
Berlin social housing winning the residential race - Mz
https://www.thesaturdaypaper.com.au/2015/11/21/berlin-social-housing-winning-the-residential-race/14480244002645
======
andor
Berlin has a housing shortage, and these measures are just workarounds. Before
the refugee crisis, a growth of 40.000 people per year was expected, vs. plans
to build 10.000 new apartments. The decision against developing the the
abandoned Tempelhof airport only makes it worse, and shows some of the social
problems in the city. Bear in mind that everybody who got to vote on the
referendum already lived in Berlin:

 _" Though about 20 per cent of the development was to be reserved for
affordable housing, the locals decided to keep their expansive city oasis free
of any new buildings. The rationale was that increased supply often only means
more luxury dwellings and does not address affordability."_

"Luxury" here doesn't mean huge, it just means "well built, nice kitchen, 14
EUR/m^2". It's like saying: "I don't want anybody else to buy a car, because
they might get a Mercedes, which I cannot afford."

The social housing system is also quite unfair, if you ask me. Social housing
apartments are in regular buildings, not separated from the rest. The idea is
to counter gentrification, and keep the population mixed. You are only
eligible below some margin of income. So far so good, but if you work and earn
one Euro too much, you need to pay twice the rent, for the exact same
apartment.

~~~
tptacek
What's the alternative to mixed-income housing? The US tried segregated low-
income housing for decades, and the result was a disaster. The new system,
called Section 8, is a privatized voucher system; it doesn't give tenants
lower rents, but by subsidizing rents directly, it has the same fairness
impact.

~~~
andor
Mixed-income housing is not the problem, the implementation is: earn a bit
more, pay a lot more. There's a similar argument against unemployment
benefits: in some cases, unemployed people can earn less by accepting a job.

I don't have a solution, but I think a basic income would set better
incentives.

~~~
nosuchthing
Why not set a gradient percentage of income against the cost of social/public
housing?

The hard cut off for social housing benefits incentivizes keeping income below
that threshold to maintain the benefit.

Basic income does nothing to increase housing supply, so urban rents would
increase as a result.

~~~
TheSpiceIsLife
Presumably the people who set these hard-cuttoffs aren't totally oblivious to
the results, Australia has a similar problem with social welfare payments.

My suspicion is this is by design because a certain level of unemployment is
required to keep labour costs down - or so the theory goes.

I've met a lot of people who don't _want_ to work, some because they're
slackers and some because they'd have to get full time employment because
anything casual they're likely to get wouldn't be worthwhile as it eats in to
their welfare payments. So the system 'works' for some definition of the term
'works'. It probably also catches a lot of people unnecessarily too.

------
facepalm
Sorry the article is full of nonsense. Rents are rising quickly in Berlin, and
the government is not paving way for enough new housing to compensate for the
demand. Limits on rents are also a reason why fewer housing is being built.

As for the protesters on the street - yes, it happens, but usually they are
not successful.

It's really weird to see Berlin cited as an example for successful housing
policies.

It may be so that if you can stay in your flat, you are in a relatively good
position. But there are many people moving to Berlin, and people having kids
can also not always stay in their old flat. So that policy only helps a few
old residents.

~~~
mschuster91
> It's really weird to see Berlin cited as an example for successful housing
> policies.

Still better than Munich lol. In Berlin you can at least find a run-down
shared punker flat or occupied house if you're OK with that, in Munich you're
straight outa luck if you aren't best friends with a RE broker.

LPT: If you ever have the chance to befriend a broker, do so - it might save
your ass in the future.

~~~
facepalm
These things exist in Munich, too :-)

------
mc32
This article covers Berlin. How is it in other cities and states in Germany?

Berlin, as far as I know, has a unique history so that it's not always
representative of Germany as a whole, in general terms.

That's to say, while Berkeley, CA, has some interesting politics, it does not
reflect state or national policies. Meaning, what works in Berkeley (or
Berlin) may not be transplantable.

Meaning that while interesting and worthwhile to study as a way to address
housing shortages, it may or may not hold a viable answer for other
jurisdictions who don't share some of the reasons making this policy viable
under particular circumstances.

What's the state of affairs in Hamburg, Essen, Frankfurt, etc.

~~~
mironathetin
Munich here. Most expensive city in Germany in absolute prices and second
expensive relative the the average income (Freiburg is top there). 12 Euros
per square meter average rent. In good locations, 20 is asked regularly. More
than 30 for small 1 bedroom appartements.

Statistics says, 3300 Euros per square meter buying price. We try to find a
good place since 3 years, and we have never seen anything below 7000 Euros (in
good central locations). 10.000+ is asked for regularly. The market is
standing still because few people can afford these prices any more. Berlin
prices would be a dream come true here.

Laws are the same as in Berlin. But since there is much more money to win,
there is more aggression to get rid of old tenants and thus raise prices
and/or build new houses. We have seen places, where the real estate dealer did
not tell us how nice everything is, but calculated how much we can make, if we
rent to Engineers who work for big companies like BMW or EADS. In cash and
percent interest rate for our investment. Never heard that anywhere before.

