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You Won’t Allow a Rent Cap? Okay, We’ll Expropriate the Landlords

On Thursday, a rent cap introduced by Berlin's city government was struck down by the German Constitutional Court. But public opposition to the private landlords has been building for years — and now, a referendum on forced renationalization looks like the only way of breaking their power.

Collection of signatures for the Berlin rent referendum, 2016. (Flickr)

In November, Arne noticed how many of his Berlin friends and colleagues were receiving letters. Normally, nothing good can be expected from unsolicited mail formulated in odd officialese — especially when it comes from your landlord. But these letters were different.

They read something like this: “Dear Sir or Madam, following the entry into force of the Act on Rent Restrictions in the Housing Sector in Berlin, only the rent on the cut-off date pursuant to Section 3 (3) of the act may be demanded for your apartment. Pursuant to Section 6 IV, the landlord is obliged to inform you of the circumstances relevant to the calculation of the rent cap.”

Arne wondered if such “calculations” applied to him. Like many Berliners, he and his girlfriend had struggled to find an affordable apartment, and they were paying the equivalent of $1,250 a month for 850 square feet — within their price range, but a lot compared to smaller cities. If the rent cap was applied, it would have saved them $150 a month.

But their landlord combined the formalities with some comments of his own: “First of all it should be mentioned that the proceedings you refer to are still illegal.” He continued: “Evil people are trying to topple the pillars of our society with the ruthless support of Socialists and their fantasies…. If I found out that tenants of mine jumped on this bandwagon, I would not only be forced to cancel the lease but would take this extremely personally.”

This reaction was certainly rather extreme. And yet when the Berlin rent cap law came into effect in November, it had a wide variety of implications for millions of renters, even if they were literally living side by side. Whereas some tenants were invited to pay a little less by their housing company, others, like Arne, decided to pay the usual rent, out of fear that they might get into trouble with their landlords.

Others decided to pay the lower amount but save the difference for now — a strategy that housing companies and even some city government officials recommended to tenants. Yet given the pressure on people’s incomes, a recent survey showed that only 41 percent of Berliners put money aside in case they had to pay it back.

Faced with legal formalities, this is a trust which they now may regret. On Thursday, April 15, the Federal Constitutional Court ruled that Berlin, as a federal state, is legally not allowed to make such decisions and that the rent cap is therefore “altogether invalid.” The ruling did not dispute the actual contents of the rent cap.

Many renters will now have to pay back money they hoped to have saved. But the court decision also heats up a long-running debate about affordable rents. And it may even feed more radical approaches — like the mounting campaign for the outright expropriation of housing stock.

Global Impact

Renting is, indeed, a big issue in Berlin. Of around 1.9 million flats in the capital, 1.6 million are rented. This is a striking rate of roughly 80 percent, the highest even in a country where renting is relatively common. For comparison: the rent percentage in New York City totals roughly over 60 percent and is one of the highest in the United States.

Today, in some Berlin neighborhoods, rents have more than doubled in the last ten years. New buildings are rarely up for rent, but rather for sale. Slowly but steadily, Berlin is changing from a city of renters into a giant condo district. As well as its growing popularity, Berlin still has to deal with huge housing privatizations of the 1990s and 2000s — a real estate sell-off made by a city government desperate for money.

Seeking to push back against soaring rents, in January 2020 the Berlin Senate, led by a coalition of the Left (Die Linke), Greens, and Social Democrats, passed the rent cap law. But if this was a move in municipal politics, it reacted to an ongoing development, familiar to anyone living in a big Western city, beset by corporate investors in pursuit of high returns.

Leilani Farha has observed this phenomenon all over the world, from Santiago de Chile to Seoul, to Montreal to Berlin. As UN special rapporteur on the right to housing, she has traveled to many cities and not only observed displacement there, but also investigated the responsibility of global financial corporations. Last year, Farha’s term ended. Since then, she has been running The Shift, an organization that works globally to combat homelessness, rent unaffordability, and evictions. A central aspect of her work is supporting and connecting grassroots movements in different cities.

Farha has been closely watching what is happening in Berlin. She even borrowed the idea of a rent cap when the pandemic went global. At the time she was still UN special rapporteur, writing guidance notes for governments on how to deal with the pandemic. Rent freezes were a central component of this.

