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03 08 2017
Rocky Road ahead for Social Housing Construction in Berlin

The BDA Association of German Architects recently published a kind of philippic that criticised social housing development in Berlin. The BDA has diagnosed a “standstill” in the construction of affordable accommodation, blaming the fact on a misguided state policy – and it does have a point.

For one thing, there is the contingent of rent-controlled flats mandated for any major housing construction project whose scale requires a local development plan. The Senate – Berlin's state government – substantially raised the mandatory minimum share of affordable accommodation at the start of this year, from previously 25 percent of all flats to now 30 percent. While this may seem like a modest increase at first glance, it is in truth quite a whopper. For it is not just the percentage that was changed: rather than referring to the number of units the way it used to, the figure now prescribes the share of the floor area to be set aside. Since social housing units tend to smaller than regular flats, the increase in the rent-controlled share is in fact much more drastic than you would think. Katrin Lompscher (from the Left Party), Senator for Urban Development, puts the increase at 10 to 15 percentage points.

Not a Way to Achieve Social Diversity

Having to factor in such a high share of social housing makes new housing development less and less appealing to investors. After all, rent-controlled flats are less profitable than privately financed ones despite state subsidies. Another drawback of rent-controlled flats is the lack of options for long-term rental growth, and this will negatively impact not just rent revenues but also the sales proceeds if the property is to be sold. The need to mitigate the various shortcomings and ultimately to make their projects a paying proposition, investors are forced to sell their remaining flats at highly inflated prices. The outcome is the creation of new flats for holders of eligibility certificates for subsidised rent-restricted apartments (WBS), on the one hand, and high earners, on the other hand, whereas people with standard incomes are left by the wayside.

This is hardly the idea of an urban development seeking social diversity, and the architects’ association says as much. For private investors, this situation of conflicting factors has become so unattractive that their willingness to engage in affordable private housing construction in Berlin is likely to keep declining.


Protest from Local Residents Preventing Construction Projects

But even public building projects have to overcome a number of obstacles in Berlin. The BDA Association of German Architects has decried the fact that plans for thousands of residential units have been shelved because protest from local residents prevents the construction of new buildings. As understandable as it may be on a personal and emotional level that residents do not feel like having new social housing blocks in their immediate vicinity, the consequences of successful protests are devastating for urban development. The state of Berlin deems it the boroughs’ responsibility to raise awareness for the issue – but the boroughs tend to be highly empathetic to the complaints by local residents and show little inclination to defuse them. It is an experience that private investors have long grown used to. But public-sector developers are relatively new to it. It does not bode well for housing construction sector in Berlin.