Dispute about socialization: some like this, others like that

According to a study by the Kiel Institute for the World Economy, the socialization sought by the Left Party with the support of the Greens would significantly harm Berlin and Germany as a whole. Contrary to what was intended, it does not help end the housing crisis in Berlin. “Socialization would not alleviate the lack of affordable housing, but would actually exacerbate it,” is the conclusion of the study. The clients were four leading institutions in Berlin's economy, which had joined forces during the election campaign to campaign against socialization.

The Left Party, which became the strongest force in the election to the House of Representatives, wants to implement the 2021 referendum initiated by the “Expropriate Deutsche Wohnen & Co” (DWE) initiative. Large housing companies would be deprived of all apartments over 3,000 in stock.

This would affect around 220,000 of the 1.7 million rental apartments in Berlin. Around 400,000 of them belong to the state of Berlin through the state-owned housing companies. The issue is considered one of the biggest hurdles for a future left-led state government, which the Left Party, the Greens and the SPD want to talk about from Thursday.

From the perspective of the expert commission set up in 2022 by the then red-green-red Senate and with reference to Article 14 of the Basic Law, compensation is possible below the market value, i.e. the price that an apartment would achieve if sold freely. How high the discount can be is controversial: The Left refers to figures from DWE, according to which compensation would amount to 40 to 60 percent of the market value. This results in sums of between 8 and 18 billion euros. The left-wing top candidate Elif Eralp also mentioned this range during the election campaign.

The SPD top candidate and current parliamentary group leader Steffen Krach, who rejected expropriations during the election campaign, assumes that 30 billion would be due. However, a study published on Friday by the Institute for Macroeconomics and Business Cycle Research (IMK) of the trade union-affiliated Hans Böckler Foundation speaks of a compensation amount of 13.5 billion euros.

The study now published by the Kiel Institute, which is one of the six leading German economic research institutes, estimates 50 percent compensation. According to their calculations, the apartments in question have a market value of 40.2 billion euros - 20.1 billion would therefore be due. The Institute for the World Economy puts this in relation to new housing construction and states that up to 71,000 apartments could be built with this money by 2045. The consequence from the researchers' point of view: "If this sum were to flow into new apartments, the asking rents could be up to 8.7 percent below the development expected today by 2045."

The Kiel Institute denies that socialization could also ensure this: there are “no rent-dampening spillover effects”. From their point of view, this makes socialization “an intervention in favor of particular interests”. The intervention does not specifically benefit people with low incomes, but only those who happen to live in one of the apartments in question. “From a socio-political perspective, the instrument is not suitable,” said the researchers at a press conference on Tuesday.

In addition to the rental market, in their view Berlin as a business location and Germany as a whole would also suffer from socialization. Internationally, one benefits here from the high reputation of German institutions, from high legal certainty and high property protection. The researchers believe that this reputation is at risk in the case of socialization. Against this background, at the federal level the black-red coalition announced in July that it would ban associations in the federal states; last week the CSU pushed for this to be made into the announced law.

There are currently great doubts about the legality of such a prohibition law, most recently in an article by administrative lawyers Remo Klinger and David Krebs for the “Legal Tribune”, the largest German online legal magazine. taz legal correspondent Christian Rath also assumed in an article on the site that such a law would end up at the Federal Constitutional Court in Karlsruhe in the same way as a Berlin socialization. The affected housing companies would sue and argue that socialization would be disproportionate because there are less drastic and more efficient means of combating housing shortages and high rents.

Researcher Stefan Kooths from the Kiel Institute pointed out that a large municipal housing stock like the one often referred to in the Austrian capital Vienna was not created through expropriation, but through constant new construction. In principle, the socialization planned by the Left Party has not yet been successfully tried out anywhere.

The researchers at the Kiel Institute criticized the DWE model for the compensation process. Stretching payments through bonds over 100 years does not occur on the financial markets. The longest known duration is said to be 30 years.

The IMK study by the Hans Böckler Foundation, on the other hand, explained how the compensation could be paid out immediately without putting a strain on the budget. She also came to the conclusion that the housing shortage could not be overcome through socialization and that new buildings were needed. However, the IMK emphasized that socialization makes sense as a supplementary means and would immediately “open up additional scope for housing policy”. Accordingly, the rent increase in the portfolios could be limited.

At the request of the taz, the DWE initiative referred to the IMK study. This has proven: “New construction alone is not enough to stop the rent crisis in Berlin – and socialization is an effective instrument for reducing rents in the long term.” The initiative also emphasized that it had nothing against 20 billion euros for new housing construction. Their own financing model does not put a strain on the budget, “since the compensation amount can be refinanced from current rental income.” In addition, new construction “does not ease rental prices,” as a look at Hamburg shows, where new contract rents are even higher than in Berlin despite a lot of new construction.

The Left Party did not respond to a request for comment on the new study by the time of going to press. For the Greens, a spokeswoman for the top election candidates Werner Graf and Bettina Jarasch referred to talks with the Left Party and the SPD starting on Thursday. There will be no comment beforehand.