What is it about and what has happened so far?
Despite the rent cap, rents in Berlin are rising rapidly: anyone who rents an apartment in the capital today pays an average of 70 percent more than in 2016, without wages having risen to the same extent. The “Expropriate German Housing and Co.” initiative wants around 240,000 apartments to be withdrawn from the free market and socialized. To this end, she initiated a successful referendum in 2021, in which almost 60 percent of Berliners voted for the socialization of large housing groups.
The Berlin Senate then set up a commission of experts, which came to the conclusion that socialization was legally possible. “Expropriate German Housing and Co.” has now submitted a draft law for socialization, which the Berlin Left would like to use as a basis. It stipulates that apartments belonging to corporations with more than 3,000 apartments in Berlin should be socialized. A new public institution will manage the apartments.
What does socialization mean?
Even if the name of the initiative “Expropriate German Housing and Co.” includes expropriation in accordance with Article 14 of the Basic Law, from a legal point of view it is about socialization. These are provided for in Article 15 of the Basic Law. This involves transferring “land”, including land and the apartment buildings on it, into “common property” “for the purpose of socialization”. The original owners must be compensated. Private property becomes public property. This public property must then be managed and managed for the common good.
The historical background is: When the Basic Law was written in 1948/1949, the bourgeois parties and the social democrats could not clearly agree on an economic order. Because bourgeois politicians at the time had great reservations about overpowering industrial bosses who had helped the Nazis to power a few years earlier, Article 15, an instrument against too much private economic power, was written into the Basic Law. Citizens should decide in elections whether the future will be more towards capitalism or a socialist community economy.
Expropriations are something different. These are regulated in Article 14 of the Basic Law. The issue here is that, for example, individual specific pieces of land are needed for a motorway or a dike and the property owners do not want to sell. The state can then expropriate these properties, but must also pay compensation.
Would socialization be constitutionally permissible?
The legal conditions under which large housing stocks can be socialized are controversial among lawyers. This is because Article 15 of the Basic Law has never been applied. So this is completely new legal territory. The expert commission appointed by the Berlin Senate was made up of well-known constitutional lawyers. The majority came to the conclusion that socializing large housing stock would be constitutionally possible.
However, there are a number of legal sticking points. One of them is proportionality, i.e. the principle that the state must not interfere too much with the fundamental rights of citizens and companies. The Commission believes that there is no less drastic but equally good alternative to creating affordable housing.
But there are also other voices: The legal scholar Ulrich Battis has written a legal opinion for the “Neuewege Berlin” association. Among other things, he says: The state of Berlin would not be responsible for the socialization of living space to this extent. It would also be disproportionate and violate European law.
How should compensation be provided?
If Berlin had to compensate the housing companies at market value, the costs of socialization would be up to 36 billion euros. The market value is the price that could be achieved with the land and apartments on the open market. However, the majority of the expert commission comes to the conclusion that the current market value of the apartments does not have to be used as a basis for the compensation, but that the compensation should be lower. She suggests various compensation models for this.
The draft law from the “Expropriate German Housing and Co.” initiative, for example, stipulates that around 40 to 60 percent of the market value per property or apartment will be reimbursed. This sum is to be paid off over 100 years through the rental income that Berlin gains from the apartments. The country should not incur new debts. However, the question of compensation remains highly controversial from a legal point of view and would probably have to be clarified by the Federal Constitutional Court - just like many other questions of socialization.
Could the federal government ban socialization in Berlin?
At the beginning of July this year, the federal government's coalition committee decided to put a stop to the socialization of rental apartments at state level. Because they endanger private housing construction. The decision has already been criticized by the Berlin SPD. Lawyers are also arguing about the proposal. Chancellor Friedrich Merz would now like to push the proposed law further.
The crux of the matter is the question of whether the federal government is even allowed to pass such a law. According to the Basic Law, associations are part of the so-called competing legislation. This means that the states are allowed to create laws here as long as the federal government does not do so. However, the Federal Constitutional Court has said clearly: A law that has the sole purpose of preventing the states from taking action in a certain area is unconstitutional.
Such a federal law would also require that this is the only way to ensure the “establishment of equal living conditions” and the “preservation of legal and economic unity” in Germany. In the end, the Federal Constitutional Court would probably also have to clarify whether this is the case.
