t even determine that effectively in my original country) but also with “can this even be done, given Berlin is a different state?” (I have yet to learn anything beyond the most superficial about German politics).
Berlin is also super unevenly populated and includes several forests. If you compare the density of the actually populated areas, like Mitte, you are still under Manhattan, sure, but only by a factor of 4 - which is extra impressive given the near complete lack of tall buildings in Berlin. Neukölln (which borders the area in question) is even more dense - about half as much as Manhattan [1].
Its unfair to compare Manhattan which apart from Central Park is nearly 100% urban to Berlin, which is significantly larger and includes many areas with widely distanced houses and forests.
That doesn't make sense. If it's 17x less dense in Berlin, then it sounds like there's still a lot of room to build that doesn't involve taking away the parks.
A lot of the available space is woodland and on the outskirts of Berlin. People want to live in the center, not further out (they already can do that, once you cross over into Brandenburg in the north, the competition for flats is much lower), that's why such a giant piece of land in a sought-after location would be a great idea for development, while some even larger piece of land out in the middle of nowhere where nobody wants to live isn't.
Berlin is not a very dense city, maybe because of the backyards (almost every block has a backyard for trash containers and bikes, maybe an elevator) in most blocks and the green spaces.
In the last years I have seen also a lot of floors being added (to the last floor) of buildings that allow it, to gain one more floor.
Your comment about periphery made me think of something. Berlin is surrounded by Brandenburg, which is even less dense. So Berlin has space to expand, unlike other cities (like Barcelona, much denser).
In my mind the solution would be to build affordable housing in Brandenburg (there is space there) and on the edge of Berlin.
For everyone not familiar with German rental markets: Berlin is quite cheap compared to other big and small cities. From cities as big as Munich to smaller ones like Mainz, most cities are more expensive (except for those in the former GDR). Cheap(er) rents are part of the reason why people move to Berlin - the more the Senate does to control rent, the more people will want to move to Berlin. The only way is to increase supply - or rebuild the wall ;-)
It's gotten way closer than even 5 years ago. I 'overpay' as an ex-pat in Berlin but my rent is within 10% of the average Munich rent (unless it's risen there recently as well) for a comparable place.
Interesting. I guess it’s a more high end rental? I don’t know the High end markets in both places that well, but I know it’s much more expensive for students and others with low income to live in Munich (which has risen recently, indeed) than it is in Berlin. But the gap might be closing nevertheless.
It wouldn't have to be. Finding a flat is extremely competitive in Berlin, so it's not uncommon for agencies and unscrupulous landlords to take advantage of "Auslanders" who might not be aware of rent control laws.
When the rents were temporarily lowered to the "fair rate" during corona, and everyone could see what they should be paying, this was eye-opening for a lot of my friends.
What do you mean by "fair rate during corona"? The local government broke the federal constitution by limiting rents in a way it has no jurisdiction for. We should be very happy that our constitutional court prevented further unlawful behaviour.
Real estate and flat purchase prices have been rising faster in Berlin than anywhere else in the world over the last five or so years. The rental market is also rising, there's a growing startup sector and lots of international immigration. There is a housing crisis in central Berlin within the ringbahn where demand far far outreaches supply. Going to a Berlin flat viewing is an exercise is intense competition. Rental prices are rising accordingly.
Or run the city into the ground, make it unattractive enough to repel the people who want to move there. That approach may even work out - Socialism succeeded doing that before already.
Posted in another thread, but there is a very interesting theory about why Germany has stable housing prices compared to other nations. This funding model may also explain why local municipalities are against multi-family housing, which is driving sprawl and unwalkable zoning policy in the US.
'Local German officials, like local leaders everywhere, seek bigger budgets to provide more and better services to their constituents. What’s different about Germany is that the way to get bigger budgets is to increase local populations. And, as Professor Buettner says, “Ultimately, to get people, municipalities will need to support housing.”
The result is a system of incentives that is the opposite of “fiscal zoning”—the US practice of zoning land in ways that maximize local governments’ income and minimize their costs. In places with high sales taxes, such as Washington State, leaders zone more land for shopping centers. In places where residential property taxes are capped, such as California, they zone less land for homes and more for offices. In affluent suburbs, they often zone land for houses on large lots, excluding low-income people.
Maximizing property values is such a central concern of local government in the United States that Dartmouth economist William Fischel developed the notion into an entire political theory. His “homevoter hypothesis” holds that local governments are almost single-mindedly focused on maximizing real estate values, because homeowners typically vote their home values in local elections. German jurisdictions gain financially by maximizing population, not house values, and because renters outnumber homeowners in the country, homevoters are not the dominant electoral force in local German elections. Renters are.'
I'm very confused: if you want to have more residents in your city with a fixed amount of land, then you need multifamily housing. Walkability is also associated with density and benefits from multi-family and mixed use zoning.
Didn’t they sell government housing before? Anyway this is probably a bad idea as governments are bad landlords and taxpayers will get the bill eventually
Except contrary to any other landlord, the government doesn't expect to earn money but to have a balanced budget. This is why medical expanses are much higher in the US than in any European country. This is why all basic necessities should be controlled by the government. Water, roads, internet, housing.
