The local government of Berlin recently introduced a new funding scheme for social housing to solve the housing crisis in the city. But the program hasn’t learnt from the failed social housing programms in the past…
This article is based on a public discussion in 2014 and was written for and published in the first edition of a magazine published by an initiative called „Haben und Brauchen“ (To Have and To Need). (deutsche Fassung des Textes: hier)
Old Wine in Old Wineskins. Notes on the Return of Social Housing
by Andrej Holm
Berlin has an aid programme for social housing again. Under the lovely title „Verwaltungsvorschriften für die soziale Wohnraumförderung des Miet- und Genossenschaftswohnungsbaus in Berlin (Wohnungsbauförderbestimmungen 2014 – WFB 2014)“ (Administrative Provisions Concerning the Support of Social Housing Promotion of Rented and Cooperative Housing Construction in Berlin), the Berlin Senate Department for Urban Development and Environment has laid out the legal framework for the re-institution of subsidies for social housing construction.
The initial rent in subsidised newbuilds is to start at an average of 6,50 EUR/m2 (without tax or heating) which is then guaranteed for 20 years. The administrative provisions further state that the rent is to be raised every two years by 0,20 EUR/m2 and that the tenant is protected against the housing being purchased and subsequent eviction through owner occupancy for a further ten years after the initial support period is over.
A protected rent for many years, the guarantee of staying in the area and protection against eviction for owner occupancy afterwards sounds fantastic at first sight, but the devil is not in the details of the small print of the provisions this time but in the overall aspects of the political housing and general framework and in the architecture of the subsidy itself.
Limited period and…
The endowment of the new aid programme of 64 million Euro a year is absolutely miserly in comparison to earlier programmes. Around 1,000 subsidised homes should be built from this budget. In comparison, between 1952 and 1997, a total of about 28 billion was spent on the building of social housing. That amounts to an average of over 600 million Euro of aid a year. Almost 430,000 apartments were built in Berlin as part of its social housing programme – on average over 9,500 social homes a year. This has meant that almost a third of all apartments in Berlin are the result of subsidy programmes. The old support programmes were structured so that the rent price and right to stay in the area for social homes was guaranteed for a limited period of at least 30 years. The Austrian housing researcher Christian Donner rightly described the logic of this social housing support programme as „temporary social use“ (Donner 2000:200).
Over 300,000 of the socially supported apartments in Berlin have long ago reverted to their market cost and only around 130,000 subsidised apartments still have their rent cost and location rights protected. In the following years the protected status of up to 10,000 apartments a year will run out.
The 1,000 apartments from the newly-planned subsidy programme will therefore not even compensate for the loss of subsidised homes from the older programmes. In other words, the Berlin Senate will spend 64 million Euro every year and have less social homes at the end of the year than they started out with. It is as though there would be talk of having to extend the new Berlin Brandenburg airport before it was finished: simply absurd!
…expulsion from the housing stock
The guarantees that are running out in the areas of the old social housing projects are not simply a problem of shortfall. A series of examples from recent years show that rent increases and the dangers of expulsion are not just a problem that limits itself to the areas of Berlin with housing stock built around the beginning of the 20th century. Even the former social housing stock in the inner city boroughs have become veritable objects of speculation. This is especially clear in the 28,000 social homes in Berlin that had their so-called aid extension stopped in 2003:
In the Fanny-Hensel-Siedlung in Kreuzberg, despite the poor condition of the housing, the tenants have faced rent increases of 30 to 50 percent. All this despite the fact that the homes endured the sad fate of being labelled ‘mould-houses’ in the local Berlin press in 2007 (Schmidl 2007). Now the rent per square metre is due to rise from 5,33 Euro/m2 to 9,62 Euro/m2 (Englert 2010).
