What is at stake after Berlin’s referendum for the expropriation of big corporate landlords

It was the mid-1990s and Berlin was suffering a fiscal crisis. Neoconservatism was the dominating ideology, spreading entrepreneurialism as the new mantra for urban development, preaching structural urban reforms to turn cities into attractive sites for international investment. This was the economic-political ambience, in which the privatisation of the city’s State-owned housing stock was presented as a no-brainer.

Years later, the no-brainer has proved how massive a failure it was. It led to an exponential increase in rents, mainly affecting lower income households, without leading to any improvement of the housing stock.

In January 2019, in view of skyrocketing rents and under pressure by social movements, the city’s government approved a five-year (2020-2025) rent-freeze, despite landlords’ fiery opposition and Angela Merkel’s federal government’s hostility. The so-called Mietendeckel was passed in January 2020 and came into effect on February 23 2020. It didn’t last long: in April 2021, Germany’s highest court ruled it unconstitutional.

But citizens refused to go away quietly. Deutsche Wohnen & Co enteignen, a campaign for a referendum in favour of the expropriation of big corporate landlords already underway since 2018, received a massive boost. The proposal would socialise 240,000 units, owned by 12 big corporate landlords, each having in its portfolio more than 3,000 apartments in the state of Berlin.

Big corporate landlords in an unequal property structure

It’s strange how normalised the workings of speculators has become. Investment funds, vulture capital, banks, insurance companies and other professional financial market players: these are some of the actors investing massively in commercial real estate around the world, but who are also active in the housing market – even more so after the financial collapse of 2008, which created unprecedented opportunities for big capital to buy cheap, fix, and resell at a much higher price.

Berlin’s housing market proved highly attractive for these companies due to the potential of a collapsing property structure to yield profit out of rent extraction. As for the ”buy it, fix it, sell it” scheme, the “fix it” part was ignored. In 2019, the total number of properties owned by the biggest corporate landlords was 240,000, all privatised after 2000 and still crumbling.

These companies distort the already extremely volatile and speculative property structure of Berlin, at the expense of tenants. According to a report published by Rosa Luxembourg Stiftung in 2019:

  • 16,5% of the total stock belongs to financial market investors,
  • 25,1% is distributed among big private owners,
  • 17% is distributed among small property owners,
  • 16% belongs to the six state-owned housing companies of Berlin,
  • 15,3% belongs to homeowners with one or two properties,
  • 10% belongs to housing co-operatives,
  • Another 20.000 belong to the church and charitable foundations.

It will be difficult to ignore a request made by such a clear majority.

Those against

Prior to the referendum, the government of Berlin, led by the Social Democrats (SPD), bought an estimated 15,000 homes back from Deutsche Wohnen, the biggest corporate player in the Berlin housing market. Some media sources announced this as a victory for the people and a retreat by the government. It was neither.

The purchase turned into a key argument for the government against the referendum, suggesting that it was unnecessary since politicians were already doing their job to socialise properties. Additionally, the city bought these properties back at market prices, even though their condition was worse than it was before their initial privatisation. This was not expropriation, but a State intervention in favour of big capital.

The campaign, for its part, clearly spelled out the meaning of expropriation (enteignen) and specifically Article 15 of the constitution, according to which “Land… may be transferred to common property… for social purposes.”      

There were two main arguments coming from those opposing expropriation – that is, the CDU (Christian Democrats), SPD and FDP (liberals). The first is that it scares investors away by sending a message that the State is expropriating property. After housing, what would be socialised next?

Secondly, they argue that the proposal would also expropriate housing co-ops (Genossenschaften). The campaign, for their part, insists that cooperatives serve the public interest by providing adequate housing at low prices and are therefore excluded from the proposal.

The soft spots

One fourth of the population, according to estimations, was unable to vote: Berlin residents without EU citizenship. This partly explains why, despite the high turnout in real numbers and the high vote share in favor of the referendum (59,1%), it still remained low considering the fact that 84% of the total population of the city are tenants. Many of those tenants, living in investment-starved, dilapidated housing, simply had no right to vote.

The “Right to the City” group, an English-speaking working group of Deutsche Wohnen & Co enteignen, has tried to include migrants in the campaign. Although insisting that they cannot speak on behalf of all migrant groups in Berlin, they attempt to represent immigrant experiences in accessing housing and thereby add diversity to the campaign.