Oh yes they do. I've got "good" insurance and have such fun when I get a surprise bill for $150 for talking to a specialist for 15 minutes when I thought it would be a $25 copay under my plan. Costs a couple grand if I end up in the hospital. $25 every time I see a doctor. That adds up when it takes 4 visits over 2 weeks to figure out what the problem is and what medication I need. And the insurance itself isn't cheap.
Why don't you know the costs upfront? "Socialist insurance" doesn't automatically cover everything you want or need, by the way. Rather, there is a government mandated list of things that are covered.
There are presumably different types of private insurances, sometimes it makes sense to agree on "self pay" for small amounts, sometimes it doesn't.
Also if "socialist insurance" would cover your 15 minute talk, you would never know it cost 150$. You would just wonder after a while why the health care system always seems to be on the brink of collapse.
Are you in the US? Not knowing the cost of a doctor visit until you see the bill is a ubiquitous problem with health insurance. Every time I need something besides a basic visit to a doctor I've seen before, I call my insurance company. I navigate the automated menu, trying to figure out how to talk to a human or press 0 repeatedly until the system gives in and connects me to someone. Then I try to explain what I need done, going back and forth with the employee for 10 minutes trying to figure out if we're talking about the same thing. They tell me that if the doctor's office bills it using this particular code, it will cost $x. If they use this other code, it will cost $y. It will probably be covered if these exact parameters are met, but the insurance representative can't guarantee that it will be covered and they can't guarantee that this is what it will cost and I'll just have to try to explain all this to the front desk at the doctor's office and again to the nurse and again to the doctor and hope everything aligns and I don't wind up on the hook for an extra hundred dollars when the bill shows up.
You can try to tell me that this is the only way medicine can be profitable and continue to function, but there are so many middle men and CEOs getting paid to do nothing but make things more complicated and more expensive that I struggle to believe that.
No I am not in the US. I also don't think private insurance has to work like that.
Here in Germany "public insurance" is like that, every "medical intervention" has a code and pays a certain amount of money. Doctors usually don't tell the "publicly insured" people what stuff costs. They just do procedures and send the bill to the insurers (the public ones). They have to waste a lot of time with entering the proper codes into the computer. And sometimes they do extra procedures to earn more money.
They also often have a budget for certain procedures. If an 11th patient with a certain problem comes to their practice, they end up treating them for free.
The privately insured people get bills from the doctors and hand them over to their insurers. I assumed the privately insured people at least sometimes talk about costs with their doctors.
At the very least they get an impression of how much things cost.
I suspect a lot of complaints in the US are also from people who don't have to pay the things. They'll say "wow, they charged my xxxxx$ for THIS???", but in the end their insurer actually pays.
It's nice that you think healthcare in the US works like that. I promise you that everyone I know who complains about what they are charged for healthcare is, in fact, complaining about the out-of-pocket cost. Let me know how you feel about it when you're paying $800/month for insurance and every time you use it for something that isn't routine, you spend the next month terrified not knowing what you're going to have to pay in addition. And then you get the bill. Either it's mostly covered and you pay an extra $75-$100 on top of insurance premiums or it's not and you have to figure out how to pay the bill.
You've got a very positive view of US Healthcare that doesn't seem to be rooted in experience.
I'm not in the US, but afaik they provide the best medical care in the world.
Socialist restrictions of course also exist in "socialist" systems like here in Germany. There also seems to be a constant shortage of workers in health care.
Not all governments are inefficient, and not all types of public housing are cheap. See Vienna. It can work.
Where I live (Montreal), a very common model is housing cooperatives. Funds help build or buy property, then gets converted to housing rental coop. It's not perfect since not everyone wants to manage a building, but it works fairly well overall.
I know some people living in apartments owned by the Berlin. Their experience with state-owned rental agencies is much better than most private landlords. FWIW.
The housing market is complex, but one point I would like to make, is that if there is now a (global?) opportunity to borrow capital, buy houses on a mass scale and rent them out, that implies to me that there is a failure in mortgage market - families want housing in a location, it is possible to borrow money and buy them, but those families don't have access to that monet.
This implies
a) inequality in wealth and incomes
b) failure to change mortgage market to account for higher risk in harder to reach areas (this is what savings and loans were literally made for)
c) errr
d) that's it.
> The housing market is complex, but one point I would like to make, is that if there is now a (global?) opportunity to borrow capital, buy houses on a mass scale and rent them out, that implies to me that there is a failure in mortgage market - families want housing in a location, it is possible to borrow money and buy them, but those families don't have access to that monet.
Not sure I see the issue. Renting and owning has very different risk profiles, which is why you'll find people can rent a place they're unable to buy.
The risks are with loss of income, e.g. due to job loss, sickness etc. Such things are somewhat inevitable in the span of a 30y mortgage. In such a situation the tenant can move to more appropriate alternative housing, e.g. moving to a smaller home, a home that's not as well located, sharing a home with others, friends, family etc.
In the case of an owner it gets trickier, typically the person would eventually be forced to sell the house to be released from the contractual obligations to pay the mortgage. The risk events' probabilities correlate, i.e. you're more likely to lose your job in an economic downturn, as does everyone else, which means home prices are more likely to be low during an economic downturn, meaning a forced-sale during such times can mean you're selling your home for less than the value of the loan, leaving you not only out of income, out of a home, but also with a sizeable debt.
