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.
Germanyâ€™s capital is taking extreme measures to stay (relatively) affordable and not go the way of San Francisco or London. Beginning in early 2020, Berlinâ€™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 arenâ€™t jacking up prices. Theyâ€™ll also have to follow new rent-cap rules, which for many landlords could mean lowering rents by as much as 40%. Those who donâ€™t comply will be hit with fines as high as â‚¬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 propertiesâ€”almost one-eighth of Berlinâ€™s housing stockâ€”and turn them into public housing. And while the move may sound far-fetched, itâ€™s won support from anywhere from 29% to 54% of Berliners, according to yvarious polls. Two of the cityâ€™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 Merkelâ€™s Christian Democratic Union. Theyâ€™ve signaled their intentions to challenge the new regulations in court.)
Berlinâ€™s landlords, big and small, are reeling. The cityâ€™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 Berlinâ€™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 Berlinâ€™s shortages. â€œAlmost 30 years after the fall of the Berlin Wall, it seems that some people want the former conditions back,â€ Michael Zahn, chief executive officer of Berlinâ€™s largest publicly traded landlord, Deutsche Wohnen SE, said in an earnings call in November, referring to the former East Germanyâ€™s all-controlling government. â€œTenants and landlords will face great uncertainty. Thatâ€™s a poison pill for investment.â€