In early January 2015, the Senate of Berlin resolved to make the conversion of rental flats into condominiums in historic district protection areas subject to prior approval. Accordingly, there is every reason to believe that the number of condominium conversions in such areas will plummet. The new ordinance is yet another piece of legislation designed to prevent rent rates in Berlin's district protection areas from rising any higher – but there is more to it than meets the eye. For the condominium conversion ban actually imposes massive constraints on tenants living in these district protection areas. They are effectively denied the option to buy and own the flat they have been renting.
District Protection to Combat Displacement?
A historic district protection area is defined as an urban neighbourhood whose demographic composition is worth preserving. The idea is to protect certain segments of the population against displacement by rising housing costs. For the same reason, the city has previously imposed strict requirements on modernisation measures in residential buildings. Any structural alteration contemplated must be approved by the competent building authority because it could – at least in theory – justify a rent increase. Tiling entire bathroom walls or adding a second balcony, for instance, is therefore not permitted in protected neighbourhoods in Berlin.
The city has zoned such areas in the boroughs of Pankow, Friedrichshain-Kreuzberg, Tempelhof-Schöneberg and Mitte. Roughly 160,000 flats are affected by the zoning, that is, more or less ten percent of all rental flats in Berlin. City Hall is now mulling an expansion of the historic district protection areas.
Many Tenants Keen to Buy
Jan Stöss, Chairman of the Berlin chapter of the Social Democratic Party, believes that tenants in protected areas will be even better safeguarded from rent hikes by the condominium conversion ban. Critics of the ban, however, feel that it is unlikely to serve its purpose – quite on the contrary. As it is, the majority of buyers active on Berlin's housing market are hardly institutional players, but private buy-to-let investors. The latter tend to acquire no more than one or two apartments as part of their retirement scheme. Empirical evidence suggests that rent increases imposed by landlords belonging in this group tend to be less frequent and less substantial.
As often as not, condominium acquisitions are actually motivated less by the desire to let them, but by the intention to owner-occupy them. The interest to buy a condominium in order to stop paying rent is growing apace with rising rent rates in Berlin. Many tenants fancy homeownership in order to become immune to rental growth. The number of tenant buyers in Berlin has been rising steadily in recent years. The condominium conversion ban will now make owner-occupation a much less realistic proposition, at least for tenants in historic district protection areas. For these residents, the ban seriously compromises a key component of their capital-building or retirement schemes.