In Akazienstraße 6 / Belziger Straße 13 in Schöneberg the tenants faced a rent increase of around 30 percent at the end of last year making their rent, excluding rates and heating, between 7 and 8 Euro/m2. If they default on their payments – the housing management threatens – their rent increase will be backdated to 1st January 2008 (Aktionsbündnis Sozialmieter 2010).
In 70 flats in Pohlstraße 43–53 in Tiergarten, the new landlord tried to push through a 60 percent rent increase. The homes in Pohlstraße were built with social housing subsidy as part of the International Architecture Exhibition in 1984 by the Groth-Gruppe, which is still very active in Berlin. After the subsidy ended and bankruptcy proceedings ensued, the houses were purchased in July 2010 by the property developers Erste D. V. I (Eitzel 2011).
Rent rises in mould-houses? Rent increases well above the 20 percent allowed by the rental laws? Backdated rental demands? It sounds like Manchester Liberalism and property owner despotism only played out here and now and in social housing of all places, or put another way, in homes that have been supported with public funds for decades. Many current tenants will not be able to afford the new rents and will have to move out. That is exactly what the investors, who have sent out these increases in recent years, count on. Empty flats can be renovated and sold off as property to own or put onto the rental market for much more money. It is a classical effect of gentrification: that speculation over future earnings can only proceed through the expulsion of current tenants. What is new however, is that this pressure from expulsion does not affect the inner city stock of turn of the century buildings but rather the social housing of the more recent past.
The paradox of ‘cost rents’
In order to understand why social housing especially has become the new playground of gentrification in Berlin, we have to look at the systems of subsidy. The building subsidy in the social housing programme followed a simple principle. Rather than the public purse being used to build, private, cooperative as well as local community stakeholders should be encouraged to invest in the building of social housing. Because the rent guarantees that were part of the subsidy were not particularly attractive to the investors, the so-called unprofitable costs were taken on by the state as part of the subsidy programme. In other words, the owners had all costs that were not covered by the social rents paid by public funds. The monthly sum of these actual expenditures are called Kostenmiete (cost rents). For most programmes the difference between the social rents the tenants pay and these cost rents have been paid out over 15 years.
The founding concepts of social housing has been thoroughly orientated to the business interests of the property owners and the cost rent system has stimulated market conditions that would not have been possible without state intervention. Originally conceived of as a mechanism which would limit profits (that is the income over the actual expenditure), the cost rent system in Berlin has resulted in a huge spiralling of costs. Protected by the promise of subsidy, there was no motive for economic building or business practises in social housing. Property developers and the banks that financed them have profited greatly from this system (Rose 2004). The cost rents of social housing projects in the 1980s were already equivalent to 13 Euro/m2 (prices that weren’t even realistic in the luxury housing sector). By 1992 they had risen to a phenomenal 19,80 Euro/m2. In the end it was the state that paid – the owners, property developers and banks were the ones who profited.
So far, so bad. But this rip-off mentality paid out double for the owners that were involved. After the subsidy ran out, the rental price didn’t orientate itself to the level shown in the rent index for that area but rather the cost rents that were still in effect. Landlords – if the market allowed – could raise the rent to these cost rent prices after the end of the subsidy programme. The social housing subsidy programme had not only filled the pockets of the property developers and bankers for 15 years, it had subsidised an incredibly and unrealistically high rent increase at the same time (the cost rent). The principle described above as ‘temporary social use’ is not the least ineffective because a lot of money is spent on an effect that only lasts for a certain time. From the perspective of the property development business it is start-up financing in order to reap profits later. Property developers and home builders know: the high costs of initial investment in house building result in a high pressure to recouping the investment, especially in the early years, as the money laid out for buying the land, planning and building can only be raised from the eventual rental income. Later, when the loan is paid off, even an average rental income is significantly higher than those costs for the maintenance of the property, repair and any modernisation work that might have to be carried out in the future. The social housing programme supports the property developer over this initial, cost-intensive phase with aid money and then, when the house is above a certain age – calculated by the property industry – in which even low rents would generate a surplus income, the apartments are released to the free play of market forces. Often the buildings that have just been paid off are sold straight away. This is a catastrophe in terms of housing policy because the logic of paying the initial investment off has to start again from scratch and the new owners try to get their investment back through as high a rent as they can possibly charge.