However, Farha told us that rent caps would only have a real impact if they were in place for quite some time: “I believe in rent caps as being very important beyond the pandemic because they are one way of keeping the big institutional investors out. If they are in effect long enough — five or seven years — a lot of investors want to see a bigger return on their investment. Sometimes their financial structuring is such that they need to have a bigger return within this time. If you have a rent cap that limits the percentage of profits then you’re going to create a chilling effect.”

Still, Farha also pointed out why rent caps might not be enough to give cities back to the people. The large financial groups that want to make profit on housing are a powerful, well-networked opponent. But, for Farha, even if it turns out to be complicated, there is something to be gained: “The beauty is: it gives many people one focus — to come together, to collaborate, to work together, to build new alliances. And then, from there on, more and more can be taken on. So the idea of a rent cap shouldn’t be viewed lightly. It is a vehicle for mobilizing and for creating movement at the grassroots level.” In light of Thursday’s court ruling, this grassroots movement will now be put to the test.

Expropriation

One year after its implementation, the Berlin rent cap had already been bearing fruit. Unlike in the rest of the country, rents not only stagnated, but actually fell — by about 11 percent, according to a study by the German Institute for Economic Research. However, the analysis also shows that significantly fewer apartments were advertised. Many landlords seemed to be waiting to see how the courts would rule.

Other data shows that the rent cap has had an ambivalent effect on the housing market. While buildings who are affected by the cap become significantly cheaper, prices for newer ones rise even faster. After all, the construction of new homes in Berlin is still badly needed, and critics of the rent cap point out that the new law could prevent this from happening in the longer future.

Landlords and the liberal/conservative media-political sphere were especially keen to warn of the cap’s dangers. They seemed to think it meant full-blown socialism lurking around the corner — something they, naturally, understood as a major threat. A politician from the ultraneoliberal Free Democratic Party (FDP), compared a journalist who had dared to comment positively on the rent cap to a North Korean anchorwoman.

Yet, while homeowners, landlords, and the affluent may have seen the rent cap as nothing less than impending doom, their opinion was opposed to that of the wider public, which had been worried about steadily rising rents for years. Shortly before the law was introduced, a survey showed that 71 percent of Germans were in favor of the cap.

It’s no wonder that the idea has gained traction. Years of gentrification, privatization of the housing sector, and displacement have fueled a highly active tenants’ movement in Berlin. These groups fight against evictions, increasing rents, and large housing corporations — and thus heighten the pressure on politicians. In fact, the reasons why the Berlin government took this step at all may in part owe to pressure from these groups, who were able to mobilize big rallies before the pandemic.

One initiative is drawing special attention because of the radicalism of its demand. The “Deutsche Wohnen und Co enteignen” campaign aims to use a petition to force a referendum to get Berlin’s government to expropriate housing corporations that own more than three thousand housing units.

In exchange for compensation, the apartments are to be returned to public ownership and could thus be permanently secured as affordable housing. According to an estimate by the Berlin Senate, this could affect about 240,000 apartments. In late February, about a thousand activists began collecting signatures. With purple vests, flyers, and posters, they are standing in squares and on sidewalks throughout the city. Not only are neoliberals and conservatives outraged by the term “expropriation,” but center-left forces like the Social Democrats also shy away from this approach.

Not herself a socialist, Farha sees the expropriation of large housing corporations in positive terms: “I think it’s fascinating that there is this referendum. It is, of course, an awareness-building thing as much as a realistic request. I think it is realistic to suggest that there should be some expropriations, because otherwise we head into the territory of monopolies.” She adds: “I think that this is problematic and it means that an entire community can be at the whim of this private actor. I really don’t think it’s healthy for there to be a single owner — except where that ownership is public.”

Protest in front of the Christian Democratic Union headquarters on the occasion of the lawsuit by members of the union and Free Democratic Party against the Berlin rent cap, 2020. (Die Linke / Flickr)

Supporters of the idea of expropriation can be found in Berlin politics as well. In a recent interview, the deputy chairwoman of Die Linke, Katina Schubert, said that she was optimistic the initiative could be successful: not least given the support of both the ver.di Berlin and the Berliner IG Metall trade unions.

By the end of June, the initiative needs to collect about 175,000 signatures to get one step closer to the actual goal: A public hearing in the German parliament, alongside the upcoming federal elections in fall. According to the initiative, fifty thousand signatures were collected in March alone.

For now, the initiative is positive that the fury over the now-halted rent cap law will only boost their concern. Just minutes after the court ruling, the group released a press statement with a clear message: Expropriation is now “the only alternative.”