In Berlin, a Radical Proposal to Combat Rising Rents: Expropriate Big Landlords

City takes the lead in growing effort by affordable housing advocates and lawmakers around the world to help financially strapped renters

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If Rouzbeh Taheri has his way, Berlin's government will seize apartments from major landlords.

On Saturday, the tenant advocate and his allies plan to start collecting signatures for a ballot proposal that would push the city to expropriate all private, profit-seeking landlords that own more than 3,000 apartments.

And this isn't the only proposal targeting Berlin's real-estate industry. In January, the city's mayor, Michael Mller, proposed buying around 50,000 apartments from private owners while his Social Democratic Party wants to freeze rents for the next five years.

Berlin is at the forefront of more cities and countries around the world considering radical policies to keep a lid on rising apartment rents. Years of increases have left renters financially squeezed and governments under pressure to do something about it.

Now some are deciding that promoting housing construction isn't enough to keep cities affordable, and are seeking to constrain the ability of private landlords to raise rents.

Spain's government recently adopted a decree to cap apartment rent increases. Lawmakers in New York and Chicago arepushing to implement(Links to an external site.)

or strengthen rent controls.

But no city is going quite as far as Berlin.

If Mr. Taheri's "ExpropriateDeutsche Wohnen(Links to an external site.)

," a name referring to a major apartment landlord, sounds like a leftist pipe dream, opinion polls say otherwise. According to a survey by pollster Forsa Institute published in February, 44% of Berliners generally support the measure, while 39% oppose it. Die Linke, one of three parties in the city's coalition government, backs it, and another, the Greens, has yet to make up its mind.

The proposal is based on Article 15 of Germany's constitution, which allows the government to socialize land for the public good. Landlords would be compensated, but whether that would have to be at market value is disputed.

The measure is still a long shot. First, Mr. Taheri needs to collect more than 170,000 signatures to make a referendum possible. Even if voters approve the ballot measure, it won't be binding. Industry groups argue that, despite Article 15, the expropriation would violate state and federal law, and would almost certainly sue to block it. How the cash-strapped city would come up with billions to compensate property owners is unclear.

But trade groups worry that even if the ballot fails, it will help push public opinion to the left, put pressure on politicians and further stir anti-landlord sentiment. Last week, several cars belonging to Deutsche Wohnen were torched and the police are investigating the attack as a potential politically motivated crime.

"A goal of the initiative was to drive away investors and create something poisoned, and it succeeded and that's very bad for Germany and Berlin," said Manuela Damianakis, Deutsche Wohnen's spokeswoman. She argued that by scaring off private investors, the initiative will make it harder to build much-needed affordable housing.

Mr. Taheri argued that even if the ballot isn't binding, it will be difficult for City Hall to ignore. And he pointed out that Berlin's mayor only proposed that the city buy back 50,000 privately owned apartments after he launched his initiative. "In other German cities people are intently watching our campaign and saying 'finally a radical solution'," he said. "Because we've been experiencing the radicalism of the free market for years, and now we have to take a radical countermeasure."

Berlin's affordability crisis is relatively new. After it became the capital of a reunified Germany in 1990, the city remained poorer and more affordable than other German cities like Hamburg, Munich and Frankfurt.

"Ten years ago, empty apartments were the problem in Berlin," said Julian Zado, deputy head of Berlin's Social Democrats and one of the people behind the push for a five-year rent freeze.In 2004, the city sold more than 65,000 publicly owned apartments to private investors.

Over the past decade, rents roughly doubled as the city's famed nightlife and cultural scene attracted more young professionals from around Europe. In 2015, Germany's federal government implemented a so-called rental price break that placed certain limits on how fast rents in big cities could rise. Meanwhile, Berlin started buying more rental apartments from private landlordson a smaller scale than Mr. Mller proposedunder a law that grants the city a right of first refusal for property sales in neighborhoods deemed at risk of gentrification.

But critics say this and other measures have done too little to keep housing affordable in a city where more than 80% of apartments are rentals. In the second half of 2018 alone, rents in Berlin rose by 9%, according to brokerage firm JLL, although the city is still far cheaper than London or Paris.

Joanna Kusiak, a research fellow in urban studies at the University of Cambridge, argued that, if successful, Mr. Taheri's ballot could set an example for other cities across Europe to pursue more aggressive policies to protect tenants. It matters, she argued, that the most radical push to keep rents low happens to be "coming from the power center of the European Union."

Question 1: We are going to utilize the concepts from the Supply and Demand model. After reading the article above, if Berlin decides to implement a rent control policy, is this policy an effectiveprice ceilingor aprice floor?

Question 2: Based on your answer in #1 above, will "quantity supplied be less than quantity demanded" or will "supply be less than demand". There is a difference between quantity supplied and supply and a difference between quantity demanded and demand. To get the points for this question then proper terminology must be used. Since question #2 is based on your reply to question #1 above, if #1 is incorrect then question #2 will also automatically be incorrect.

Question 3: Let's say that the rent control is implemented, what do you think will happen to theQUALITYof the apartments. Will the qualityincreaseordecreaseandWHY? (Hint: Put yourself in the landlord's position where you are now receiving less rental money than what you could have charged in apartments.)