Berlin’s great corporate landlord mistake
Ruby Hinchliffe reports from the German capital on how it is fighting to restore social housing and what Britain can learn from it
Mortgage arrears are piling up fast for Britain’s private landlords, having climbed 174pc over the past year. Despite London’s average rent tipping over £1,000, those letting a couple of mortgaged properties can no longer make the numbers work. With a quarter of landlords planning to sell up over the next year, according to insurer Simply Business – and many having already exited their portfolios – demand for rental properties is only continuing to rise. One group is trying to cash in on the opportunity. Household names such as Lloyds Banking Group and John Lewis have published their plans to become “corporate landlords”. In 2021, Lloyds launched Citra Living – a subsidiary that bought 604 new homes for £168m from Barratt earlier this year. John Lewis has also said it wants to build 10,000 new homes in and around London as part of efforts to make 40pc of its profits from outside the retail sector by 2030. But as Berliners will tell you, landlords with deep pockets and boards of investors aren’t necessarily the antidote to a saturated rental market. In fact, Berliners rue the day their city decided to sell hundreds of thousands of homes to private equity-backed corporate landlords to make a quick buck. The city’s largest renter association has since said that while individual landlords typically raise rents by around 20pc, corporate ones will raise them by as much as 50pc; all the while their residents, laden with maintenance issues, are left to feel like numbers on a spreadsheet. Now, Berlin state officials are struggling to return the properties back to social ownership. Chris Anders, 35, has lived in a Deutsche Wohnen- owned apartment in Neukölln, Berlin, for four years and pays around €800 a month – or £700 – for it. “Their shareholders have nothing to do with the provision of my home. And yet, hundreds of euros of my rent goes straight into their pockets each month,” he explains. Other corporate landlords with a stronghold in Berlin include Vonovia – Deutsche Wohnen’s new owner – as well as Adler, Heimstaden, Grand City Properties and Covivio. Their shareholders benefit from around 41 cents of every euro tenants pay in rent on average, according to the research arm of consumer lobby group Finanzwende. This, among other discoveries, is why Anders became a member of “Deutsche Wohnen & Co Enteignen” ( Expropriate Deutsche Wohnen & Co) – a campaign group born out of Kreuzberg’s underworld to topple Berlin’s corporate landlords for good. Two years after gaining a majority in a referendum to put 250,000 privately owned homes back into social ownership, renters are still campaigning. ‘Privatising our housing was a mistake’ Everyone, even Berlin state officials, admit the sale of social homes to private corporations was a grave mistake. Unlike London, around half of Berlin’s population has traditionally qualified for social housing. Now, in the city of renters – who make up 85pc of all residents – there is less social housing than council houses in London. Renters dominate in Berlin, partly because Germany’s pension system is much more generous than Britain’s. This means retirees don’t necessarily need to own a property to make ends meet when they leave the workforce. Jochen Lang, head of the housing, urban renewal and urban development funding division at the Senate, says: “Of course, privatisation of municipal housing was a mistake. But at the time, many other cities across Europe were selling their housing stock too. “Back then [in the 1990s], Berlin was broke and around 10pc of our apartments weren’t being used. Thousands were also being demolished.” With a surplus of social housing at the time, the state decided to sell off some of its apartments to shrink a growing, multibillion-euro debt. Up until two years ago, it would have been relatively easy for the city to buy these apartments back. But now, with inflated prices and high interest rates, it is no longer viable. “These days, we don’t get good prices,” says Lang, a renter himself. The mid-term goal is to reach 500,000 state- owned apartments – currently, there are around 380,000 on its books. But the state is also struggling to build new properties. Price of construction isn’t falling, despite the cost of debt driving down demand. Environmental regulations and Nimby neighbours are weighing heavy on developers’ timelines too, much like in the UK. Corporate landlords don’t stick to rent controls In Berlin, landlords cannot raise rents on existing tenancies by more than 10pc. But this rule isn’t sanctioned, which means it is often broken, according