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WHousing cooperatives are rarely known for their strident political tone. But when it comes to the rent cap, the Berlin Association of Housing Cooperatives is showing no reluctance. A position document of the cooperatives speaks of an “interference in the cooperative substance”, of an “attack on legal security” and even of “creating a housing deficit”.
The reason for the outrage is the rent limit law passed by the House of Representatives in June 2019. This prescribes upper rent limits that are based on the year of construction and equipment. Apartments built up to 1918, especially the coveted Wilhelminian-style apartments, should in principle cost no more than 6.45 euros per square meter throughout the city. For good locations there is a surcharge of 0.74 euros per square meter; Homeowners can also charge one euro per square meter for modernization measures. Apartments that were completed as of 2014 are exempt from the requirements.
“Because of the rent cap, housing cooperatives have less capacity to modernize, build fewer apartments and do less for social infrastructure,” says Dirk Enzesberger, spokesman for Berlin’s housing cooperatives, summarizing the criticisms. As a member of the board of directors of the Charlottenburger Baugenossenschaft (6700 apartments), he gives specific figures: because the usage rates are decreasing as a result of the rent cap, his cooperative must save 1 million euros a year on renovating apartments to re-rent. Investments in modernization would also be reduced “drastically”, explains Enzesberger, justifying this with the fact that modernization costs are much higher than the euro that the rent index law allows landlords.
Rental coverage affects the new building
Above all, however, the rent limit has a negative effect on the new building, Enzesberger explains. This is initially irritating because the new building is excluded from the rent limit. Enzesberger argues, however, with the revenue deficit due to the forced reduction of the user fee, which is why the required capital stock for new construction projects is lacking. According to their own statements, the housing cooperatives will therefore build only 2,000 apartments instead of the 6,000 initially planned.
Jürgen Michael Schick, president of the Real Estate Association Germany (IVD) also expects the new building in the capital to collapse. The number of approved apartments increased by 12.7 percent in the first half of 2020 compared to the same period of the previous year; but before that it had continuously decreased. “Many private companies continue to manage the projects for which they have already bought land,” explains Schick. “But after that, they will build more in Brandenburg.”
The fact that many representatives of the real estate industry expect a drop in construction activity is related to skepticism from pension funds, fund companies and other institutional investors. Some investors have pulled out of Berlin because they feared that the new building would also fall within the rental limit in the future, says Jürgen Leibfried, a member of the board of project development company Bauwert. Other investors, however, remain convinced of the long-term potential of the capital’s property market. “In the case of good new-build projects,” emphasizes Leibfried, “effects on the purchase price have not yet been determined.”
