According to a study, socializing large housing stock in Berlin would increase the housing shortage. However, if the amount assumed for compensation were invested in new construction, up to 71,000 new apartments could be created by 2045, according to the study by the Kiel Institute for the World Economy. This could “significantly dampen” the rent increase.
The economists calculated what rent level would be necessary to recoup the one-off compensation paid and at the same time cover ongoing costs.
There is a dispute about how high the compensation should actually be. After all, the Kiel Institute estimates that there is a housing stock worth around 40 billion euros. Would the state of Berlin have to pay the full market value to the housing companies? Or 80 percent? Even just 20 percent? In its scenario, the research institute assumes compensation of 50 percent - around 20 billion euros. A proportion that is also used as a basis for other calculations.
The result: If the net rent were frozen at the current average rent for these apartments of just under eight euros per square meter, the costs would still be covered in 2026. However, in order to operate without losses in the long term, the rent would have to rise with inflation from 2027, i.e. be indexed, the economists calculated.
Economic initiative warns of “dangerous experiment”
This means that the rents for public housing are below the level of private housing companies. However, according to the Kiel Institute, this would have a disadvantage: anyone who lives in one of these apartments would want to keep it and therefore no longer move out. This would increase the so-called lock-in effect and reduce the supply of available rental apartments. In addition, new construction investors could withdraw from the market. “The advantage for existing tenants turns negative for the entire market in the long term because the supply continues to thin out and price pressure increases for everyone,” says Stefan Kooths, study author from the Kiel Institute. The conclusion is clear: the scarcity problem would not be solved; it would be exacerbated by partial socialization.
And the study authors see another disadvantage: who benefits from the cheaper rent depends on chance - namely on whether someone lives in one of the socialized apartments or not. This means that people who could actually afford a higher rent would also benefit. “As a result, there will be even more standstills and incorrect assignments,” said study author Stefan Kooths from the Kiel Institute. The model is neither convincing in terms of housing nor social policy.
New construction in the lower price segment makes more sense
The Kiel Institute suggests that it would be more effective to invest around 20 billion euros in the construction of new apartments. Especially in simple apartments in the lower price segment. “If this sum were to flow into new apartments, the asking rents could be up to 8.7 percent lower than expected today by 2045,” says the study. And that would dampen price increases across the market.
The study was commissioned by the economic initiative “Berlin thinks ahead”. The business associations united therein warn of a “dangerous expropriation experiment.” Members of the initiative are the Berlin Chamber of Industry and Commerce, the Berlin Chamber of Crafts, the Berlin-Brandenburg business associations and the Berlin Merchants and Industrialists Association. The arguments of the study are in line with those of other institutes, such as the employer-oriented Institute of German Economics IW.
Another study sees socialization as a useful element
On the other hand, just last week the union-affiliated Institute for Macroeconomics and Business Cycle Research (IMK) of the Hans Böckler Foundation as well as the University of Mannheim and the University of Duisburg-Essen also published a study on the socialization of large housing stocks. They also come to the conclusion that socialization cannot solve the housing shortage; This requires “new construction on a large scale”.
However, this study also argues that socialization, as it increases the stock of rent-controlled apartments, “makes an important contribution to making life in Berlin affordable for lower and middle incomes.” Socialization can therefore be a useful, complementary element to the new building. It is important to implement socialization in such a way that the construction of new apartments does not suffer. Tom Krebs, an economist at the University of Mannheim, argues similarly.
Point of contention in possible exploratory talks
The Berlin Left had made the socialization of large housing companies one of their central election promises. In doing so, she took up a referendum from 2021 in which the majority of Berliners spoke out in favor of socializing apartments - more than 200,000 apartments could be affected.
After its clear victory in the elections to the House of Representatives, the Left announced that it would stick to its plans. The SPD, however, rules out socialization. The topic could therefore become a central point of contention in possible exploratory talks between the Left and the SPD and the Greens.