The example of the Fanny-Hensel-Siedlung shows that after the aid programme period expires, not only are rent increases levied from a purely economic calculation but unwelcome tenants are deliberately driven out. Sebastian Jung, a tenancy activist who lives in the Fanny-Hensel-Siedlung recently warned that the rents of migrant tenants especially are being targeted for increase. The technique to accelerate expulsions and get new solvent tenants from attractive, in-demand sectors who can pay higher rents is becoming more and more widespread. According to the Turkish Federation in Berlin-Brandenburg (TBB), 17 families have left due to rent increases, 13 of whom have Turkish or Arabic backgrounds (TBB 2015). The fact that the property owners have had to pay out 30,000 Euro damages after court cases for discrimination in the Berlin law courts (Dernbach/von Törne 2015) has not reversed the massive rate of evictions in their properties.
Sebastian Jung has publicly stood up for his neighbours, later becoming an annoyance for the property management himself. Together with an offer to purchase his flat he had the honor of receiving, on 1 April 2014, the first rent increase to the value of the cost rent. The rent for his 50 m2 apartment will increase from 5. 38 Euro/m2 to 13. 32 Euro/m2. Because of the structure of the cost rent agreement for social housing that favours the property owners, the rent increase can even be backdated so that now the tenancy activist is faced with a rental arrears demand of over 9,000 Euro.
When expulsions become the norm
A recent study by students of the Humboldt University in Berlin now shows that the examples above are not isolated cases. An examination of the living conditions in social housing projects in which the extended support period is now running out has uncovered a horrifyingly high rate of expulsion.
15 buildings were examined in Kreuzberg, each containing more than 40 apartments and a total of 83 interviews with tenants took place. The goal was to obtain information about the individual housing conditions (rental costs, length of tenancy, level of satisfaction etc. ) as well as the expulsions in each property (change of landlord, modernisation activities, tenant turnover rate etc. ). The results of the study point to an enormous amount of expulsion in social housing:
- In the properties that were part of the study, the majority of old tenants have moved since the basic support programme ended.
- The rents in the properties in the study were between 9 and 14 Euro/m2 (including rates and heating) which is much higher than the usual rent in Kreuzberg
- Even the rents identified as more reasonable: the 9,09 Euro/m2 level is above the assessment threshold for living costs and above the housing support limit for people on long term unemployment (Hartz-IV)
- 80 per cent of the properties examined have changed ownership in recent years.
- Almost a quarter of the properties in the study have been completely turned over to owner occupier use or offices.
An employee of a property management company in Berlin who was interviewed for the study formulated the consequences of these developments in the following way:
“…even the people that the social housing was built for are being driven out by the job centres at the moment. It is called a rent reduction process: they get a friendly request to reduce their rent. […] and then they have half a year to find an appropriate apartment that is not actually available in the current market […] And then they get their welfare payment reduced to the level that they are sooner or later homeless because they simply cannot pay their rent any more – when you’re hungry, food comes before rent. And then it happens: they’re out. […] You have to imagine: you have two children at school and kindergarten and you should move out to Spandau… Can that be right?”
In social housing in Kreuzberg after the aid programme ends, the rents are too high for families on long term unemployment support. The majority of tenants have changed already and parts of the property has been converted to luxury properties. In Kreuzberg at least, the ending of the aid programme has increased the expulsion rate in the area. It is no surprise, then, that one study states: “the replacement of residents is in full swing at the moment” (Frühauf/Rieder/Schneck/Stoutness 204: 37).