In other words, there can be reasonable explanations for why a government could buy homes and rent them out to tenants who can afford the rent, while those same tenants could not afford an equivalent mortgage.
Second, I think it'd be very sensible to assume that the government is not going to be renting out these units at market rate. In other words, they're subsidising the tenants, with taxpayer money. That's why the rent would be affordable, but the purchase would not, for the tenants. If anything that implies this decision is lowering the effects of inequalities, due to in-effect a redistribution of wealth from rich to poor.
For those wondering what drives real estate prices, there's a look at the most expensive ZIP code in the US, 95027, a/k/a Atherton, CA:
The town’s ascendance stems largely from its single-family zoning, 1-acre-minimum lot sizes, flat land, streamlined permits and changing buyer demographics — which have translated into soaring house sizes and skyrocketing prices.
Even if you were right (and I don't think you are) about the same 5 real estate companies buying up all added supply, it wouldn't matter. Those 5 companies would still be subject to the forces of supply and demand. Increased supply with flat demand means falling prices.
Vienna's population intensely declined after it was no longer the seat of a large empire, which gave the government an opportunity to buy up land for cheap. Vienna's population is still lower than it was in 1916, which explains why housing is relatively affordable there. It's not something easily replicable in other cities.
Berlin itself is quite full (with the exception of the airport park, which is intentionally kept as a green area). There is a lot of cheap land available in Germany, especially in the countryside on the east, but near the city the situation is different.
in the middle of a city with a shortage of housing? That is 150 x 500 m piece of land where at least 5 thousand people could live comfortably even without a need for high-rises. (6 story houses or so). In a walking distance from an existing U-bahn station.
(Not to mention the other factories around.)
There is a discussion in Prague about moving some big shopping centers from the wider center to the outskirts and using the freed land for construction. But everything takes long in our state of bureaucracy.
If you declare housing "a fundamental right" then you still need more supply when you have a location (like Berlin) that doesn't have sufficient housing for the number of people that want to live there.
While I can't speak for Berlin specifically, I can say that in most places with very expensive housing this isn't true. You can see this because other problems tend to occur when housing gets very expensive:
- Overcrowding
- People being forced to move out of city centers
- Very long commute times to work
- Reduced fertility rates because people want more room for kids
All of these problems are due to insufficient housing and not just too high prices.
How does adding more housing fix the lack of room issue? If anything, all of those subdivisions and upzonings shift the market preferences to people without kids.
If housing is too expensive for you it simply means other people have a greater desire to live there than you do. If you still want to live there you will have to suck it up and either build more housing for them or build more housing for you.
If you don't use price to determine who receives a scarce good, then you're stuck with other bad mechanisms. In Stockholm, for example, waiting lists for apartments can be over a decade long.
Much better to recognize that "The problem is not that there isn't sufficient housing" is wrong and legalize building more housing.
What's wrong with waiting lists? Sounds much fairer than to give all housing to rich folks. I'm not advocating that 100% of housing should be run this way, but for sure more than what is now (in most large EU cities).
I'm not saying social housing is bad. We should definitely have more social housing.
I am saying "The problem is not that there isn't sufficient housing" is wrong. Very very very wrong. There are massive supply shortages of housing in many many places. Governments need to fix their oppressive zoning policies so they stop preventing people from living where they want to live (either because of $, because of waiting lists, or any other mechanism).
That's what people say until they are on the shitty end of the deal. The distorted housing markets in Germany are pretty rough for newcomers -- think immigrants (not a minority group, refugee, etc), international students, seasonal workers...
Those people either don't know enough about the system to take advantage of it, or don't have enough time to wait in waiting lists, so they end up paying twice what their native peers pay. But hey, they don't have a vote anyway, so it's all good...
Regarding the "fundamental right" ... does that include "at the location one wishes", "of the size that one wishes" and "for the price that one wishes"?
Because there's no shortage of housing in Germany, it's just not hitting all three of those. People want to live in sought-after areas, have large apartments and pay very little. Understandable, but everyone should be able to see why that doesn't work.
Let me give you an exercise in thought so you can see that just simplifying it into "dEmAnD vs SupPly pRobLem" is incredibly misleading.
Imagine there is one person that owns 99% of the worlds wealth. Now, is there demand for housing? You bet. That guy wants to buy all the houses he can. If they build more, he will buy them too. No matter how much supply you offer, the demand will be there. He will buy anything. Now replace wealthy guy by corporations, REITs and wealthy people (who would own not 99% but ~90% of the world's wealth) and entertain me how increasing supply fixes anything.
Your thought exercise is interesting, but not in the way you think.
Property owners do, in fact, conspire with each other to prevent the construction of new housing (via zoning laws). They do this, as you say, so that they can get richer.
Allowing them to get away with it (by denying the fact that there is a supply problem) plays right into their hands.
What we need to do is thwart their scheme and, through better government, legalize the construction of new housing so that wealthier people who own much of the existing property stop seeing artificial government created gains in the the value of their housing because they've conscripted the government into their cartel.
It won't. Companies will always have more money to spend than people. We should add extra tax on house/apartments and you don't need to pay it if you live there. Initially landlords will add tax to rent but as the tax will increase (let's start at 1% and increase each year) eventually the rent will be so high nobody will be able to afford it and landlord will have to sell it.
