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WITHu One of the strange ideas in German housing policy is that restoring non-profit status would improve conditions in the housing market. This demand comes from the Greens, the leftists and parts of the SPD and is by no means gaining momentum in circles far removed from the economy.
The objective is to strengthen housing associations that operate non-profit. In return, they should be tax-exempt and receive other benefits, such as cheap state building land. This should allow for low incomes, especially in large cities.
The strange thing about this requirement is that it actually ignores all the economic teachings of the recent past. This includes the fact that nonprofit housing was abolished in 1990 for good reason. The massive housing shortage in the postwar period had long since been resolved.
The main non-profit organization, the union’s Neue Heimat, had collapsed under scandalous circumstances. Its board of directors had shamelessly enriched itself, among other things through excessive bills to the companies they founded. Also because of this he felt that there was not much resistance against non-profit housing abandonment.
Basic design flaws
However, in hindsight, it becomes blurred that the Neue Heimat problem was not based solely on human error. Rather, it was based on a fundamental design flaw.
Companies that do not have or cannot make a profit are freed from the pressure to measure themselves directly in the market from the start. This means that your top employees are not required to run their administrations as efficiently as possible and constantly review their business models.
That was exactly why the Neue Heimat failed. When there was no longer a special need for new developments by the 1980s at the latest, the company sought its salvation abroad; after all, it was necessary to employ a completely oversized workforce in some way.
But that failed the colossus with its 330,000 apartments. In the end, he had to renounce over-indebtedness entirely, a devastating chapter for the unions that dealt the death blow to non-profit organizations in the housing sector.
So what should speak in favor of reviving nonprofit life? It is true that cheap rental apartments are lacking, especially in the metropolises, but increasingly also in the surrounding areas. Clearly, private companies are now more likely to market expensive apartments.
But does this really have to do with the fact that they think primarily or even exclusively about their benefits? Rather, there are many indications that the conditions in which private housing providers work are unsatisfactory.
The large settlements became ghettos
Almost all the largest cities have begun to approve new residential projects only on the condition that at least a quarter of the apartments are rented to socially needy people below market prices. That sounds like a noble edition, but it means that the remaining apartments are being rented or sold at high prices, so the project as a whole is worth it.
Beneficiaries can expect the social benefits of low rent, but the vast majority of those in need cannot be helped; this type of lottery is not fair. For the middle class, on the other hand, the offer is not expanded with such requirements.
It would make more sense to make construction cheaper by reducing regulations and, above all, by providing more building land. Municipalities in particular fail because of this, either because weakened authorities are overwhelmed by it, or because indigenous people fear new construction works in their area. Frankfurt, for example, has struggled to find new land for urgently needed apartments for years.
However, if this is successful, it would be a disservice to leave the construction and management of the new apartments to non-profit organizations. They would have to constantly fight to generate sufficient funds to keep the apartments and the entire district in good condition, against the main incentive of municipal agencies that are superior to them to lower rents, no matter the cost.
Neue Heimat has already shown the depths that threatened this: due to economic difficulties, its large estates degenerated into ghettos in which no one wanted to live anymore who could afford other things. No one who has good intentions in the German property market should wish for a future for a non-profit life.