There is also no single, mature and active tenant union to provide the organising needed for a long-lasting struggle against corporate landlords, despite low home ownership rates. The Berlin Tenants’ Association, with 180,000 members, does little more than providing legal assistance to members. In 2020, the Tenants’ Union of Berlin was founded, with a more militant mission: providing a long-term base for organising, testing new ways of contending housing disputes such as direct action and rent strikes, safeguarding tenants’ rights but also tenant agency and sharing knowledge for the purpose of self-empowerment of the tenants. The MGB seeks more radical action, but there is still a long way to go.

Organise, convince, expropriate! 

The counter-arguments were not enough to overturn the wave of civic rage unleashed after years of speculation and exploitation at the expense of the poor.

This was due to the impeccable organisation of the campaign, crushing defamation. The main organising body, primarily charged with resource management (coming from voluntary contributions), ensured access to decision-making for all participating members. The main executing bodies were organised at neighbourhood level, divided into sub-groups (for legal support, awareness raising, collective participation etc.), while the whole campaign was not geared around large-scale, central protests but into local, decentralised actions, organised by grassroots action groups.

Areas dominated by suspicion of the new left and marked by a strong right-wing presence, such the district of Marzahn – a working-class neighborhood but stronghold of the far-right AfD – were tackled by militant segments of the campaign who charged themselves with the difficult task of fitting in and helping raise local awareness. For example, activist groups from the guaranteed pro-referendum neighbourhood of Friedrichschain made it their job to fill in information gaps with their field actions in Marzahn.

In total, 1,035,950 people (56,1%) voted in favor of expropriation and 715,698 (40,86%) opposed it. Central districts, like Kreuzberg and Friedrichshain, voted “yes” overwhelmingly, as did the majority of voters in Marzahn.

There were only two districts in which a majority was against expropriation: Steglitz-Zehlendorf and Reinickendorf, both strongholds of the CDU with high levels of homeownership.

The referendum explicitly calls for expropriation of the stock at below-market prices.

Landlords’ defiance and the strategically elusive demand of the campaign

On Monday, a day after the referendum, the firm Akelius transferred its Berlin portfolio of 13,700 properties to Heimstaden. On that same day, Vonovia, the second largest corporate player, acquired a majority stake in Deutsche Wohnen stock.

That purchase took place for two main reasons. First, Vonovia believes that the expropriation will not take place. Second, it hopes that if the city does socialise units, it will do so at market prices, and such a transaction would be highly profitable. That would violate the essence of the referendum, which explicitly calls for the expropriation of the stock at below-market prices.

The referendum did not come together with a pre-crafted proposed legislation on behalf of the campaigners. This is because in 2014, a similar law put on the ballot was legally discredited, leading to the cancellation of the whole campaign. This time the organisers preferred a different approach, so as to not jeopardise the referendum taking place. The city government, therefore, is responsible for turning the referendum’s text into law.

Several committees in both the Federal Parliament (Bundestag) and the Senate of Berlin confirm that the expropriation request is legally valid and compatible with the constitution. If the call for expropriation is followed to the letter and to the spirit, companies will still be compensated, but not at market prices. The State will then have to set the compensation and decide which entity is to manage the socialised housing stock.

Many activists have pinned their hopes on the Bezirke, the district-level councils that played a key role in preventing evictions and controlling rents. The Bezirke, nominating leftists and activists, usually offer the strongest tenants’ protection because of two key tools:

  • the Vorkaufsrecht, which gives a Bezirk a right-of-first-refusal on properties,
  • the Milieuschutzgebiet, which means that in the poorest areas with larger swathes of people in need of social protection, the conversion of a tenure into property (mainly the conversion of rented houses into privately owned properties) cannot take place without the approval of the Bezirk.

But the campaigners have defence enough. Their intention is to push for the expropriation to be implemented, and they are focused on the district level and local representatives to enforce the popular will in the city’s Senate.

However, it is the skeptical SPD that holds a majority both in the city and in the federal level. Yet they cannot govern alone. The composition of the new administration, whether it will be a conservative or progressive coalition, will play a key role.

According to the activists, the law can be drafted by the spring of 2022 and the expropriation will cost between 9 and 10 billion euros. If their local representatives or the government try to bypass them, they will call for a new referendum, this time spelling out their 21-page long legislative proposal. A vote in favour would mean that the proposal would become law, bypassing the parliament altogether.

What does the referendum result mean to housing activists everywhere?         

The decision of Berliners to expropriate corporate landlords will surely be a point of reference for housing movements everywhere. The housing crisis is raging worldwide. Since the financial collapse of 2008, housing precarity is eating its way into the core of societies, unsettling even those defining themselves as part of the middle class who were previously protected by the alleged robustness of their housing system. Now these too are collapsing under the pressure of finance and speculation.

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