Big buyers eye Berlin properties despite rent freeze

After learning that Berlin property owner Deutsche Wohnen aimed to buy the century-old buildings in which they lived, Lisa Stertz and Lorena Jonas took their own crash course in financial markets and real estate law.

The two women, a meditation instructor and art history student respectively, met politicians, combed local laws and studied the Dax, Germany’s stock market index. DW was listed on it in June with a valuation of €14bn.

But their studies could not answer one particular question: why would a company buy a slew of properties in a city that had practically declared war on private real estate investors?

Last autumn, in a bid to fight skyrocketing prices and gentrification, the city state not only froze rents for 1.5m homes in Berlin — the Mietendeckel policy — but gave tenants the right to demand repayment from November 2020 if they were charged more than city-imposed rates.

Investors and property owners, who are challenging the Mietendeckel in court, warned of a blow to Berlin’s economy. DW, Germany’s second-largest property company, said it would look elsewhere for investments.

Yet months later, it is spending €90m to scoop up 23 properties, mostly in Berlin, including the buildings where Ms Jonas and Ms Stertz live.

“We have to fight this shopping tour,” said Ms Jonas, who, along with Ms Stertz, joined other tenants to form the 23 Häuser Sagen Nein — 23 Houses Say No — campaign. “We are worried about why Deutsche Wohnen would buy right now.”

DW’s purchases have not just unsettled tenants, wary of allegations from renters, which the company denies, about DW implementing poor maintenance standards and raising rents. Activists and leftist politicians are also concerned that the curbs so far imposed will not hinder companies seeking bargain buys in the country’s coronavirus-induced recession.

“It’s a paradox, but I think we may have just become even more attractive for large corporations,” said Florian Schmidt, district councillor of the fast-gentrifying Friedrichshain-Kreuzberg district of Berlin. “There is a race to get these properties, between corporations and the public or non-profit actors.”

Though Berlin’s rents are among the cheapest in any European capital, they have doubled in the past decade, while wages have not. With its historic mix of leftwing activism and squatting culture, Berlin is becoming a hotspot not only for artists and hipsters, but for experimental ideas on rent and campaigns challenging capitalist tenets.

“Our political principle is that you cannot just make your money out of people’s right to a place to live,” Ms Jonas said.

Some politicians are even supporting a campaign by residents and activists, so far unsuccessful, for the city to expropriate 200,000 apartments from private landlords in Berlin, most of them from DW.

In May, activists met politicians to try to block the company’s purchase of some of the 23 buildings through an older law, milieuschutz. This gives city authorities the right of first refusal in purchasing buildings to protect the economic and cultural balance of a neighbourhood. 

Some of Ms Stertz’s neighbours have lived in her building for generations. Others arrived with the wave of postwar Turkish guest workers, when the area was a neglected district alongside the Berlin Wall. “A lot of history suddenly came to the surface when we started organising,” she said.

To enact the principle, however, Berlin first had to offer DW the chance to meet specified conditions — notably, waiting 20 years before it could sell any affected properties. Meanwhile, officials lined up a number of prospective buyers in the shape of public companies and non-profit co-operatives.

However, DW accepted the requirements, with locals concerned the landlord is betting the Mietendeckel will be overturned in court.

Cansel Kiziltepe, an SPD member of the Bundestag from Berlin, said that even if the challenge failed, companies might decide to wait out the city’s political climate. “This buying strategy of Deutsche Wohnen shows us they are gambling on a long-term game,” she said. “20 years seems long, but 20 years are soon gone.”

A spokesman for the company, Mario Rostock said DW had improved its maintenance record and was not only committed to the 20-year sales ban but vowed not to sell off the properties as condominiums later.

“We are convinced [tenants] will be satisfied,” he told the Financial Times. “It is more difficult to acquire a bigger portfolio, so we regard this purchase as a good opportunity.”

Analysts say the Berlin experience indicates how rental caps can in fact hurt tenants, with smaller landlords selling off properties to bigger buyers who can afford to take risks. This could lead to fewer rental properties being available, or higher stakes for renters if the Mietendeckel failed.

“In the long term, this won’t stop the gentrification of Berlin,” said Michael Voigtländer, a real estate analyst at the German Economic Institute in Cologne. “It will be a hard battle between the investors and the more leftist politics of [the city].”

Mr Schmidt acknowledged a need for private and public investment in housing, but said the real lesson for Berlin was to set up an authority to find and purchase properties faster than property developers could.

“Berlin’s people don’t accept their city being bought up by corporations,” he said. “They need the city’s help in this fight.”