I have thought something similar but more in terms of deduction for living in your own home. But it does make more sense to increase the cost of rent-seeking as well.
Also i pondered would adding a law that allows tenants to have an option for purchasing the house at market price for decreased taxation for the landlord help. That should make more people home-owners and thus allow them to generate more wealth in the long run.
Of course the whole topic is so complex it's impossible to invent any rule or law that fixes everything. But preventing useless speculation is what every common sense individual should wish for.
Owner occupied housing already gets a tax deduction because owners don’t have to pay taxes on imputed rent (in the vast majority of tax jurisdictions). It would be great to actually fix this because it distorts the housing market to the detriment of renters, but I’m not holding my breath.
No, I just said that it's not an elastic market. Powerful entities like large investment funds can easily corner the market and push the prices up, which is exactly what happened in many cities across the world.
Of course if the supply "literally doubled overnight" or pigs started to fly the prices would go down. For a number of years.
Technically, it's land that's not a fungible good.
Housing (and other construction) is. The key though is to tax the unimproved land value to make low-density, low-intensity utilisation (and unimproved holdings) economically nonviable.
No, land is not fungible but also the volumes occupied over land are not fungible.
You cannot simply build vertically indefinitely and/or at almost-linear cost. There are a million constraints.
Not to mention the geographic limitations of the market. You cannot buy a house or land in a cheaper country/city and teleport it to your city. Relocating comes with all sort of burdens, from getting visas to leaving friends/partners/family/job behind, to language barrier.
All of this makes housing extremely non-fungible.
Finally, people in need of housing are under extreme pressure not to be homeless, while those who own 20 apartments can easily keep 1 unoccupied if that means pushing up the market value of all apartments in the long term.
This asymmetry is what makes the market speculative and exploitative.
- The bias against sufficient provisioning exists regardless of scale or growth rates. Housing tends to be underprovisioned when it serves as an asset, whether at the individual or institutional scales.
- Infinite expansion of housing stock isn't necessary. In mostt cases only a small fraction of existing housing stock need be added. California has a homeless population of roughly 170,000 (https://www.usich.gov/homelessness-statistics/ca/) on a given night.
That's a large number, yes. It's also less than 1/2 of one percent of the total population of the state.
The incremental housing need is small. It's localised. Those constraints of which you write will not be even remotely approached in addressing the housing needs of even 10x or 100x this number of people. Adding a small amount of additional housing at affordable rates in high-demand markets will address the housing problem nearly completely.
(There may also be some additional services for the addicted, mentally ill, disabled, elderly, and young. That's independent of the housing issue itself.)
But adding a few percent to the housing stock will have an immense impact on the very thin trade of that asset, plunging prices, and hence household and family wealth, as well as real estate, mortgage, bank, and financial derivative asset values. Given the utter dismanteling of defined-benefit pensions and the importance of real estate appreciation to family retirement planning, and the role of the financial sector in politics, the resultant political pressure is immense.
That covers your first two points.
For your fourth: yes, I fundamentally agree, that's what I just argued above, and it's a core aspect of the present homelessness crisis. Given that landlords can also drive evictions at will (effectively creating demand), the market is further unbalanced.
The geographic structure of the market is a non-issue when present low densities and low marginal change requirements (as discussed above) are factored in. SF Bay Area housing demand could be addressed with improved transit, increased densities, and stronger tenant protections with only modest increases in total housing stock.
Because housing isn’t completely in-fungible either. So, while there might be irregularities here and there, increasing supply will in fact put downward pressure on prices.
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It matters where the money goes afterwards. If it goes to a local landlord that spends it in that same neighborhood, improving it, vs going into an REIT that will make their investors, and their board, several states away happy. This is an important distinction that between trickle down theory and practice. Getting one person to $100mm vs making 10 people $10mm-airs vs 100 people to be single digit millionaires? Matters a lot in the long run, for a lot of reasons.
We can't abolish rent-seeking entirely without overthrowing the whole system, so we have to realize that there are different shades of damage done by rent-seeking.
Trickle-down doesn't work at any scale. If you want money to "trickle" down to a group of people, simply give cash to that group of people. This means lowering taxes on labour, for instance.
> We can't abolish rent-seeking entirely without overthrowing the whole system
Well we can certainly ameliorate it. Implementing a proper Georgist LVT would be a nice first step.
Yes you can. You tie companies back to a specific person who has control over that company. And limit ownership of residential property by those people.
Meh. I have friends who lived in a Vonovia apartment in a prefab in East Berlin. It's not for me, but the rent was pretty cheap (~10 Euros/sqm, heating + warm water included) and didn't get raised during the years they lived there.
Berlin just came from a place of super low rent and is slowly catching up to other large German cities. Understandably, Berliners are in shock, but it's more "things are returning to normal" than "Berlin is so expensive, nobody can live there".
The simple fact is that the people who complain about their homes they rent from those companies are unable to find other accommodation for a comparable rent. Which in turn implies that it is not really the fault of those companies, otherwise somebody else would be able to provide better housing for the same price.
You can not simply charge "ever-increasing rent". You can only charge what people are willing to pay. More people are pouring into the city every day who are prepared to pay more. Simple as that.
Those companies owning 150K apartments are also shareholder companies, so "small people" and their pension plans will still be affected.
