Debate still rages in Berlin over vote to buy back properties from big landlords

It was 2006, the Celtic Tiger was still roaring and the Irish visitor liked the Berlin apartment he was viewing so much that he bought two.

Corkman Tim O’Leary (not his real name) had heard on the grapevine about a property sale of the century in Berlin. To plug a multibillion euro, self-inflicted hole in its budget, the city was selling off the family silver, including swathes of social housing stock, nearly 66,000 units in all.

His two apartments of 80sq m and 61sq m were built in the Bauhaus era and cost him €89,000 and €69,000 respectively.

The agent told him they would be worth at least twice that in 10 years’ time.

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“It was like she was looking into a crystal ball,” Tim, from Youghal, says now. “If I saw her today I would give her a hug.”

Nearly two decades on, Tim’s flats have at least tripled in value. The arrival of institutional investors in the euro crisis and a population surge have seen average Berlin rents rise by 60 per cent since 2012. Rising interest rates have halted property price rises, but not rent increases.

Behind the rent rises is a supply shortage based on reasons familiar to Irish ears: record land prices, a shortage of skilled labour, an end to developer tax breaks and a planning permission backlog.

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Two years ago, a group of Berlin tenants, tired of excuses and fearing for their future, forced a referendum on corporate property ownership. Their proposal – force the city to buy out corporate landlords with more than 3,000 units in their housing portfolio – was backed by 57 per cent of Berlin voters.

It was a slap in the face for ruling city politicians who denounced the proposal as a populist mirage. It would create no new apartments, they argued, and could even be illegal.

They pointed to how post-war Germany, in response to Nazi-era property seizures, inserted high constitutional hurdles to expropriation.

Realising they could not ignore the vote, however, the city set up a panel of legal experts to investigate options, in particular the relevance of article 15 of the Basic Law, Germany’s post-war constitution.

This states that “land, natural resources and means of production may, for the purpose of nationalisation, be transferred to public ownership or other forms of public enterprise by a law that determines the nature and extent of compensation”.

Article 15 was the bedrock of Berlin’s expropriation campaign but has never been used in the way campaigners were proposing.

But even in Berlin, it seems, there is a first time for everything. The panel’s final report, published last month, told Berlin’s state government it was not just legally entitled to legislate: article 15 gave adequate grounds for expropriations if they served the public good.

“This is a historic day for Berlin,” said Constanze Kehler, spokeswoman for the expropriation campaign. “The commission has confirmed the socialisation [of housing] as legally safe and laid down the legal framework in its final report.”

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Beyond that overall green light, however, the report is a legal obstacle course. Proving the proportionality of the measure could be as tricky, it warned, as fixing a reasonable price at which to buy back apartments.

Berlin’s state government argues the buy-back cost could be as high as €36 billion for apartments it sold 20 years ago for €2 billion. Such money, it says, would be better invested in building new social housing.

The backers of the referendum dismiss such figures, claim the cost would be €7 billion and point to the report’s backing for a buy-back at below market rates. Replenishing social housing stock, campaigners insist, would act as a valve to release pressure on the private market.

For an estimated 200,000 Berlin tenants affected, Kehler said the report was “like winning the lottery”. For now, though, Berlin’s centre-right coalition government refuses to cash in the ticket.

As the debate rolls on, Tim is watching closely from Youghal. Charging rent at the lower end of the local rates, he wonders if Berlin’s buy-back plan could take on an arbitrary life of its own.

“It’s easy to talk about taking property back from the corporates,” he said. “But I bought my flats when Berliners weren’t interested. What happens if they come down the line now to people like me?”