Apartment rents have increased faster thant he incomes of wage earners. Real estate decays to an object of speculation. Capital seeks lucrative investments. Hectic activity and bustle replaces inactivity and idleness since the protests of renters cannot be ignored any more.
GOOD HOUSING FOR ALL
2019 Memorandum
By the Alternative Economic Policy study group, Bremen, Germany
[This memorandum published on 8/25/2019 is translated abridged from the German on the Internet, www.alternative-wirtschaftspolitik.de.]
Housing becomes increasingly expensive. Apartment prices and rents, particularly in the population centers, have increased faster than the incomes of wage-earners. Real estate decays to an object of speculation. Capital seeks lucrative investments. The housing market degenerates into a distribution battle between capital and labor. Whoever supports market forces makes the rich richer and the poor ever poorer. Politics is overstrained with the current housing policy drafts. Since the protests of renters cannot be ignored anymore, hectic activity and bustle replace inactivity and idleness.
In this explosive situation, the Alternative Economic Policy study group presents its special memorandum "Housing." Causal analyses, stocktaking, and the property question are central. Scenarios of future possibilities are offered. The debt brake could also act as a creative brake.
Ten theses on housing:
The problems in the housing market go back to long-term errors in the control system. These include the deregulation of the housing market, the privatization of the public housing stock and the effective end of promoting apartment construction. The crisis on the housing market is a symptom of a neoliberal redistribution policy in favor of capital.
2. Capital switches to real estate markets in the search for lucrative investments given the low-interest rates. Real estate decays to a speculative object. Prices are forced up. Higher rents claim a growing part of the income of paid workers. The wage incomes must increase enormously to make the average rental prices affordable. However, such a rise in wages is unrealistic for many reasons.
The private market has not built enough units. More than a million apartments are missing in Germany, particularly in population centers. Affordable apartments are in very short supply. Apartments are built without addressing the need. Luxurious apartments arise that are unaffordable for most people.
The current construction boom has all the characteristics of a short-term boom…
A free enterprise solution of the housing question is not in sight. Today's market failure in the housing market is fueled by the unequal distribution of wealth.
In the past, the housing market was structured by state measures. Today, state interventions are necessary so the social division between capital and labor can be halted.
The rent ceiling provides short-term relief to the housing shortage but cannot solve the problem. An expropriation of housing corporations cannot change the inadequate housing supply and will only outfit investors with new funds for new speculation.
State investment programs in new housing are urgently necessary. Errors of the past could be avoided. Communal apartment building programs should have priority over promoting private investors. The debt brake becomes more and more a brake on possibilities.
Building new apartments at affordable rents is feasible.
The current land tax reform will probably raise the rents in population centers. Homeowners must continue to pay the land tax as a wealth tax. This tax may not be shifted to renters in the course of the reform.
Background
More than a million apartments are currently missing in Germany – above all in population centers. Official projections start from a necessary new construction of 350,000 to 400,000 apartments per year…
A "social housing construction" was developed in Germany with the new apartment programs of the postwar era promoting developers through subsidies, loans at reduced prices and higher deductions for certain rental prices for a limited time. Altogether the model promoted investors with limited "interim social use." It was flanked by the creation of housing subsidies as wage subsidies. However, a new orientation was carried out with the economic crisis of the 1970s. Special apartments should only be built with state support for the very needy and not for broad population sectors anymore. This changed the character of some existing "social housing" that became social focal points. Affordable housing was regarded as a marginal problem or a marginal group problem.
In the old German states, the free enterprise "normalization" of the housing economy was manifested in the abolition of housing cooperatives from 12/31/1989. At the same time, the new construction of social housing was largely ended. The number of subsidized units fell inevitably. In 1988, there were 495,000 social apartments in Bavaria. By the end of 2018, there were only 137,000. In Berlin, the number of social apartments sank in the same period from 340,000 to 116,000 and in North-Rhine Westphalia from 1,411,000 to 458,000… Altogether German social housing declined from 4.1 million units to 1.1 million units…
The 1990s brought a boom in new construction comparable to the early 1970s… With the 2006 federalism reform, the sole responsibility for social housing was shifted to the German states. Most German states did not meet their responsibility for social housing. This blind liberalization of the housing market has long-term consequences. A crucial field of social state development was systematically terminated.
