Middle of Society Ignored by German Housing Policy
Going forward, residential living will become a good deal more digital and smarter. This is the—admittedly unsurprising—gist of the survey “Wohntrends 2035” the GdW Federal Association of German Housing and Real Estate Companies conducted to determine housing trends between now and 2035.1 But far more interesting than this insight is another aspect—the parallel emergence of a polarising trend on Germany’s housing market.2
The survey suggests that future housing demand will be dominated by two target groups. On the one hand, there will be the group of people with lower income levels, whom the survey describes as “modest and pragmatic, with a keen price sensitivity.” This group prefers smaller flats with simple fit-out features. On the other hand, the “communicative, aspirational and domestic” type of people generate demand for the sort of housing that provides a high level of quality, modern specifications and a certain range of amenities. In short, tomorrow’s market will be dominated by particularly affordable flats on one side and fancy apartments on the other. The mid-market segment, called the “conventional” type of residents, will fall behind, according to the survey.
Focus Clearly on Tenant Protection
This polarised view is the outcome of an analysis of tomorrow’s housing market in Germany, and it is already manifesting itself in another place—in the government’s housing policy. The further tightening of the landlord-tenant law contemplated by the Federal Government, which includes an expansion of the rent freeze and the reduction and capping of the modernisation allocation, is just the latest measure in a series of rent policy initiatives taken in recent years.
Tenant protection has long been the focus of the body politic—not just on the federal but also on the municipal level in many metropolises. In Berlin, for instance, city hall limits its housing policy to residents of lower income levels, which takes the form of historic district protection areas, condominium conversion bans and administrative hurdles for new-build construction and infill densification. The approach effectively perpetuates the housing shortage in Berlin, which principally benefits those who already own their homes because rising property prices also increase their wealth. The mid-segment of society, by contrast, meaning people with average income, take the back seat as the result of a policy that primarily promotes the low-income groups and, indirectly, the affluent ones.
Average Earners are Politically Neglected
Why? Because policy-makers have turned the path to homeownership, and thus one of the key stepping stones for capital formation, into a rocky road. Selling prices are rising due to short supply while the many households find it virtually impossible to meet the capital requirements because of incidental acquisition costs that are vastly inflated by real estate transfer taxes. Although the Federal coalition government did introduce the child tax credit for first-time home buyers, surveys suggest that it might sponsor mainly those buyers who least need it.3
So, it could well be argued that the middle of society is being blatantly neglected by the housing policy. Unless the political focus shifts, the polarisation predicted by the GdW survey on residential trends by 2035 presents a by all means realistic scenario.