New study by economists: Socialization can be financed

It is a paper that comes in handy for the Left Party ahead of possible exploratory talks for a left-wing alliance in Berlin - and is likely to put the SPD under pressure. “The transfer of large housing stocks into public ownership” is the title of the study published on Friday by the Institute for Macroeconomics and Economic Research (IMK) of the trade union-affiliated Hans Böckler Foundation. And it is a tailwind for supporters of the socialization of private real estate holdings.

The economists Sebastian Dullien, Patrick Kaczmarczyk, Tom Krebs and Achim Truger come to the conclusion: “Socialization permanently increases the number of apartments with rent controls and thus makes an important contribution to making life in Berlin affordable for lower and middle incomes.” According to the authors, it “could quickly open up additional scope for housing policy” – “for example in terms of rents, renovations, neighborhood development and social mix”. The necessary new construction of social housing alone, however, “will not be able to solve the affordability problem in Berlin within a reasonable period of time”.

The authors paid particular attention to the question of financing the project. They assume a compensation payment to the real estate companies amounting to 13.5 billion euros, which is based on a calculation of the affordability of rents. From this they derive: “The transfer of housing stock into public ownership is economically and fiscally viable without state subsidies.”

The economists led by IMK leader Dullien even assume that the country can pay the full amount of compensation directly at the time of socialization. The previously discussed financing concept of the “Expropriate Deutsche Wohnen & Co” (DWE) initiative, however, has brought repayment via 100-year bonds into play.

The study examined three different models of socialization: the takeover of the housing stock by a newly founded public law institution (AöR), as proposed by DWE, the takeover by the six state-owned housing companies (LWU) or by a new AöR that integrates the housing companies.

As a result, the economists vote for the second variant: According to this, the housing associations are best suited to minimize the legal, financial and organizational risks of socialization due to their experience in managing currently around 400,000 apartments. An AöR, on the other hand, would require considerable effort to set up; There is also a risk that their debt would be “attributed to the state sector” and thus “increase Germany’s Maastricht deficit”.

Financing in the event of a takeover by the state's own owners would come from additional equity provided by the state and external financing from the housing companies. The authors expect an equity ratio of 30 percent for the takeover. To do this, the country would have to make around 4 billion euros available to companies. These would be financed from borrowing, which would not fall under the rules of the debt brake due to the equivalent value received in the form of the participation, i.e. would not burden the state budget.

The LWU would have to finance the remaining 9.5 billion euros through debt capital. The interest and repayment costs would then have to be refinanced from the annual rental income. According to the economists' calculations, there would be scope for this: According to this, the public sector “could achieve an annual net income of 543 million euros from the socialized apartments despite permanent rent controls”. This compares to interest and repayments amounting to 345 million euros.

The study identifies the “organizational and administrative challenges” as the greatest risk of corporateization, i.e. the administrative effort that arises from taking over more than 200,000 apartments. This could be at the expense of new construction activity, which remains urgently needed as a second component of a solution to the rent crisis.