The social apartments of the past are today‘s objects of speculation. This situation is no accident: the limited time periods, the cost rent agreements and the uncontrolled spiralling of costs have transformed social housing into the perfect scenario for exclusion and expulsion. We have to see the old aid programme for social housing in its effect over a long period of time as the co-production of speculation and expulsion by the state. If income from rent was initially subsidised by the aid programme, the income projections after the aid programme runs out have to be maintained with new tenants. The new aid programmes only correct some of the mistakes of the past. Even though upper limits have been set to the available subsidies in order to encourage a reduction of costs, the fundamental principles such as taking on unprofitable costs and the guarantee that goes with it of private profits has changed little. Particularly exasperating is the lack of willingness to learn from the mistakes of the past in terms of the limited period of the support programmes. Social housing is still conceived of as a temporary status on the way to its proper usage and we can now guess where the objects of speculation will be in 20 years. Instead of obtaining time-limited obligations through an expensive system in homeopathic doses, it would be more effective for the city‘s social housing provision to apply money and laws to secure a long term solution to the last 130,000 apartments from the old social housing stock.
When a ‘temporary social use’ is discussed as an alternative to aid programmes, the term ‘revolving funds’ is not far. The idea is instead of private profits from the excess earnings from properties that have been paid off, the income from the old properties should be used to replenish the funds for future aid programmes. A self-nourishing finance concept like this would socialise the long term effects of property industry calculations.
A long term solution such as this is not going to come from those currently in charge as the concept has been available for a long time (Kotti & Co 2014) and until now been completely ignored in the drawing up of the new aid programme. The government’s attempt to prove their competence in terms of housing policy to the current protest movements has turns out to be a dead-end and we can only hope that this arrogant political style cannot prevail in the long term in Berlin.
Aktionsbündnis Sozialmieter 2010: Schluss mit den Vertreibungen aus dem Zuhause. Aufruf zum Aktionstag am 03. 04. 2010. (Activist Association of Social Tenants 2010: Stop the Evictions. Call to demonstrate on 3/4/2010) (http://www. scharf-links. de/109. 0. html?&tx_ttnews[tt_news]=9642&cHash=83436e4054, last accessed 19. 12. 2014)
Dernbach, Andrea; von Törne, Lars 2015: Migranten unerwünscht – Geldstrafe für Vermieterin. (No Migrants Here – Landlords Fined) Tagesspiegel 15/1/2015 (last accessed 18/1/2015)
Donner, Christian 2000: Wohnungspolitiken in der Europäischen Union. (Housing policies in the European Union) Vienna: Self-published
Eitzel, Birgitt 2011: Investoren können gut Verdienen. (Big Profits for Investors) Berliner Zeitung 13/1/2011, http://www. berliner-zeitung. de/archiv/in-tiergarten-steigen-wohnungsmieten-um-bis-zu-60-prozent-investoren-koennen-gut-verdienen,10810590,10764098. html, (last accessed 19/12/2014)
Englert, Daniela 2010: Sozialmieter müssen draufzahlen – oder ausziehen. (Social Tenants to pay more – or move out) Tagesspiegel 21/04/2010, http://www. tagesspiegel. de/berlin/wohnungen-sozialmieter-muessen-draufzahlen-oder-ausziehen/1805326. html (last accessed 19/12/2014)
Frühauf, Hannah, Rieder, Tobias; Schneck, Nora; Stottmeister, Kristin 2014: „… und täglich droht die Mieterhöhung“ (“… the daily threat of rent increases”) – Verdrängung im Sozialen Wohnungsbau in Berlin-Kreuzberg. (Expulsion in Social Housing Projects in Berlin Kreuzberg) Projektarbeit im Rahmen des Projektseminars: „Gentrification: Theorien, Erklärungsmodelle und Untersuchungsmethoden“ (Project as part of the seminar “Gentrification: Theories, models and research methods”) am Institut für Sozialwissenschaften der Humboldt-Universität zu Berlin (Institute for Social Sciences at the Humboldt University, Berlin)22