Housing costs and wealth
The repercussions of privatization have a continuing effect. The consequences of liberalization, privatization, and financial market orientation appear mercilessly on the housing market in population centers… The dynamic of capitalism can easily come into contradiction with housing… For their own home or lower rents, millions of commuters accept long commute distances…
Who owns the rental apartments?
…In the course of the financial market-oriented change of values, traditional housing firms often adjusted their business policy to the general trend supported by a politics backing free enterprise or financial market economic solutions. This basic idea was condemned to fail. So housing became increasingly expensive. The division of society was fortified.
No free enterprise solution in sight
The housing shortage in population centers leads to higher rents, not to an adequate increased supply… The private market has not developed adequate living space even though the interests for house-building credits were extremely low for years. The long-term profits or yields in apartment construction for normal employees are too low for private investors…A dynamic demand faces the relatively static supply of apartments…migration to population centers intensifies the demand for living space… The labor market -, income-, and wealth situations of private households have far-reaching consequences. The omissions of the past cannot be overcome by short-term activism. Intelligent corrections are necessary.
Politics in the tension of its failures
The classical liberal answer to social conflicts on the housing market is making needy households market-accessible by subsidizing their purchasing power. The housing supply itself is left to market forces. The rents rising on account of market tightness are subsidized instead of creating affordable living space and easing the market. The funds expended in subject-promotion land directly in the pockets of real estate owners and relieve businesses of the duty of paying wages and salaries covering the reproductive costs of employees.
In the long-term, the expended public funds mostly disappear in the pockets of private developers while the rental subsidies are only temporary… The system is the error…
The Berlin rent ceiling example – only a breather
…Increased costs for landlords should be cushioned to avoid economic hardship for the owners. Nevertheless, the reaction of landlord associations is unambiguously negative,
The resolution of the regional Berlin government met with broad public approval. So the German Renters Union urges a rent moratorium. A state or local community can only rely on regulation for short-term relief. This is also true for many other political areas… A rent moratorium can only gain time for a housing policy based on reorientation,
From the recommunalization-hope to expropriation?
Raising the property- or ownership question is important given the enormous problems. That may be the greatest service of the Berlin initiative "Expropriate Deutsche Wohnen & Co"… The proposal aims at mammoth housing corporations with more than 3000 apartments and profit-maximizing intentions. The housing stock of profit-oriented businesses should be brought under public control to prevent further privatizations. The goal is the expansion of non-market housing stock. The models of the initiative were recommendations of local providers that were realized in the last years…The property question must be answered realistically and not only raised. Socialization of private property should not cost much…
Public investments in new housing
The pressure on the market can only be permanently reduced through an adequate housing supply. This is contested. The market fails in this task. Therefore, state interventions are urgently necessary. As an answer to the housing question, a housing policy is needed that improves housing conditions for broad sectors of the population, in the city and countryside and in the East as in the West. The question of how we want to live tomorrow is central, not only the supply of housing. Such a change can only occur through a democratic change of the hierarchy of power, not through lobbying or media-effective symbolism. As also true in the realm of environmental policy, this is a long-term process in which the self-image of the social actors must change and will change.
The state has a creative responsibility here. Reviving the social state is imperative. Germany can reconnect to its social state past. The market and regulation alone will not solve the housing question. Considerable investments are necessary.
Revitalization of public housing
A social solution of the housing question must give a realistic answer to the property or ownership question. Build public structures instead of promoting private investors!... Public tasks should be carried out by public authorities. "Vast possibilities for a post-neoliberal turn in local housing policy lie in public ownership" (Metzger, Joscha/ Schipper, Sebastian 2017).
In the next years, a new basic core of public housing should be built… Communal self-government should be complemented by forms of renter decision-making.
As a first step, an immediate program for building 100,000 new apartments in public ownership per year is necessary and feasible…
New housing cooperatives
Cooperative housing has a long tradition in Germany as in other European countries. In Prussia in 1867, cooperative housing firms were exempted from taxes. After the Second World War, cooperative housing in Germany was the backbone of the public housing supply. However, after over 100 years, cooperative housing construction was abolished in 1988 under the Kohl government. This created the basis for later massive privatizations of the housing stock.
