These three ideas could be the end of the tenant nightmare


Lerato Khumalo

Rents are rising and rising – and the traffic light coalition is lagging far behind its new construction target. Is it time for uncomfortable ideas?

The most important things at a glance

22 euros per square meter? That’s now standard for new rentals in Munich. In many other big cities, too, rent prices are continuing to rise. And this despite the fact that fewer and fewer people are moving to the big cities and more and more people are moving to the countryside. The search for a new home has become a nightmare in many places.

How can this be ended, how can the housing crisis be stopped? The traffic light coalition is focusing on new construction: up to 400,000 apartments are to be completed each year, including 100,000 social housing units. But the results so far are mixed: this goal has already failed miserably in 2022 and it will probably not be achieved this year either.

The problem: building is becoming more and more expensive. At the end of January, Germany’s largest housing group, Vonovia, announced that it would stop all new construction projects planned for 2023 due to rising interest rates and inflation. The real estate and construction industry is therefore calling for greater support for new construction.

But will that alone be enough? Or is it time for more radical ideas to create affordable housing? An overview of three controversial ideas:

They still exist in Austria, but Germany abolished them in 1990: non-profit housing companies. The concept is easy to explain: housing companies commit to offering their existing housing as social housing and receive a tax exemption in return. They are also obliged to reinvest the profits in new construction projects. Since housing in big cities is becoming increasingly expensive and scarce, this idea has become controversial again.

The reason for the abolition of non-profit status under the former CDU Chancellor Kohl was primarily financial: the tax exemption was too expensive, said the government at the time. Lukas Siebenkotten, head of the German Tenants’ Association, sees things completely differently: a non-profit sector would be cheaper for taxpayers in the long run.

Because: Such companies could offer social housing without a time limit. This is not the case in the current system. Municipalities buy so-called occupancy rights for social housing in order to rent it out for a certain period of time, often 30 years. After the period has expired, new rights must be acquired. This is unattractive for many landlords in the currently tight housing market and the municipalities have to dig deep into their pockets. This is also why Germany loses thousands of social housing units every year. A non-profit sector could counteract this problem, says Siebenkotten.

If the federal government were to reintroduce non-profit status, municipal companies could set up a subsidiary to offer cheaper housing and thus save taxes, explains Siebenkotten. “Of course, that won’t immediately solve all the problems on the housing market,” says Siebenkotten. “But it would be an important building block.”

The criticisms: The German Economic Institute (IW), which is close to employers, spoke out vehemently against the reintroduction of non-profit status back in 2016. The economists see a problem, among other things, in the management of these companies. Because there are no economic incentives, there is a risk that these companies will be poorly managed.

In addition, economists and the housing industry fear that new problem areas could emerge. If a non-profit housing company does not have sufficient funds, there is a risk of poor quality housing – which will then only be moved into by people who have no other choice.

Siebenkotten does not see these dangers. “When existing companies set up subsidiaries, they are ultimately run by the same people as the parent company,” he says. In addition, unlike in the 1970s, today the focus is on mixed residential areas and no more social housing projects are being built.

The return of the prefabricated building – or not? The Ministry of Construction wants to give new impetus to serial construction in Germany. This means that houses will no longer be built in their entirety on the building sites. Instead, building parts, so-called modules, arrive prefabricated and are simply assembled on site.