~~~
mc32
Does that mean Berlin's approach to housing is unique to Berlin and that the
policies which make renting both the preferred housing option as well as
making it economically rational, not the case in other large metro areas?

I'm curious because people point to Berlin as a model (for providing
affordable and desirable housing) but it would not be a good model if it does
not work elsewhere. But conversely soul be a good model to study if it were
viable elsewhere (especially booming cities -- where the issue is pronounced)

~~~
mironathetin
To my knowledge, the law is the same everywhere in Germany. Berlin makes a
good example with still low prices because of its history. But there is
certainly more protest against investors in Berlin compared to Munich. And
more protection from the traditionally less conservative government. In Munich
it counts as embarrassing not to be rich.

------
arbitrage314
I'm in full support of some housing/rental market regulation, but such
regulation is not without its cons.

Similar to Berlin, in New York, tenants have very strong rights. For instance,
if a tenant stops paying rent, the landlord can't evict that tenant for 6
months. This sounds nice--helping someone in need instead of the greedy
landlord--but the overall effect is largely negated (as usual, the market
seems to always adjust when you mess with it). It's now MUCH harder to get an
apartment in New York in the first place. You need a large income, guarantors,
or lots of savings, in addition to credit checks, bank staements, tax
statements, etc. I'm pretty sure the same people that the law was meant to
help are now unable to rent in the first place.

One idea I have is, instead of messing with the free market, create a futures
exchange whereby renters and landlords can lock in rent. This market is
possible because there are just as many people concerned about rent going up
as there are rent going down.

If you want to keep renting, but you don't want to hedge yourself via the
futures market or via buying a place, you'll just have to accept the risk that
you'll be priced out of your neighborhood someday.

~~~
puredemo
>create a futures exchange whereby renters and landlords can lock in rent.

Can't you just sign a longer lease?

~~~
oh_sigh
Considering you and the landlord have opposite goals(you want to minimize
rent, she wants to maximize it), it is unlikely you would find a situation
where long residential leases are offered.

~~~
arbitrage314
Why is that? You might be right, but your argument isn't intuitive to me.

Landlords are afraid of rent going down, and renters are afraid of rent going
up, so a long-term contract would be nice because it could simultaneously
reduce stress for both of them.

These are the trades that create value--trades that reduce risk for everyone!

~~~
oh_sigh
Each party has different acceptable levels of risk, and different outlooks on
the market. Imagine a hot market. What landlord would sign a long term
contract? Imagine if a landlord in silicon valley rented a house out on a 20
year lease 15 years ago. Big mistake.

~~~
arbitrage314
This happens in other futures markets all of the time. The price/month of a
long-term lease ends up being a bit more than the price/month of a short-term
lease.

The same thing happens in interest rate markets: if you want to borrow money
short-term, the interest rate is pretty low; long-term borrowing is scarier
for the lender, though, so the rate charged is much higher
([https://en.wikipedia.org/wiki/Yield_curve](https://en.wikipedia.org/wiki/Yield_curve)).

------
al_chemist
Two years ago I moved to Berlin from a different country and it took me 6
months to get my own apartment. Which was pretty good, because I knew someone
who was leaving and he vouched for me. Then I understood that I subletted from
someone who was subletted from another one who rented from company who rented
from owner.

Normally you need credit score, letter of recommendation from previous slave-
own^Wland lord. Then you can try to rent one. By which I mean you go there
with 20 other people and land lord does... casting. They pick the best tenant
out of quite big group.