People have to live somewhere, if someone's forced to choose between picking up an extra job to afford rent or living on the streets, they're gunna choose the first. I'd argue this is a bad thing and people deserve places to live.
Yes, they have to live somewhere. Not necessarily in central Berlin, or central San Francisco. There are plenty of places with cheap housing in Germany.
Also just because people need something, doesn't imply they have to be given those things for free. That's not usually how it works.
Extending that idea, we arrive from lunacy to a good thing: a city that is completely owned by one company. Where police is the company's private guards, the city council is its board of directors, and municipal taxes are just fees the company charges. And that is a good thing. I'd live in such a city if there was one.
For example: no homeless. This is all a private territory, and if you don't pay your rent, a guard escorts you off the premises. Very little if any crime because crime prevention is all in one hands and these hands are protecting by and large, their own private property and their profits (because if the crime rate goes up, rent goes down and rent is how they make money).
A wall keeping undesirables out.
Guards/police that can check your papers anytime just simply as they can say in a hotel - "what's your room number"? So no "undocumented" aliens.
There can't be any constitutional etc. bullshit that could prevent them from having an actual 24/7 guarded wall and checkpoints with papers check around their PRIVATE property. It can be a functional society where everyone who's there, belongs there.
> "very little if any crime because crime prevention is all in one hands and these hands are protecting by and large, their own private property and their profits (because if the crime rate goes up, rent goes down and rent is how they make money)."
a) Extortion is how they make money. They control your entire life, job, 'safety', home, streets, food supply, and everything you can do, and they aren't accountable to the public. You have no choice but to give them everything or your life collapses. "Just leave" works if you're a 20 year old single programmer with a six figure salary and no family or friends, it doesn't work if your family is dependent on your income, you have social bonds with your neighbours, limited savings, education and media controlled by the feudal Lord CEO telling you everywhere outside is awful. You may as well suggest North Koreans can just leave if they don't like it.
b) Why do they need to make money? You're a captive slave, their private security force isn't going to let you out of the wall until you've paid your "debts", "citizen". Make your way back to your cell and show up for work tomorrow.
What would you do when the city decides to double prices overnight because it’s a private company focussed on profit maximisation and has a complete monopoly over absolutely everything
What's the problem? Just move elsewhere. You don't own a place there - you can only rent - so you don't lose anything - it will be about as stupid/unworkable as one hotel in a city raking up room prices 2x just because they "try to maximise profit".
Lmao, I actually heard this one before and the guy was serious.
I give it a few years before your corporate lordship fucks you over and you have no recourse or you simply get bored out of your mind in this perfect city.
But don't worry, the rest of us will provide some quality locks on the outside of your wall, so you can stay there until death.
That's the only potential downside i can see: because the landlord company is big, it will by nature become very conservative with the (working for hire) bosses being too cautious as to not goof up their jobs, with a huge bias on preventing failures as opposed to enabling success. So they may indeed tend to ban more and more "unsafe" or "morally objectionable" activities to please everyone, eventually making the place too boring to stay in.
I don't know much about housing in Berlin, but I think the story is that in the time after the Berlin wall was torn down, late 80s, the city really needed money. As a result, they sold hundreds of thousands of publicly-owned apartments to these private companies in the 90s and 00s for almost nothing.[0][1] Now those apartments are worth a lot more, and people are mad because housing is not affordable to many. Hence you often hear demands for dispossession.
The whole story is probably a lot more complicated though, idk.
edit: if you read [1] for example, the private companies bought 65000 apartments for 400 million Euro. Now the city bought back 14750 apts for 2.46 billion Euro. Considering that these houses probably have barely been renovated if at all, the quality probably dropped significantly.
I wouldn’t use the Netherlands as an example, your link is only a “plan” they’re floating.
The housing situation here is horrible - skyrocketing prices and massive corporate ownership. Real estate is massive money, and the politicians are in on it - so nothing is going to actually change. Plus, they take forever for new builds, so supply doesn’t meet demand at all.
Houses can be homes to live in or can be an investment. They cannot be both. Since spending considerable labour and materials building concrete boxes for the ultimate purpose of speculation is silly, then it must be the former.
Building housing for others to live in is an investment and we should encourage it. The problem is that houses don't exist in isolation, they are built on land. Most of the value is in the land.
Land is valuable because taxes pay for public services and you need to be in close proximity of public services to benefit from them. Investing into land is effectively investing in the exclusion of other people, which is why the land owner should compensate the government for the public services he is receiving.
What is an investment defined as? Because I'm pretty sure someone can buy a home, rent it out and make a monthly return on it, thus satisfying both a place to live and investment.
Or live it in themselves as they ride the speculative wave.
Optimizing construction for investments leads to different houses, apartments and even neighborhoods than optimizing for living - the same way as optimizing your site for ad revenue leads to a completely different structure than optimizing it for actually being useful to your visitors/customers.
> Because I'm pretty sure someone can buy a home, rent it out and make a monthly return on it, thus satisfying both a place to live and investment.
No, they are inserting themselves in the process as a middle-man providing absolutely no service or added value. All they have is capital, a monopoly on capital wrt. the person renting the house. This lets them add a drastic markup on the monthly price of housing for the person renting, as a direct first-order effect, PLUS, as an indirect effect this mechanism incentivises speculation and raises house prices even more.
