socialization | Because of the threat of expropriation: Heimstaden stops investments

Is that enough reason to flee? Even before socialization takes shape, Heimstaden pulls the ripcord. Photo: IMAGO / Bildgehege Is it just rumbling or is it really shaking? The Heimstaden real estate group has announced that it will no longer invest any money in Germany as long as there is talk of socializing larger housing stock in Berlin. "Of course I believe that you can't invest in Germany if you make laws like that," said Christian Fladeland, co-chairman of Heimstaden Bostad, in an interview with the Bloomberg news agency.

After Vonovia with 130,000 apartments, Heimstaden with 20,000 apartments would be most affected by a possible socialization law. Around 15 percent of Heimstaden's portfolio is located in Berlin. If such a law comes into force, the Adler Group and the French company Covivio would also have to give up part of their estimated portfolio of 17,000 apartments each.

Although he sees a "very, very low probability" that the company will actually be socialized in the end, the uncertainty would already have an impact on where the company invests, said Fladeland. In the event that a coalition of the Left, the Greens and the SPD comes into being in the Berlin House of Representatives, the three parties have already agreed to relieve private housing companies of part of their property. Everything beyond a deductible of 10,000 apartments should be expropriated. A total of a maximum of 16 billion euros in compensation should flow.

"Of course I believe that you can't invest in Germany if you make laws like that."

However, the project faces some hurdles. First of all, the coalition must actually come into being. On Saturday, an extraordinary party conference of the Left will decide whether to start coalition negotiations with the Greens and the SPD. According to reports, the majority of members are likely to vote in favor.

There are bigger question marks behind the project because it would break new legal ground. For the first time, Section 15 of the Basic Law is to be applied to apartments, which allows land, natural resources and means of production to be transferred to public ownership.

In 2023, a majority of an expert commission appointed by the Berlin Senate came to the conclusion that this would be legally possible. The commission also referred to the successful referendum of 2021, in which Berliners voted to socialize housing stocks from private companies with more than 3,000 apartments. That would have transferred a total of 220,000 apartments to public ownership. It remains to be seen whether the 160,000 apartments still affected would have a sufficiently positive effect on the general welfare, as provided for by the Basic Law.

Opposition to the law is unlikely to come only from the federal government, which is working on its own dubious draft with which it wants to prevent the Berlin project. The affected housing companies will also want to have the matter resolved in court. This is also why the Left, the Greens and the SPD have given each other time. The law should only come into force one year after it was announced. It is expected to be introduced to the House of Representatives for the first time in mid-2028.

If the law actually comes into effect in the end and compensation of 40 percent of the market value is paid, Heimstaden board member Fladeland expects a loss of one billion euros. The total value of the inventory in Berlin is around five billion euros. Heimstaden Bostad AB is based in Sweden, but is 100 percent owned by the Norwegian investor Ivar Tollefsen through the Norwegian company Fredensborg AS.

At the beginning of this year, Heimstaden completed a new building project comprising 85 apartments - the first since entering the market in 2018. The most recent plan for the coming year was to densify a residential complex on Borsigstrasse in Berlin-Mitte. This should create 19 new rental apartments.

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