Truly, the best way to rent!

~~~
hussong
It's gotten a lot worse in the past two years, more like 60 people showing up
for attractive places and the whole job / income / vouching paperwork dance
even for small apartments in the 500 Euro range.

------
Tiktaalik
What is the vacancy rate in Berlin? Is it at all possible to actually get your
foot in the door and rent a cheap apartment?

The typical argument against price controls is that it reduces returns and
discourages investment and new development, which can make it extremely
difficult to find an apartment. The article didn't touch on this much, but
this one line suggested that developers were still happily involved.

 _"...the large institutions that own much of the city’s housing stock are
looking for a steady return rather than boom-and-bust cycles..."_

Of course low vacancies happen in aggressively pro-development cities too.
Canada has similar pro-homeownership policies to Australia and Vancouver's
real estate market is similarly high priced as Melbourne's. New condos in
Vancouver are being developed aggressively and yet the vacancy sits at 0.5%.

------
jfoster
_And yet the tens of thousands of new investment properties in Sydney and
Melbourne that sit empty while waiting for a capital gain – labelled
“speculative vacancies” by non-profit lobby group Prosper Australia – or which
are rented to tourists at highly inflated rates, indicate that the market is
not always a panacea for affordability._

Is that not just a glut that hasn't yet taken hold? If there really is over-
supply, the investors will eventually end up competing with each other once
they try to realize their capital gain.

I don't mean to suggest that a growing glut of empty properties ending with a
bust is the best way for this to go, but it does seem to me that on a long
enough time scale, supply & demand principles will still hold true.

~~~
darkr
"Empty" doesn't necessarily mean that it still owned by the developer and not
yet sold on. It can mean that it has been purchased, but that whoever has
purchased it has no use for it other than as an investment.

We've had this problem in London for years now, mainly in the west towards
Vauxhall and beyond, but there are pockets of it all over, and it doesn't seem
to be going away any time soon. Large new tower blocks containing "luxury
apartments" are built, purchased by and often marketed solely to foreign
investors and offshore companies as a way of parking large amounts of money
into what is seen as a relatively safe investment, with several tax loopholes:
Unlike many other investments, property in the UK is not subject to capital
gains tax, inheritance tax etc. Also, if the property is owned by an offshore
company rather than an individual then stamp duty (5% on £675k or more) is not
payable. AFAIK this last loophole was closed last year, but only for
properties over £2 million (and, I think the tax is only payable on the
remainder that exceeds that).

As well as adding to an existing under-supply in the market for actual houses
in which actual people can live in, the speculative feedback loop caused by
this only drives up property prices further.

------
arbitrage314
If you want rents to go down, you need to incentivize builders to build more
property.

Some regulation is good, but if there's too much in favor of the tenants,
building more property becomes unprofitable, and you're stuck with the same
problem.

------
duncan_bayne
> It's like saying: "I don't want anybody else to buy a car, because they
> might get a Mercedes, which I cannot afford."

It's funny how often envy is a motivating factor behind socialism.

------
biafra
Pretty much the only way to be kicked out in Berlin is if the owner needs the
apartment for themselves (or a close relative) to live in. It is called
Eigenbedarf.

------
datashovel
The way markets boom and bust so frequently these days, one could almost
interpret this as unveiling how ludicrous purely free markets can and probably
will behave if they're given free reign, in the modern world, to "discover"
market value.

Instead markets are in many ways indistinguishable from casinos anymore.

~~~
rosege
yes but markets these days are anything but free - with the fed (and its
equivalents around the world) fixing the price of money then doing their
Quantitive Easing tricks I would argue that we have a highly manipulated
market now. On top of that the bailing out of banks etc also show that the
market isnt free.

~~~
datashovel
Very true. I think I was mostly attempting to point out "Shiny Object
Syndrome" and how it applies to financial markets, and how quickly (in today's
world) it can reinforce itself given the real-time nature of how information
is distributed and consumed.

[http://impossiblehq.com/shiny-object-
syndrome/](http://impossiblehq.com/shiny-object-syndrome/)

As soon as all day traders (not just my circle of friends, but every single
active investor in the world) get word that the new big trend is going to be
real estate in Brisbane Australia, that's where we're going to put our money,
which is going to push the price up, which in turn is going to attract
additional investors, which is going to push the price up even more, etc..

That is until the market starts to turn. In which case all people who have
bought into the real estate market craze in Brisbane Australia (who don't
actually live in Brisbane Australia) pull their money out, which in turn
causes prices to drop, which in turn causes everyone else to start pulling
their money out. Because they all knew it was way over priced. It's not their
fault after all. It's not illegal. They were just riding the bull as long as
they possibly could. Doesn't matter what kind of devastation they leave behind
because they don't live there and won't feel its effects.

Oh, and by the way... Now that the Brisbane Australia bubble has popped, I
heard the next big thing is going to be tulip bulbs. Great, I'm all in!

------
mschuster91
> And yet the tens of thousands of new investment properties in Sydney and
> Melbourne that sit empty while waiting for a capital gain – labelled
> “speculative vacancies” by non-profit lobby group Prosper Australia – or
> which are rented to tourists at highly inflated rates, indicate that the
> market is not always a panacea for affordability.

Easy solution: for any period longer than 3 months in which the property is
not rented with a minimum lease time of 12 months, the owner has to pay a
fixed sum per square meter of the property; said sum should be based on the
asked rent price.