Renting out a house is a service. Being a landlord means legal responsibilities and liabilities. Houses need to be up to code, maintained, insured, and this is expensive. Grass needs to be cut, pipes need to be fixed, appliances need to be in working order.
The person who wants to rent a house has obviously chosen not to, or cannot afford to, buy a house. They get the upside of having to take no financial risk, ie. fire, tornado, flooding, economic/housing market collapse, etc. The downside is they do not have ownership and make no market gains.
As long as homes are being used there is little difference between them. The important bit to keep speculation rational is to keep occupancy rates high, a simple tax on unoccupied homes seems like the logical solution.
Bullshit. Of course buying your own house is also an investment decision. You speculate that its future value minus your initial investment (and plus the "extra joy" you get out of being a homeowner) is worth more than what you would have paid in rent in the same time.
> If a corporation owns the property and you have to rent then it may not be in compliance with article 17.
A corporation is a vehicle for owning property in association, so denying it the right to use itd assets to acquire property would arguably violate Article 17, as would not permitting such associative ownership vehicles.
The right to own property doesn't imply the means to individually afford the particular quantity, class, or specific item of property you desire, only the freedom to use the resources you have to acquire property.
EDIT: OTOH, if the market conditions the government allows to persist make adequate housing (not necessarily ownership) unaffordable, after whatever social support is provided and considering the cost of other necessities, it is a violation of Section 1 of Article 25. “Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.”
A lot of people say that "more houses need to be build" to fix it.
The problem is less "not having apartments" but "not having affordable apartments".
A a lot of "housing" had been build in the recent years but hardly any of it increased the "supply of affordable housing".
Most had been very expensive "luxurious"(1) living spaces, from small one family houses to large "luxus" apartments.
At the same time a lot of affordable living space has been converted into non affordable ones or removed from the rental marked.
Reasons for this are many fold and include:
- Prices in Berlin had been unrealistic low, so once they started rising/people realized it they rose fast attracting a lot of speculative investments, speeding up the price rise and level above what it should have been.
- Stupid formulated laws around "energy" renovations turned out to be a perfect backdoor to circumvent existing limitations about how much rent can rise, especially if combined with little continues wide spread Illegal acting allowed massively bumping prices in short time.
- Certain tax changes done ~7 or so years ago increased renovation cost massively, and the price boom and building (of non affordable housing) boom made it hard to build/renovate affordable housing for people just owning a small number of apartments).
- Also maybe thinks like Aribnb had a bad effect, but I can't judge this.
So what should be changed IMHO:
1. Change the energy renovation law to not be trivially abusable.
2. Make regulations which favor affordable rentable living space over all other versions (also favor it over office space).
3. Change certain laws about tax handling of losses from "rent", i.e. there are people which but absurd prices on apartments with the intent of them to not ever be rented because they bought them for speculative investments and selling a unrelated one is easier/better. If a apartment is in a area with a deficit of (affordable) living space you should not be able to tax-deduct losses because you werent able to rent out an apartment. (Similar the kind of "buy to sell at a higher price later" behaviour should be illegal.).
4. Add a legal method the state can use to punish organizations which en-mass do a lot of systematic small illegal things which each on themself are not worth opening up a law suite and affect a different person, like systematically trying to increase rents slightly more then average every time.
5. Maybe (idk, only if it matter) auto-sync databases of platforms like Airbnb with residential databases to auto detect abuse.
6. Undo mistakes of the past where Berlin reduced affordable housing programs.
Why buy rather than expropriate? Berlin has lots of people with no apartments, and the commercial corporations have apartments without permanent residents. Instead, Berlin is funneling ~200K EUR of public funds x 14,750 to partially rectify an allocation anomaly of Capitalism.
(If you're against expropriation - it could just be a massively high tax on apartments owned besides the one you physically live in; or a strong de-criminalization of squatting of such apartments, including allowing for registering as the resident based on actual residence etc.)
Anyone who thinks you can take this model and apply it to America, with all the evidence we have of horrific public projects, is quite literally insane.
This is likely a bad deal for the German taxpayer and a great deal for the corporate landlords.
Essentially, the Berlin gov has given the corporate landlords a profitable exit for their investments. The corp landlords, seeing the writing on the wall and fearing lower rents, unrest among tenants, and diminishing exit opportunities via selling to the market (which wont want to deal with the risks) can now exit by selling to the government. The German / Berlin gov gets an investment that is all but guaranteed to be a loss assuming they drop the rents for the tenants. Thus, tax payer eats the loss.
I see something similar playing out in the US, and not just for corp landlords - it could happen to baby boomers looking to sell their homes upon retirement. During the last housing crisis in '08, Alan Greenspan and Warren Buffet suggested buying homes and destroying them, effectively lowering the housing supply in order keep prices at the same level in a market with lower demand [1].
Key takeaway from all this - governments and the folks that influence them (who also own and get their primary income from assets) wont let asset prices go down. They would rather destroy assets and lower supply to protect price levels. This dynamic teed-up a political war between those who own assets vs those who do not, young vs old, establishment vs anti-establishment, etc.
I feel for tenants - I am one myself. However, better to let the market to clear market inefficiencies.
Legally, you cannot increase rents above 10% of the respective average here. If Berlin-owned rents aren't increasing, this will slow down the whole market.
