The socialization debate before the Berlin House of Representatives election

The election for the Berlin House of Representatives next Sunday will be dominated by one topic. Almost exactly five years to the day after the referendum on the socialization of housing portfolios of large real estate companies, the socialization debate could also determine the balance of power in the new Senate. The previous government parties, the CDU and SPD, spoke out against the socialization of housing stock during the election campaign. The Left, which is just over 20 percent ahead of the Union in the most recent surveys, wants to implement the referendum just like the Greens.

The Berlin economy is holding its breath. “The socialization debate questions the social market economy and scares investors away,” says entrepreneur Sebastian Stietzel, President of the Berlin Chamber of Commerce and Industry. The Berlin-Brandenburg business associations (UVB) put it even more clearly. “It would be nothing less than a frontal attack on our economic system,” says UVB Managing Director Alexander Schirp. Socializing apartments would not help people in Berlin to live cheaper again, he says. “In the long term, we will only be able to live more cheaply with more apartments, which will not come if even the last investor is deterred.”

According to the Senate, there is a shortage of more than 100,000 apartments in Berlin. While the population grows by the size of a small town every year, the housing supply is not keeping pace with the influx. Last year the net migration was just under 20,000. The number of completed apartments fell to around 11,000, the lowest level in the past ten years. Asking rents have risen by almost 70 percent over this period. Rents for new apartments are more than twice as high as existing rents. In no other major German city is the gap greater. This particularly affects many households here. The rental rate in the capital is above 80 percent.

Anger over developments in the housing market led to the “Expropriate Deutsche Wohnen & Co” initiative in 2018. The initiators accuse the real estate companies of abusing their market power. In 2021, they launched the “referendum on a resolution for the Senate to develop a bill for the socialization of the housing stocks of large housing companies”, which received almost 60 percent approval. The Senate, which was then still led by the SPD, set up a commission of experts that classified a corresponding proposed law as fundamentally constitutional. The government, led by the CDU since 2023, developed a framework law for socialization in accordance with Article 15 of the Basic Law.

An initiative by Berlin banks warned of the consequences in the summer. Socializing housing stock would not lead to more living space, but would drive real estate companies into insolvency, deter private investors and burden the state of Berlin far beyond the budget's carrying capacity, explained Berliner Volksbank, Berliner Sparkasse, Deutsche Kreditbank and Investitionsbank Berlin. “Socialization would be a precedent that would result in economic upheavals that go far beyond the Berlin real estate market,” said Carsten Jung, CEO of Berliner Volksbank.

There are different estimates about the costs of socialization. Companies with more than 3,000 apartments in Berlin would be affected. The relevant inventory is estimated at more than 230,000 apartments, of which around 130,000 would be attributable to the real estate group Vonovia alone, which took over the portfolio from Deutsche Wohnen. The Berlin State Audit Office puts the necessary compensation payments to companies at up to 36 billion euros. It is based on the market value of the property. The “Expropriate Deutsche Wohnen & Co.” initiative expects a maximum of 17 billion euros and proposes financing through the state’s bonds.

The initiative, which presented the first draft of a corporate law a year ago, sets 40 to 60 percent of the market value of the real estate for corporations' compensation. “Socialization is the best way to create permanently affordable living space,” says Tobias Gralke, a spokesman for Deutsche Wohnen & Co expropriate. The apartments would be removed from speculation and rents would be kept stable. “This will have a dampening effect on the entire market,” says Gralke. Affordable new construction could also help stabilize rents. Investors who only create living space if it is profitable for them are not welcome. “There is no fundamental right to profit from housing,” says Gralke.

Economist Stefan Kooths, who is working on a report on the economic consequences of socialization at the Kiel Institute for the World Economy, sees it differently. “For an economist, it is not surprising that the socialization of existing housing stock does not change the actual problem of scarcity,” says Kooths about the preliminary results of the study commissioned by the Berlin economy. If the country were to use the funds for new apartments instead of for compensation, it would have a greater effect on average rents, says the economic researcher. It would be even better if the Senate designated more building land and issued building permits more quickly, he says.

If the state takes over more than 200,000 apartments in order to reduce rents, that would be spectacular, says Kooths. “But it won’t have a lasting effect,” says the economist. He is more concerned about the signal effect that socialization of property in Berlin would send to all of Germany. “This is extremely dangerous because it would make the investment location overall less safe,” he says. Legal certainty and property protection are among the location factors with which Germany can still score points even in the current difficult economic environment.

Hinrich Holm, CEO of the Investitionsbank Berlin, reported the first doubts about these location factors in the summer. “We are already seeing an impact on start-ups and questions from investors about whether their capital is safe here,” he says. Ibrahim Köran from the venture capital company Heliad confirms this perception: “The socialization debate is significantly damaging to the location; the expectation alone is detrimental to the investment climate and thus the growth prospects of start-ups.” Caution is growing, especially around the establishment of companies in the field of defense technology as part of the DefTech strategy adopted by the Senate in 2025, also because the Left party rejects settlements and research in the sector.

Philipp Kreibohm from the investor network SB 21 is also critical of the socialization debate. The political dispute is tying up forces while the new building is not making progress, he says. “The housing problem is real and will not be solved with symbolic politics.” What worries him more than the Left's program is the AfD's emerging growth in the election to the House of Representatives. “An ecosystem that largely consists of highly qualified immigrants hits 18 percent harder for the AfD than any property debate.”

The AfD is opposing the socialization of home ownership in the election campaign, but will not receive a government option in the state of Berlin after next Sunday. The Expropriate Deutsche Wohnen & Co initiative has already announced that it will make the draft of a socialization law it has developed the subject of another referendum this year. The federal government wants to forestall this by banning the nationalization of large rental housing stocks through socialization laws at the state level.