How must modern cooperatives be organized so it contributes to solving the social problems in the housing market? Profits of cooperative housing firms should be reinvested in cooperative housing or used for rent deductions…
The new cooperative housing could be open to public and private businesses. Communal housing firms and non-profit cooperatives would be the central but not the only actors of the new cooperative housing. Firms could establish cooperative subsidiaries to supply inexpensive and attractive living space to their personnel under the prescribed criteria.
Effects on Rents
Financing
Housing projects are investments. Investments are usually financed through debts and these are counter-financed in the long-term through returns (in this case, rents or taxes). In 2009, the German Bundestag and Bundesrat ignored this economic principle and changed the German Basic Law so net credit borrowing was limited to 0.35% of the GDP and new indebtedness for German states would be completely prohibited from 2020 (German debt brake).
Nevertheless, financing the necessary housing programs is possible. Local communities are not affected by the prohibition of new credit borrowing. Credit-financed new construction is possible through nationwide construction firms for city-states that fall under the credit prohibition. Since a gigantic investment backlog arises in all possible areas (infrastructure, public buildings, protection of the atmosphere etc), the credit-prohibition anchored in the Basic Law proves to be a future- and creativity-brake. Therefore, it should be rescinded.
Conclusion
The problems in the housing market are homemade and go back to long-term errors in the control system. A free-market problem solution is not in sight. Therefore, the Alternative Economic Policy study group urges building communal housing. The supply of affordable living space must be increased.. Affordable rents could be permanently protected with the development of public housing. This seems urgently necessary because of the current inequalities, imbalances, and discrepancies. Only resistance and opposition lead to a harmonious future.
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RENT MADNESS
Why We Need New Housing Cooperatives
By Attac AG – De-Privatization
[This article published on 9/29/2019 is translated abridged from the German on the Internet, https://theorieblog.attac.]
Renter protests have forced the urban housing shortage to the political agenda. However, the answers of politics are completely inadequate. To solve the housing crisis, more radical measures are needed like new housing cooperatives. This background paper describes the goals, instruments and underlying conditions of this concept and concrete initiatives for its realization.
Hardly a day passes in which the media do not show the distress of renters in cities or forward the advice of diverse experts. Politics react at best on the local plane. The German government shines through inactivity that it tries to cover up with placebos like the rental price brake or ceiling.
Still, the great support for more radical measures like squatting and expropriations is slowly putting governments under pressure. One of the foundations of capitalist societies, private property, is openly called into question.
As a result, the private real estate economy increasingly loses legitimation. Its lobbyists try to regain control of the discourse in the media and politics. But they must admit their distancing propaganda toward any regulation of the housing market hardly cuts the ice. Housing is a vital necessity and must be removed from the private pursuit of profit.
Building, Regulating or Expropriating
After the renter protests forced the housing shortage to the political agenda, a broad discussion broke out on countering this problem. Different perspectives are clear.
The private construction industry and the real estate economy promote the expansion of house building without changing the legal framework as their ideal solution. "Build, build, build" is their battle-cry. State support and tax privileges should flow but new buildings and the lion's share of the housing stock should remain in private hands.
The position of trade unions and renter unions is different. They rely mostly on a mix of building and regulating. They want to stimulate home building with state incentive programs in both private and public authority. They seek to decelerate the rent increases in the population centers through instruments like improved rental brakes or moderate rental ceilings.
Renter initiatives are the driving force of the debates. They demand a fundamental transformation of the predominant private housing sector. They want to fight speculation on houses and property with radical rent ceilings, expropriations, cooperatives, and buyouts. The private housing market should be shriveled and the public housing stock expanded.
The demand for new housing cooperatives (NHC) is common to renter alliances, unions, and initiatives. A cooperative housing sector should arise through tax relief and privileged access to subsidies and property. This could be guided by public and cooperative firms and socially controlled by the renters. In a countermove, the favored businesses must guarantee affordable rents and accept social rights of occupation by the local communities.
Commercialization of the Common Good
The concept of new housing cooperatives reacts to the inadequacy of current approaches to the generation of social living space. While social house building suffers from flaws in its incentive system, public housing firms and cooperatives were insidiously commercialized.