Now, this depends a lot on how the law will be enforced in the future.
I, as a taxpayer, refuse to finance a few lucky grandfathered-in people that want to live in a highly sought-after district but cannot afford the rent.
There is no human right to an apartment in the city center of a megapolis.
"Buy land. They ain't makin' any more of the stuff." -- Will Rogers
In economics, rents are goods or services whose supply is inelastic (doesn't increase when demand increases), so that any increase in demand simply results in a rise in price.
Another way of looking at this is that all surplus value of that service is appropriated by the seller. This contrasts to normal commodity goods in which price tends to fall to the cost of provisioning. Note that wages generally behave this way as well, with the result that unskilled workers (lacking any wage premium) in a rents-based world are squeezed between wages which deny them all surplus value of labour and rents which appropriate all surplus value of housing. Any increase in wages is immediately met by a corresponding increase in rents.
Your proposal of a direct rent subsidy is the equivalent of a wage increase. You'll pay it to the workers, who'll in turn pass it on directly to the landlords.
Counterintuitively: if you want to lower the cost of housing, tax the unimproved value of land.
Where regulation allows for increased utilisation density, the result is that the tax (as with the wage increase) is passed on to landlords. It effectively takes up the surplus value of housing, and appropriates it for public expenditure. Landlord profits are reduced. Landlords can increase profits by increasing the real estate units available --- by building more units on the same land. This means one or more of less unbuilt land per property (setbacks and easements), smaller units (more people in a given space), or more floors.
Building two storeys rather than one doubles the available real estate. Building up 5 or 10 storeys increases land by a factor of 5 or 10. (It's not necessary to build cloud-scraping towers, even modest increases in height limits will greatly increase housing densities.)
Housing is a good for which increasing taxes, if done correctly, INCREASES supply. Highly counterintuitive, but true.
I'm a bit surprised. I thought the referendum over this wasn't due for another week, since there will be general and state elections next sunday.
This looks like a hail mary move before elections could have switched up majorities and brought a change in administration. As a born-Berliner I'm highly critical of this populist move, that was mainly organized by transplants who demand stuff for free all the time: UBI AND open borders. Unfazed by the fact that somebody will have to foot the bill for socialist cloud castles eventually. These people will move back to their hometowns when they have made the living situation in Berlin become untenable, for me it's my home and where all of my family lives.
The above comment is propaganda. I doubt the person is from Berlin or lives there still.
The Deutsche Wohnen Enteignung campaign has broad and diverse support across the population. This was actually proven in an investigation for possible "radical left" influences, suggested by the conservative opposition.
>The above comment is propaganda. I doubt the person is from Berlin or lives there still.
Haha, what? I should probably be grateful you didn't outright call me a Nazi or something. If you're in fact involved with the campaign feel free to ask around where your fellow people are from originally.
How about you? Real Berliner? Or do you move back if Berlin doesn't pan out for you?
For instance, I haven't met a single signature collector that was native to Berlin and boy have I been engaging them in discussion when I ran into them every day while commuting between Neukölln and Friedrichshain.
>The Deutsche Wohnen Enteignung campaign has broad and diverse support across the population.
This is actual propaganda.
>This was actually proven in an investigation for possible "radical left" influences
A lot of people are saying that housing supply needs to go up to resolve the problem. This is essentially correct! But the market is not doing it, so government intervention is reasonable. The government should buy land, construct a whole bunch of high quality housing on it, then rent it at below market rates. Rents in the rest of the city will collapse downward to compete.
Problem solved. This is the same tactic that the us government used to make electricity cheap in the 1930’s with the construction of the grand coulee dam.
Edit:
Look: governments all over the world are willing to plow unlimited amounts of money into the stock market when rich people are in trouble. But when young people just starting out can’t get an affordable apartment, somehow nothing can be done.
The construction market is heavily regulated in Germany. The government is actively suppressing the creation of supply by issuing permits very slowly (or not at all) due to zoning laws and similar bureaucracy, or due to financial reasons: in a lot of places, the city itself is already the biggest owner of housing. They would reduce the value of their own assets.
Indeed, quite a number of countries don't have a concept of zoning at all, or nowhere near what it is in US.
Most of South Asia lives with nearly completely unregulated construction. Somebody just building a very narrow highrise on their townhouse plot is nothing unheard of, if not quite popular. Google Dhaka, or Karachi.
Most of China's villages near big cities in the south are chock full of self-constructed 5-10 storey apartments.
Wealthier South East Asian countries are starting to flex bureaucratic muscles on that, but I believe rather cautiously. A highrise flat, even completely illegally constructed, is way better than a slum, by any measure.
> The government should buy land, construct a whole bunch of high quality housing on it, then rent it at below market rates.
They can't, because they'd need to zone that land for housing use (a different part of the government is responsible and won't do it) and they'd have to relax the regulations for building houses to make it cheaper (another different part of the government is responsible and won't do it). You can't spend your budget on subsidized housing if you also want schools, infrastructure and low tax rates.
Low tax rates for existing landowners are not the goal here; low rents for young people are what you want. One makes the city grow and thrive, the other just allows old or rich people to have big piles of money.
I said high quality housing, not crappy housing. No need to relax regulations or fiddle with zoning.
