[Economics] Berlins looming housing scam 2019-04-16

1. Supply and Demand
2. Privatization of Schools
3. Cui Bono

The Deutsche Wohnen Aktiengesellschaft (German Housing joint-stock company) is currently on everyone's lips. And a referendum has been launched that aims to expropriate the Deutsche Wohnen AG. [1] [2] In Berlin people have repeatedly demonstrated for this. And Katrin Lompscher (The Left) last took part in the demonstrations on April 6, 2019. [3] [4]

1. Private housing companies which own more than 3,000 apartments should be expropriated in accordance with Article 15 of the Basic Law and their holdings transferred to common ownership.
2. The affected companies should be compensated significantly below market value.
3. A public-law institution (PLI) will be created to manage the stocks. Its statutes shall state that PLI's holdings can not be privatized.
4. In the PLI the holdings transferred under public ownership are to be managed by a majority of the democratic population of the town and tenants.

[2]

The referendum demands that landlords with more than 3,000 apartments will be expropriated. For this purpose the state of Berlin should buy the apartments compulsorily and below value. The total cost would probably amount to 30 billion euros. Although such a referendum can simply be carried out one is not legally binding. [5] [6]

Grundgesetz für die Bundesrepublik Deutschland - Art 15
Grund und Boden, Naturschätze und Produktionsmittel können zum Zwecke der Vergesellschaftung durch ein Gesetz, das Art und Ausmaß der Entschädigung regelt, in Gemeineigentum oder in andere Formen der Gemeinwirtschaft überführt werden. Für die Entschädigung gilt Artikel 14 Abs. 3 Satz 3 und 4 entsprechend.

Basic Law for the Federal Republic of Germany - Art. 15
Land, natural resources and means of production may for the purpose of socialization be converted into public ownership or other forms of public service by a law governing the nature and extent of the compensation. For compensation Article 14 (3) sentences 3 and 4 shall apply. [5]

Grundgesetz für die Bundesrepublik Deutschland - Art 14
...
(3) Eine Enteignung ist nur zum Wohle der Allgemeinheit zulässig. Sie darf nur durch Gesetz oder auf Grund eines Gesetzes erfolgen, das Art und Ausmaß der Entschädigung regelt. Die Entschädigung ist unter gerechter Abwägung der Interessen der Allgemeinheit und der Beteiligten zu bestimmen. Wegen der Höhe der Entschädigung steht im Streitfalle der Rechtsweg vor den ordentlichen Gerichten offen.

Basic Law for the Federal Republic of Germany - Art. 14
...
(3) Expropriation is only permitted for the benefit of the general public. It may only be done by law or by law governing the nature and extent of the compensation. Compensation must be determined with fair consideration of the interests of the general public and those involved. Due to the amount of the compensation in case of dispute legal action before the ordinary courts is open. [6]

And social housing construction in Austria for example is a great success story. In the Austrian city of Graz a total of 564 municipal apartments were built in 2016 for a rent of only 5.81 euros per square meter. And in the Austrian capital Vienna there are council apartments in each district for a rent of only 5.80 euros per square meter. Such a policy affects the entire housing market and pushes prices down. Such intervention by the state in the market is largely harmless as technical innovations due to competition in housing are secondary. And housing construction results in apartments as assets which in turn generate income in the form of rents and are therefore comparable to investments. [7] [8] [9] [10]

Supply and Demand

Berlin is growing incessantly. In the third quarter of 2018 3,634,069 people were registered in Berlin. [11,p.4] And the tendency is rising open is just how fast. Depending on the forecasted scenario it could grow by another 5% until 2020. Of course this raises the demand side in the housing market. [12,p.24] This development is not least due to the fact that more people are staying in Germany as a result of the migration crisis. And the Berlin state government has repeatedly taken in people who were picked up with ships off the coast of Africa. [13] [14] [15] [16] [17]

With this in mind the behavior of the Berlin state government should be considered. If Katrin Lompscher (The Left) does not demonstrate for the expropriation of Deutsche Wohnen AG she is Senator for Urban Development and Housing in Berlin since December 2016. And since 2001 the Berlin state government has been continuously led by Social Democrats. Nevertheless both have failed to prevent the current situation in the housing market.