Private Enrichment: the System Error of Social Housing
The incentive of social housing construction represents a gigantic redistribution of tax funds in favor of the construction industry and private real estate proprietors. The state grants subsidies when investors agree to limit rent increases (usually only for 15 years) and award people housing certificates or permits.
After the expiration of the subsidy period, these apartments fall out of the social obligation which often leads to drastic rent increases and displacement of renters. Although state financing was crucial, the property returns to private control after the subsidy period ends. This is part of the absurdity of the system.
At the end of the 1980s, there were still around 4 million social apartments in Germany. Through the decline in subsidies, this number shriveled to 1.1 million social apartments today. On average, 75,000 apartments lose their social bonds annually. [1]
Continuing this system through increasing subsidies for social housing cannot be the solution. Tax funds are only expended for "interim social use." [2] The rich continue to enrich themselves thanks to state subsidies. Instead of this, a transformation of the subsidy system is necessary. In the future, state funds must help develop a permanently affordable housing stock in public authority.
Plundered and Fleeced: Public Housing Firms
Many renters of communal housing firms also come under pressure regarding rental prices and business practices. Communal firms often resemble profit-oriented companies. Changed political conditions including the end of cooperative housing and budget cuts are mostly responsible for this development.
The abolition of tax privileges for cooperative housing firms carried out under the Kohl government forced their costs to skyrocket and was especially fatal. This paved the way for privatizing their stock. The public sellout increased considerably after the red-Green German government fiscally released the capital gains of corporations. Since then, around 1.1 million apartments were privatized.
Today, cities with tense or strained housing markets have few possibilities for creating a sufficient number of affordable apartments and lowering rents.
Communal housing firms suffered under the disastrous budgetary policy of the Red-Green German government. Generous tax gifts to the rich ensured a continuing low tide in the public treasuries that also reduced the supply of social housing. But that was not enough. With the 2009 introduction of the debt brake, the Black-Red German government intensified the austerity course.
Through the austerity pressure, communal housing firms were misused as milkers or milking cows that brought back surpluses to the tight local communities. To gain their surpluses, they raised the rents so enormously they were veritable drivers of high rental prices…
Cooperatives Reloaded
To safeguard the supply of social housing, the housing sector must evade commercialization and become a public asset. The new housing cooperative (NHC) as discussed for several years in Berlin could gradually bring about a shift of the ownership structure for houses and property with the development of a cooperative housing sector. Businesses that apply the NHC principles should be rewarded with different privileges: tax relief and privileged access to state subsidies. In a countermove, they must agree to permanently affordable rents and democratic control of the businesses. The NHC necessitates political changes on the federal, state and local community planes…
Democratic Control: From State Property to Common Property
Expanding public housing stock can happen in different ways. One central prerequisite is stopping the sell-off of public property and the housing stock.
A public housing firm must be created if it does not already exist. Local communities could then gradually develop a housing stock through construction or purchase. German states and city-states have the additional possibility of expanding this stock by expropriating private housing firms.
As its most important challenge, the NHC needs instruments for preventing future privatizations and for democratizing public firms…
Public property is only state property released for public use. The governing parties have the control, not the citizens, the real sovereigns. They set the conditions for use and have the right to develop or sell the public property as they please.
However, socialization requires that citizens can influence the control of public firms. Citizens must have the right to jointly determine rental prices, investments, and criteria for allocating housing. [5]
The Way is the Goal: Encouraging Initiatives
In many local communities, there are already initiatives that take the first step on the way to a new housing cooperative reality. They offer a valuable treasure of experience that could be used by activists in other cities.
In Osnabruck, a civil society alliance initiated by Attac led to a council resolution to form a communal housing firm… In Kiel, an "Alliance for Affordable Housing" formed a new communal housing firm in September 2018…
Expropriation: A Legitimate Remedy
In Berlin, the referendum petition "Expropriate Deutsche Wohnen & Co" fights for the expropriation of holdings of private corporations with more than 3000 units. These holdings should Passover into an establishment of public law that would be democratically controlled by renters and the urban society. This initiative is an important contribution for an NHC…
The Expropriation initiative met with great approval in the maltreated Berlin renter alliance and massive resistance by the real estate lobby… The initiative strives for socialization according to Article 15 of the German Basic Law. [9]
Moreover, borrowing for socialization is an investment that pays off in time. The conditions for borrowing are very favorable on account of today's low interests. Playing off the different instruments for expanding the public housing stock – building, purchasing and expropriating – against one another is senseless.