No, I meant tax rates in general. Berlin levies lower business taxes compared to other German cities, complains that it has less tax income and gets subsidized by the other German states while still complaining about being poor. It's an act, they could just raise taxes, but prefer not to.
> I said high quality housing, not crappy housing.
Okay, so what services should be cut to pay for high quality housing and then rent it out below cost? Schools? Fire fighters? Social programs?
And since zoning should not be a concern, do they just build over parks?
> You raise property taxes to pay for it, you don’t cut anything.
But that's my point. Berlin is not raising taxes and there's absolutely no indication that they will change that. If they wanted to spend more money, they'd either have to raise taxes (not going to happen) or get even more subsidies from the other German states (unlikely, because they're already getting billions per year, and those who have to pay aren't too happy about Berlin's wastefulness).
> You build it in zoning that is designated for housing.
They don't have enough areas zoned for housing, and they aren't even issuing enough building permits for the required amount of apartments that need to be built right now. How would that be changed? Do we just clap twice and voila, government suddenly works efficiently and the red tape gets cut back to reasonable levels?
The problem is that people want more housing, but they don't want denser cities, they don't want construction sites, and they don't want parks and open spaces to be converted into housing zones. Especially in Berlin, people are extremely against new development, see Tempelhofer Feld.
But if you raise property taxes, then the rental rates must go up, to pay for those taxes. That's one of the problems in many North American cities, where yearly rising local city taxes can make housing unaffordable.
Real estate (land) has an inelastic supply. It's not possible to bring more to the market. It is possible to utilise existing real estate more intensively, by building more densely, most often by building up. Each storey added to a building multiplies the available land intensity accordingly. (Modulo a small exception for staircases, elevators, and some building utilities.)
If you tax the unimproved value of land, you make lower levels of utilisation comparatively more expensive. Rents cannot increase, as people effectively pay the value gained by holding the property --- in the simple case, earning potential.
So higher land value tax -> same rents -> less profit to landlords.
Landlords and property holders can increase their returns by adding more units (intensifying land use). Which then increases the housing supply.
The counterintuitive result is that housing is something you get more of with higher taxation rates, so long as those apply to the value of the land itself, and not improvements to the property.
Absolutely, property taxes are pretty much always "passed on" in Germany as well.
Berlin still has plenty of rope in business tax though, which is a significant part of local funding in Germany. Their strategy has been to undercut comparable cities by a good margin to attract businesses that might move to Berlin, while at the same time complaining about not having enough tax revenue and needing financial support from both the German federal government and the other German states.
But since they benefit from the current setup, there's no incentive for them to change it.
By that logic, the construction of housing by the private sector would never make rents drop either. There’s no difference whether the government or the private sector does it.
No, with sufficient supply all owners/landlords will have to drop their asking prices. Problems tend to arise when a portion of landlords keep their prices artificially low.
Demand exists at a lower end of the market, where there is less incentive for suppliers. There is no affordable housing stock being created. Government exists for things precisely like this situation.
Imagine car suppliers were only allowed to build 1M new cars per year (in the US, consumers currently buy about 17M new cars per year). Suppliers would no doubt use their limited quota to produce high end cars for the richest customers.
This is essentially the situation housing suppliers have in many major cities. The solution isn’t government built housing. Private suppliers are perfectly capable. The solution is to lift the quotas.
Can the market 100% solve all housing problems? No, probably not. Can the market solve A LOT more housing problems than it currently is? Yes, absolutely. The market is hugely constrained by government enforced zoning in a huge number of places right now. It's the primary housing issue of our time.
I don’t know generally that zoning laws are the problem in Berlin but famously voters fought against adding housing units at the old airport vs the communal parks that were there:
I can't speak for Berlin, but it's basically illegal to build new housing in sufficient quantities in virtually every major American city. Due to this fact, prices have shot up everywhere.
The entire state of California now has a housing crisis with > 30% of residents spending more than a third of their income on housing.
Some estimates indicate that the US as a whole has underbuilt by around 5M units of housing. There are quite a few causes to this, but exclusionary zoning is definitely one of them.
There is plenty of evidence that housing supply is significantly limited by zoning regulations in lots of places. And in those places the little bit of construction that does happen tends to be targeted to the top of the market.
So I'm not just making an analogy. I'm reasoning from the available evidence.
Except it is obviously true, and you can see in this very thread examples of policies that would reduce housing prices that people don't want to take. Zoning restrictions, quality requirements, bureaucracy all adds costs, and all of these are imposed by the government
Socialized housing only creates slums. Tenants have no incentive to keep the place nice, government rationing of maintenance ensures they degrade faster than the government is willing to spend to keep them functioning. Anyone that can afford better moves out. Eventually (not that long), only destitute remain.
Relevant quote "In 2008, Singapore was lauded by the United Nations Habitat's State of the World's Cities report as the only slum-free city in the world"
That's why Vienna mixes subsidized housing and regular housing, often in the same building. They also allow families to stay in their housing or purchase it as long as they pay the higher rate related to their rising income.[1]
The problem in the US is that there is no gray area for subsidized housing. As soon as you hit some magic number, you lose all of your benefits. The people who game the system to stay under this number are not stupid, but acting rationally because they know their new job may not stick around. They would rather have housing security than take a chance at losing everything and living in the street until their tax return shows that they are poor again.
