Die Linke’s housing plan in Berlin: high costs and no growth

Berlin. There is no longer any talk of expropriation. Now the watchword is ‘socialisation’, a concept that perhaps still needs clarifying but is certainly less threatening – at least in terms of how it sounds. Over the weekend, talks between Die Linke (social communists), the Greens and the SPD (social democrats) – who came first, fourth and fifth respectively in the 20 September elections to renew Berlin’s legislative assembly – concluded on a slightly optimistic note. The exploratory negotiators from the three political forces have drawn up a draft programme to be presented to their respective parties, to decide whether to proceed with full-scale negotiations or whether – though this applies only to the Greens and the SPD – to abandon the red-green-red project and throw themselves into the arms of the Christian Democrats (CDU), who came second ahead of the sovereigntists of the AfD.

The draft, which the three parties must approve or reject by 31 October, promises a relentless fight against anti-Semitism and against “anti-Muslim racism, anti-Roma sentiment and racism against Palestinians”, but the main attraction is Die Linke’s proposal to expropriate – or rather, “socialise” – the property holdings of Berlin’s major corporate groups. The measure would affect all companies with more than 10,000 flats in the capital: any properties exceeding this threshold would be acquired by the city-state.

In Berlin, the housing crisis is twofold: on the one hand, the price per square metre has risen much faster than in any other German city; on the other, the city continues to attract East Germans, European citizens, immigrants from America and the Middle East, and refugees from all over the world, growing by 20,000 inhabitants a year, with peaks of 40,000. Die Linke won the election by promising to put an end to this crisis. How? The red-green-red coalition agreement plans to bring 160,000 flats back under public control. A rent cap could then be introduced for the approximately 440,000 publicly owned flats, limiting increases to a maximum of 2 per cent per year.

Cost of the operation: 16 billion euros. A mad idea for many, especially as Berlin’s public finances are already deep in the red. Yet ‘socialised’ housing really is capable of cooling the property market. Konstantin Kholodilin, a researcher in the Department of Macroeconomics at the German Institute for Economic Research (DIW Berlin), explains: “For the 20 per cent of the population with the lowest incomes, expenditure on rented accommodation as a proportion of disposable income has risen from 30 per cent in 2001 to 40 per cent in 2024. And we’re talking about an average; for some, the situation is much worse – so the problem is both acute and widespread. When there is a large stock of council housing or accommodation managed by non-profit organisations, this has a moderating effect on rent levels.”

Kholodilin’s other point is that tenants of social housing are, as a rule, better protected against the risk of eviction. All very well, were it not for ‘the other side of the coin’: 160,000 flats, costing 16 billion, works out at 100,000 euros per flat, compared with an average value of 150,000, explains the researcher, without ruling out a flood of appeals. The financial implications are significant: Berlin would cover 20 per cent of the operation, amounting to 3.2 billion euros to be financed – a new burden on the entire resident population. “And the interest rates aren’t even low,” adds the researcher. Kholodilin also points out the further sum of almost 13 billion euros that the special-purpose companies, set up by the city council, would have to raise on the market to purchase the properties: “They would do so as private entities, at higher rates than those granted, for example, to the local authority.”

And who will pay for the maintenance and refurbishments? Perhaps the city once again, at the taxpayer’s expense. Not to mention that money is a finite resource: the market would be completely drained ‘and there would be no money left for other investments’, against a backdrop of ever-rising interest rates.

For the researcher, the icing on the cake is that “this measure would not solve the problem of housing shortages, as it would merely redistribute existing homes”. In short, a highly questionable move. We then ask Kholodilin if there is nothing that can be done, and his answer is surprisingly creative: the researcher reminds us that around 50 per cent of flats in Berlin are occupied by a single person and that 40 per cent have at least four rooms: “It’s the classic case of the elderly lady living in a flat with more than three rooms”. Instead of evicting her or raising her rent, why not renovate her flat to create two? “Perhaps we could invest just six, eight or ten billion to support existing public or private property companies, so that they have the necessary resources to build new housing. I believe that would be much more beneficial for the market.”