A Better World: Conditions for the NHH
A New Housing Cooperative could help ease the housing crisis. Its effectiveness depends on the political conditions that must be changed. This involves firstly regulating the nearly uncontrolled capital streams that intensify social and regional inequality. Secondly, the public authority must supply the necessary funding for the NDC.
The Tax- and Debt Break Must End
Investment-seeking capital in Germany has massively swollen with the tax gifts to the rich and their austerity policy. Enormous sums flow into the real estate stocks of the population centers where investors speculate on rising land- and rental prices…
The tax brakes must be relaxed to finance vital regional necessities and cooperative homebuilding. Both require greater public employment, hiring administrative personnel for the new apartments. Therefore, the country needs a progressive tax reform together with higher top tax rates and revival of the property- or wealth tax.
The debt brake and the policy of the "zero deficit" must be overcome, not only the tax break. The austerity policy blocks the necessary borrowing for expanding the housing stock and the regional infrastructure. The striking under-investment in Germany is the most important reason why the European Central Bank urges continuing its low-interest policy and resumption of its loans. Real estate prices and rents will rise again in the population centers. The fetishists of the "zero deficit" in the German government bear essential responsibility for the rent excesses.
EU: Combating Deficit Rules
The European Union also puts veritable hurdles in the way of a cooperative housing sector. The deficit rules of the Maastricht treaty and the restrictions of the state aid law are the most dangerou8s weapons of EU authorities.
So the EU Commission took up the complaints of the private real estate lobby that campaigned against the Dutch subsidy system for social housing… EU law endangers the system of cooperative home building in Vienna regarded as exemplary all over Europe for its successful social mix and comparatively low rents. That was the impulse for the European citizens' initiative "Housing for all" that originated in Austria. Its most important goals are changing the EU deficit regulations and the state aid law. [11]
Rent Ceiling: Thwarting Profit Expectations
Thwarting the exorbitant profit expectations of real estate investors is one of the most important conditions of social housing supply. For example, a rent ceiling as now discussed in Berlin is ideal for that.
It was a success of the renter protests when the Red-Red-Green German Senate submitted key points for a strong rent ceiling in June 2019. This froze rents for five years and established upper rent limits. However, the Senate gave way to the vehement resistance of the real estate lobby and the smear campaign against the cooperatives. In September 2019, a draft for a greatly watered-down rent ceiling was presented.
Rent ceilings could be a suitable instrument for containing speculative price increases for property or land and not only for rents. But rent ceilings must be carefully designed with viable upper rent limits. That is a prerequisite. The evasion possibilities of landlords like high modernization surcharges or remodeling into their condominiums must be prevented.
The legislative process continues in Berlin but the example already radiates. In Bavaria, there are plans for a referendum introducing a real moratorium. The "Hesse – Rent Madness" alliance demands a nationwide rent ceiling.
The Time is Right: Housing Must Be a Common Property
The many local initiatives to combat the housing crisis show one thing very clearly: the time is right for more fundamental measures that go beyond the policy of small consolations. More and more people understand that the housing system belongs in the public domain and must be democratically controlled. New Housing Cooperatives offer a suitable instrument for that with starting points for communal, regional and national plans.
The central challenge today is exerting the necessary pressure for building a cooperative housing sector. The renter protests on the regional- and national planes and not only on the local plane are important and cannot be ignored. Local mobilizations are often impressive examples for the larger contexts. We organize nationwide protests by joining local mobilizations. Opposition and resistance is the way forward.
RELATED LINKS
"Against the Rent Madness and For a Nonprofit Orientation!," 2018
https://www.indybay.org/newsitems/2018/09/24/18817740.php
"Affordable Rents? A State of Emergency Intensifies," 2018
https://www.indybay.org/newsitems/2018/10/01/18817927.php
"The Right to the City and the Greed of the Rich," 2017
https://www.indybay.org/newsitems/2017/12/01/18805018.php
Original: Good Housing for All and Rent Madness