The plan for the construction of 30,000 predominantly cheap rental apartments in Berlin is not met. And instead of the planned 6,000 apartments only 3,000 were completed by the state of Berlin until 2017. [18] [19] [20] [21] In addition fewer building permits are issued on a regular basis. According to the Office of Statistics nearly a quarter fewer building permits were issued from January to March 2018 than in the same period in 2017. [22] [23]

Privatization of Schools

At the same time this red-red-green state government of Berlin privatizes schools on a large scale. The state government in Berlin asks the housing company Howoge for help with the construction of new schools. To bypass the balanced budget amendment a private company should be responsible. In this way, the costs should be borne as current costs instead of a one-off debt payment. The state of Berlin then retains the land but the HoWoGe cultivates it and leases it to the districts. After the rental period of at least 25 and a maximum of 33 years the schools then goes to the districts.

After the planning initially took place under exclusion of the public even district mayors criticized that the state government in the form of the Senate only sparsely disclosed information. But instead of changing or ending the balanced budget amendment in the state-constitution of Berlin the state government in Berlin gives the makers of the balanced budget amendment what they want. More return on private orders. And leftists have failed to prevent the exploitation of government contracts. See: [Economics] How a left-wing coalition in Berlin privatises schools

Cui Bono

So there are several questions. After expropriation the Berlin state government could directly determine the prices for these apartments and indirectly influence the prices for the housing market. However new apartments would not be created through an expropriation and thus won't give an answer to the growing demand in Berlin. The Berlin state government would simply transfer its own failure in social housing construction and the consequences of the next election to the Deutsche Wohnen AG.

It is also questionable why a joint-stock company should be expropriated instead of simply buying the shares. Depending on which decisions the Berlin state government would like to make the majority of 51% of shares could be enough to achieve their goals. In the past a takeover of the Deutsche Wohnen AG by Vonovia has already failed because not enough investors were in agreement with the selling price. In view of the privatization of schools and the failed social housing construction one should not trust the Berlin state government too much. [24] [25] [26] [27]