to Dr Hamann-Onnertz, a managing director at Berliner Mieterverein. She says individual landlords typically won’t raise rents more than 20pc. But corporate landlords, she says, will run roughshod over these rules to the tune of 50pc. As well as repeatedly breaking rent cap rules, tenants have also accused corporate landlords of spending far less than other housing providers on maintenance. The city’s six largest corporate landlords have spent € 10.93 per square metre on repairs and maintenance in recent years, according to an academic report commissioned by socialist lobby group Rosa-Luxemburg- Stiftung. This was compared with the €18.54 spent by state-owned housing companies. Hamann-Onnertz says rule-breaking rent hikes are the most common reason tenants who live in corporate landlords’ properties reach out for support. After that, it is maintenance issues such as water pouring through the roof and repeatedly failing elevators. Corporate landlords, Hamann- Onnertz says, tend to deinvest in their stock so shareholders can receive larger dividends. Anders says he has friends who say their “individual landlords are good and look after them”. But those in shareholder-owned property, he says, always struggle to get a reliable service. Every Christmas “just like clockwork”, he says the heating in some of Deutsche Wohnen’s apartments will fail and not be fixed for weeks. “It’s not even a scandal anymore because it’s so predictable.” A spokesman for Deutsche Wohnen said some of its buildings are 50 to 60 years old and added that it distributes mobile radiators to tenants during periods of delays. Earlier this year, corporate housing giant Vonovia came under scrutiny following accusations that some of its staff had taken kickbacks from contractors in return for preferential treatment. Rolf Buch, the company’s chief executive, admitted in March: “It appears individual employees at our subsidiaries have accepted bribes to the detriment of Vonovia – that is not acceptable.” The findings of an internal investigation overseen by Deloitte are due imminently. A spokesman declined to comment. ‘These rent increases make people angry’ High rents and a lack of social housing mean the city’s tenants are now petrified of moving. Until this year, Berlin’s social housing bands had been frozen. This summer, they were raised so those earning €2,000 a month – such as nurses and train drivers – could actually qualify. Though with the shortage in stateowned homes, many are still renting in the private sector where rents feel unaffordable. Andrej Holm, a professor at Humboldt University, lives in a family-sized apartment with his partner. He has plenty of room to accommodate his piles of academic books, but with kids on the cusp of flying the nest he will soon have more space than he needs. Holm, one of the city’s ex- deputy housing ministers, says: “No one is willing to move into another apartment. If I was to move into a smaller flat, I’d still be paying more.” He pays around €1,500 for his apartment now, equating to €7 per square metre. If he was to move, he would have to pay around €12 per square metre – taking his rent well over €2,000. As a result, families in need of more space simply aren’t getting it. “It’s the return of overcrowding. And it’s not just affecting the poor. Middle- class families aren’t able to move into bigger homes. You’re often hearing of two or three- child families in two - bedroom apartments.” Holm acknowledged that the drive towards expropriation “sounds a bit like a communist rebellion”, but he believes the reason why the first referendum was so successful was because it mobilised much of the middle-class. “This is not just a problem for low-income households. People with a lot of money didn’t expect rental prices to go up. Back in our days as students, we said we wouldn’t pay more than € 200 a month. Now students are paying over triple that. “These rent increases make people angry and more open to radical demands.” A final attempt to restore social housing Members of Deutsche Wohnen & Enteignen are currently preparing for a second referendum to restore the city’s social housing. They want 250,000 privately owned homes to be placed back into social ownership. There is much debate over how this would work in practice. The city’s most radical argue that the stock should be sold for a nominal £1. Others say the state could force the companies to sell them back at a reasonable price below the market rate. The first referendum did not carry the legislation needed to make it count and so, this time, the group has crowdfunded £100,000 and poured it into writing legal documents stipulating how it will work. If they win again, the law will have to be passed the next day.