accentro-hitzigallee
18 05 2017
Private Home Owners as Landlords: Berlin Trailing the German Average

For owner-occupiers, buying a home is financially more lucrative than renting a comparable place into their old age. Homeownership will also spare them the worry over looming rent hikes. But aside from owner-occupancy, residential real estate is also a great private investment toward your retirement. Interestingly, statistical evidence suggests there are differences between private and commercial landlords. Renting from a private owner can have its perks, and this should encourage buy-to-let investors.

The Housing Market by Type of Landlord

Private individuals acting as landlords are clearly in the minority on Berlin’s housing market. Instead, the letting market continues to be dominated by housing associations. The situation does not always work to the tenants’ advantage. Naturally, corporate players are subject to the same legal parameters as private owners when letting accommodation. But housing associations, aside from having long-term experience and time-tested practices in the field, represent profit-driven companies that manage their landlord-tenant relationships professionally in order to maximise their profits. By contrast, the lease terms and conditions negotiated with a private owner can be more flexibly adapted to personal circumstances because both parties are interested in a harmonious occupancy of the residential premises and in a partnership-like relationship. One consequence of this attitude is that private landlords are more reluctant to raise rents than commercial ones, as surveys have shown. Communicating with a private individual also tends to be simpler, quicker and more personal – and this can be a big advantage in day-to-day affairs.

Berlin Trailing the Rest of Germany

With a homeownership rate of 15 percent, the German capital is well below the national average while also trailing international metropolises. The homeownership rate in London, for instance, is 22 percent, and the one in New York City more than twice as high at 31 percent. Other German cities such as Hamburg, Munich and Frankfurt am Main, show an average homeownership rate of around 20 percent. Despite the favourable parameters, including the low-interest cycle and rising income levels, Berlin is at the bottom of this ranking, as the figures of several state offices for statistics suggest. This is explained not least by Berlin’s housing policy, which focuses on tenant interests more than on the promotion of homeownership. With a view to the risk of old-age poverty, however, city hall would be well advised to consider the advantages of homeownership, and to promote this classic form of retirement planning.

Suggestions for Promoting Homeownership

There are several levers the body politic could pull to boost the trend toward homeownership. One way to help raise the homeownership rate would be to lower the real estate transfer tax, the going rate in Berlin being six percent, another would be to support precarious households with low-interest loans through the state-owned IBB Investment Bank Berlin, or to abolish the condominium conversion ban in historic district protection areas. After all, the promotion of homeownership is part of the legal mandate of Berlin’s city government because Article 28 of the state constitution says so. The purpose of the constitutional clause is to create and preserve accommodation for people with low income through state subsidies, and to promote the development of new housing by writing the right to adequate accommodation into law. Article 47 of Berlin’s constitution says moreover that the state is obliged to do everything within its means to facilitate the implementation of the right to adequate accommodation, specifically by promoting homeownership, by pursuing social housing construction programs, as well as through tenant protection and rent subsidies.