[1] Deutsche Wohnen Enteignen
https://www.dwenteignen.de/
[2] Deutsche Wohnen Enteignen - Forderungen
https://www.dwenteignen.de/warum-enteignen/forderungen/
[3] Auf Demo gegen hohe Mieten - Berlins Bausenatorin demonstriert gegen eigene Koalition 2019-04-07
https://www.bz-berlin.de/berlin/berlins-bausenatorin-demonstriert-gegen-eigene-koalition
[4] „SIE IST TEIL DES PROBLEMS“ - Berliner Bausenatorin protestiert gegen „Mietenwahnsinn“ - CDU findet es perfide 2019-04-10
https://www.merkur.de/politik/berliner-bausenatorin-katrin-lompscher-protestiert-gegen-mietenwahnsinn-cdu-findet-es-perfide-zr-12139961.html
[5] Grundgesetz für die Bundesrepublik Deutschland - Art 15
https://www.gesetze-im-internet.de/gg/art_15.html
[6] Grundgesetz für die Bundesrepublik Deutschland - Art 14
https://www.gesetze-im-internet.de/gg/art_14.html
[7] Studie: Gemeindebau – sozial treffsicher? 2016-03-22
https://diepresse.com/home/panorama/oesterreich/4951771/Studie_Gemeindebau-sozial-treffsicher
[8] HANAU - Graz macht’s vor 2017-04-26
https://www.fr.de/rhein-main/main-kinzig-kreis/hanau-ort66348/graz-machts-11047407.html
[9] WIRTSCHAFT - Wie sozial ist der geförderte Wohnbau? 2017-11-30
https://kurier.at/wirtschaft/wie-sozial-ist-der-gefoerderte-wohnbau/300.098.905
[10] Sozialer Wohnungsbau - Warum Wiener günstig wohnen 2018-09-20
https://www.deutschlandfunk.de/sozialer-wohnungsbau-warum-wiener-guenstig-wohnen.769.de.html?dram:article_id=428615
[11] Bevölkerungsentwicklung und Bevölkerungsstand im Land Berlin 3. Quartal 2018
https://www.statistik-berlin-brandenburg.de/statistiken/statistik_sb.asp?sageb=12015&PTyp=700&creg=B&anzwer=6&bok=1&bbok=1
https://www.statistik-berlin-brandenburg.de/publikationen/stat_berichte/2019/SB_A01-01-00_2018q03_BE.pdf
[12] Bevölkerungsprognose für Berlin und die Bezirke 2015-2030 2016 Januar
https://www.stadtentwicklung.berlin.de/planen/bevoelkerungsprognose/download/2015-2030/Bericht_Bevprog2015-2030.pdf
[13] Migration - Berlin will Flüchtlinge der „Sea-Watch“ aufnehmen 2018-12-28
https://www.focus.de/regional/berlin/migration-berlin-will-fluechtlinge-der-sea-watch-aufnehmen_id_10123046.html
[14] Libysche Flüchtlinge - Berlin würde "Sea-Watch"-Flüchtlinge aufnehmen 2018-12-28
https://www.rbb24.de/politik/beitrag/2018/12/seawatch-rettungsschiff-fluechtlinge-aufnahme-.html
[15] Flüchtlinge im Mittelmeer - Schiffe deutscher Seenotretter dürfen in Malta anlegen 2019-01-09
https://www.tagesspiegel.de/politik/fluechtlinge-im-mittelmeer-schiffe-deutscher-seenotretter-duerfen-in-malta-anlegen/23844206.html
[16] Lösung für "Alan Kurdi" - Deutschland nimmt Flüchtlinge von Rettungsschiff auf 2019-04-05
https://www.t-online.de/nachrichten/deutschland/gesellschaft/id_85536770/seenotrettung-deutschland-nimmt-fluechtlinge-von-schiff-alan-kurdi-auf.html
[17] Rettungsschiff "Alan Kurdi" - Vier EU-Länder nehmen Geflüchtete auf 2019-04-13
https://www.tagesschau.de/ausland/migration-fluechtlinge-rettungsschiff-103.html
[18] Leitung - Senatorin Katrin Lompscher
https://www.stadtentwicklung.berlin.de/service/de/senatorin_lompscher.shtml
[19] Wohnungsmarkt Berlin - Lompscher wird Ausbremsen von Neubau vorgeworfen 2017-09-12
https://www.tagesspiegel.de/berlin/wohnungsmarkt-berlin-lompscher-wird-ausbremsen-von-neubau-vorgeworfen/20319200.html
[20] Schupelius-Kolumne - Frau Lompscher ist eine Bausenatorin, die nicht baut 2018-01-06
https://www.bz-berlin.de/berlin/kolumne/frau-lompscher-ist-eine-bausenatorin-die-nicht-baut
[21] Debatte um Berliner Wohnungspolitik - „Entlassen Sie Frau Lompscher“ 2018-04-26
https://www.tagesspiegel.de/berlin/debatte-um-berliner-wohnungspolitik-entlassen-sie-frau-lompscher/21219842.html
[22] Wohnungsbau - CDU fordert Entlassung von Katrin Lompscher 2018-05-10
https://www.berliner-zeitung.de/berlin/wohnungsbau-cdu-fordert-entlassung-von-katrin-lompscher-30152164
[23] Nach bizarrer Personalentscheidung - Michael Müller müsste Katrin Lompscher entlassen 2019-07-06
https://www.tagesspiegel.de/berlin/nach-bizarrer-personalentscheidung-michael-mueller-muesste-katrin-lompscher-entlassen/22775650.html
[24] ÜBERNAHMESCHLACHT : Deutsche Wohnen wehrt sich 2015-11-28
https://www.faz.net/aktuell/wirtschaft/unternehmen/uebernahmeschlacht-deutsche-wohnen-wehrt-sich-13937189.html
[25] 14 Milliarden für Deutsche Wohnen - Vonovia legt offiziell Übernahmeangebot vor 2015-12-01
https://www.n-tv.de/wirtschaft/Vonovia-legt-offiziell-Ubernahmeangebot-vor-article16477866.html
[26] Übernahmekampf um Deutsche Wohnen - Vonovia verlängert Frist für Aktionäre 2016-01-25
https://www.spiegel.de/wirtschaft/unternehmen/vonovia-gibt-deutsche-wohnen-aktionaeren-im-uebernahmestreit-mehr-zeit-a-1073866.html
[27] Wohnungskonzern - Vonovia scheitert mit Mega-Übernahme 2016-02-10
https://www.spiegel.de/wirtschaft/unternehmen/vonovia-scheitert-mit-deutsche-wohnen-uebernahme-a-1076666.html