Berlin has been making waves in the global news with a campaign to expropriate a large private owner of apartments. Some uncollected thoughts after the jump.<\/p>\n
Deutsche Wohnen <\/a>owns more than 100,000 rental units in Berlin, making it the city’s largest landlord. The majority of this rental stock consists of formerly city-owned apartments that underwent privatization in the 1990s and 2000s, mainly under a left-wing government.<\/p>\n The main question, i.e. whether expropriation is legally enforceable, is not for me to answer and will doubtlessly keep courts busy should a referendum succeed. The organizers of the campaign think it is in line with Germany’s constitution.<\/p>\n The other major question, i.e. whether such a move is financially affordable, is important for deficit-weary Germans. Germans’ obsession with\u00a0the “black zero”<\/a>\u00a0is often used to make any major government expenditure look morally wrong due to the burden it places on future generations.<\/p>\n But of course nationalizing 100,000 apartments creates a cash flow, and interest rates are still very low for large-scale borrowing to be affordable. So the initiators of the expropriation campaign have crunched the numbers<\/a>\u00a0and suggest this transaction can be self-financing, i.e. do without government subsidies.<\/p>\n The major question relates to the assumptions you put into any model: Should you compensate Deutsche Wohnen (or other entities to be expropriated) at market prices or find a formula to separate general market price increases from the price appreciation due alone to the owners’ investments in the capital stock?<\/p>\n If we agree that prices have been seriously inflated — what is your baseline year for calculating market prices? When socializing land on a grand scale during the 1970s and 1980s, Singapore fixed <\/a>land acquisition prices at 1973 levels because value creation had been primarily “socially, rather than privately created”.<\/p>\n (Singapore being of course a very special case with limited land. However, I think that our global urban future has to proceed with less private ownership <\/a>if we are to confront some important sustainability issues. More on that later. Hopefully!)<\/p>\n Much of the recent past’s real estate value appreciation stems from zero interest rates by the ECB following the financial crisis. Does that mean 2009 offers a convenient base year? That would hurt property owners substantially.<\/p>\n The answer to this question obviously has a huge bearing on the eventual price tag for expropriating the major private players — will it “cost” EUR 28 or 38 billion, even more, or much less?<\/p>\n I have to admit that the campaigners from Berlin make a convincing point<\/a> when they argue for a more aggressive re-pricing of the portfolio of apartments.\u00a0This would allow renting these apartments out at a much more affordable price if the whole transaction were to be self-financing.<\/p>\n Then again, the boss of Deutsche Wohnen also\u00a0has a point <\/a>when he says that in the future, we will have to learn to live on less space in our cities. For him, that thought derives from justifying higher per-square-meter rental prices. For others, this is a sustainability issue, and unavoidable in an age of growing cities and climate change.<\/p>\n Finally, the head of the Young Socialists (JuSos), the “youth” organization of Germany’s Social Democrats has made a few interesting points <\/a>recently. Besides calling for the collectivization of BMW, he suggested that no one should own more than the living space occupied by him- or herself. Unsurprisingly, the response was largely hysterical, even in his own party<\/a>. I think it’s the way forward.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" Berlin has been making waves in the global news with a campaign to expropriate a large private owner of apartments. Some uncollected thoughts after the jump.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[16,35],"tags":[],"class_list":["post-4466","post","type-post","status-publish","format-standard","hentry","category-economics","category-personal"],"_links":{"self":[{"href":"https:\/\/benbansal.me\/index.php?rest_route=\/wp\/v2\/posts\/4466","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/benbansal.me\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/benbansal.me\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/benbansal.me\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/benbansal.me\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=4466"}],"version-history":[{"count":4,"href":"https:\/\/benbansal.me\/index.php?rest_route=\/wp\/v2\/posts\/4466\/revisions"}],"predecessor-version":[{"id":4478,"href":"https:\/\/benbansal.me\/index.php?rest_route=\/wp\/v2\/posts\/4466\/revisions\/4478"}],"wp:attachment":[{"href":"https:\/\/benbansal.me\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=4466"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/benbansal.me\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=4466"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/benbansal.me\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=4466"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}