09 Feb 2020

Cities Make People Crazy, and It’s Happening in Berlin

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A Berlin rent protest.

You missed visiting bombed-out, rubble-strewn Berlin post-1945? Don’t worry. You’ll have another chance, just a few short years down the road, to see entire empty neighborhoods comprised of falling-down, abandoned buildings.

New York City had square miles of buildings like that, back in the 1970s, thanks to Rent Control.

When Government Price Controls gift tenants with give-away rents and buildings’ incomes fail to suffice to pay taxes and buy heating oil, their owners have no choice but to walk away. Nobody wants to abandon valuable real estate, but when the Government expropriates all the income and destroys a property’s value, abandonment becomes inevitable. In NYC, countless thousands of buildings, entire neigborhoods, were once boarded up and abandoned. Berlin’s turn is obviously coming.

Bloomberg

Germany’s capital is taking extreme measures to stay (relatively) affordable and not go the way of San Francisco or London. Beginning in early 2020, Berlin’s left-leaning government will freeze rents for five years. Landlords will be required to show new tenants the most recent rental contracts to prove they aren’t jacking up prices. They’ll also have to follow new rent-cap rules, which for many landlords could mean lowering rents by as much as 40%. Those who don’t comply will be hit with fines as high as €500,000 ($553,000) for each violation.

Even more radically, tenant groups and thousands of activists are demanding that large corporate landlords be expelled from the city altogether, their property expropriated. The goal is to get the government to buy back roughly 250,000 properties—almost one-eighth of Berlin’s housing stock—and turn them into public housing. And while the move may sound far-fetched, it’s won support from anywhere from 29% to 54% of Berliners, according to yvarious polls. Two of the city’s three ruling political parties have even endorsed a nonbinding public referendum on whether to force big landlords to sell their real estate to the government. (The biggest party, the Social Democratic Party, or SPD, is against the move, as is German Chancellor Angela Merkel’s Christian Democratic Union. They’ve signaled their intentions to challenge the new regulations in court.)

Berlin’s landlords, big and small, are reeling. The city’s publicly traded real estate companies, whose share prices fell for most of the summer after the government announced the planned freeze in June, complain that Berlin’s new regulations will scare off needed capital. Fewer companies will invest in modernizations to make buildings more appealing or energy-efficient, they say, and construction of new units may suffer, which would exacerbate Berlin’s shortages. “Almost 30 years after the fall of the Berlin Wall, it seems that some people want the former conditions back,” Michael Zahn, chief executive officer of Berlin’s largest publicly traded landlord, Deutsche Wohnen SE, said in an earnings call in November, referring to the former East Germany’s all-controlling government. “Tenants and landlords will face great uncertainty. That’s a poison pill for investment.”

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3 Feedbacks on "Cities Make People Crazy, and It’s Happening in Berlin"

OneGuy

My state is thinking about rent control. I admit rents are high. But my property taxes are about 25-30% of my monthly payment. I just bought a new home and I know that the city and county have regulations that increase the cost of the land and the structure by about 30%. The bottom line is I would have to rent the house for $2000 a month just to break even AND about 50% or more of that expense is directly caused by government.

Our governor is also floating legislation that would increase property taxes to create a pool of money that could be used to build “affordable housing”. The irony is so think you could cut it but they either don’t understand or don’t care.

Another irony is that “affordable housing” will actually cost more to build than my simple home did. Why? Because government! They cannot do anything without cost over runs and the most expensive choices. So the working stiff has to pay 50% more for housing and the drug/alcohol addicts and marginally insane will pay nothing but we taxpayers will have to pay their rent forever once they get ensconced in their “affordable housing” unit. Again the irony is lost on our politicians.



Seattle Sam

Most of these people missed Econ 101. Leftists seem to want to learn all the laws of economics through painful experience instead of learning from history.



Mike-SMO

The Leftist urban machine Corruptocrats are hitting the economic wall. Their controlling position depends on poverty and dispair.

High expenses require well paying jobs a/k/a gentrification, that will drive away the captive but essential “Gibbs-Me-Dat” class. People who work hard to earn a good income are not likely to give it up to the Corruptocrats and then be victimized by the “sacred” ghetto population of one minority or another. The dependent class can go someplace else which leaves the urban ruling class out of a job.

What’s not to like?



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