An Innovative Solution to the Affordable Housing Crisis in Berlin


London, 15 January 2018 – For the average earner, it is becoming increasingly difficult to find affordable housing in Berlin. Rents have risen by 72% over the last 10 years, and the purchase price for an apartment has doubled in the same period. Berlin attracts investors from all over the world so how do we balance growth and modernisation with affordable housing and a mixed milieu, which makes the city a vibrant and creative place to live?

Urbanologists say the conflict between investors and renters is detrimental to a city's health in the long term and we are currently seeing this in working-class areas like Kreuzberg where rents and property prices are rising. One solution to help relax the housing market is to is bring back state subsidies for developers and to motivate the private housing sector through a rewards system. This has been successful in the past and helps alleviate the tense situation between landlords and renters.

“We should take a positive approach to the problem,” says Achim Amann, CEO and co-founder of Black Label Properties. “This is a great opportunity to relax the housing market. The private sector would be more motivated by the state through a ‘rewards system’. We suggest that developers are supported by state subsidies again which was successful in the 1990s with Sonder-Afa Ost, a special tax depreciation to motivate builders to create affordable housing. The state doesn’t lose any money, and private individuals can be brought back into their own property with this solution.

“In the 1990s we had tax cuts for people who promised to rent cheaply for 20 years after the building was constructed. We now want to see that developers are motivated to build and sell their properties cheaply so that normal people can buy them and create their own assets, rather than staying renters for the rest of their lives.”
Listen to Achim Amann talking about this issue in a special report for Spiegel TV. (from 55:18 mins).

New Tax Breaks for Rental Apartments

Affordable housing has been on the political agenda in Germany for years. In 2015 the federal government introduced a rent cap and other measures including increasing environmental protection areas (where the conversion of rental apartments into owner-occupied apartments is subject to authorisation). These actions have not helped to alleviate the tense situation in the Berlin housing market. In 2016 the government also planned to introduce a new tax law for special write-offs on rental apartments to encourage investors to buy tenanted property in areas with a tight housing market. According to the government’s draft bill, up to 2,000 EUR per square metre would have been eligible for funding. There was also a cap on the amount that would be paid (3,000 EUR) to prevent the tax breaks from being misused to build new luxury real estate.

“The new legislation should have been adopted in 2016 but unfortunately it has stalled so it’s very frustrating – it could have been put into law a year ago. We still see special write-offs for private investors as a sensible way out of this issue. It is not acceptable that many people who work in Berlin can no longer afford to live in the city,” continues Amann.

The Wrong Types of Apartment Are Being Built

It's nothing new that German cities are running out of affordable housing, but it’s also become clear from new research* by the economic think tank, Cologne Institute for Economic Research (IW) that the wrong type of housing is being built. The study found that only 32% of the necessary new apartments were built in Germany’s main cities between 2011 – 2015, which puts huge pressure on the housing market. In Berlin, there was a particular scarcity – just 20% of demand was being covered – in particular, of two to four-room apartments. Those looking for an upmarket apartment (five rooms +) however, have no shortage of options.

“Many property developers can’t afford to buy land in the suburbs and have no choice therefore but to continue to build luxury apartments so that the project is worthwhile. However, expensive and large apartments are now difficult to sell. We have too many large (four to five room) apartments being built which most people can’t afford in larger cities anyway. There is a lack of smaller (two and three-room) apartments. If private developers don’t start building cheaper, smaller and shared flats, they will carry on exceeding demand, and the cycle will continue. We need to find incentives to help them do this and push the government to introduce new tax breaks to support the market.”

Read more in Zeit Online, 2 May 2017.

Deutche Welle (DW): Germany building too few homes, and the wrong kind (8/2/2017)

Cologne Institute for Economic Research:
Michael Voigtländer: Three Risks for the German Residential Property Market (21/8/2017)

Zeit Online: There are enough luxury apartments (2/5/2017)

Spiegel TV interview with Achim Amann, pre-election broadcast (3/3/2017)

About Black Label Properties

With over 25 years’ experience in the real estate industry, Black Label Properties specialises in helping international clients to find a home in Berlin. We offer a full-service package and support which includes financial advice, tax/legal, visas, relocation services and business mentoring. For news and updates on the Berlin property market follow us on Twitter, Facebook, LinkedIn and YouTube.

Press contact: Nicci Talbot, 07758 621106.

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