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Policymakers Promise Housing Summit

From “we need a housing summit” (IVD Federal Investment and Asset Management Association) to “housing must be given chief priority” (GdW Federal Association of German Housing and Real Estate Companies) – the interest groups of the German real estate industry unequivocally reaffirmed their demands vis-à-vis the body politic in recent weeks. And their cries have not gone unheard. Even the Christian Democrats’ government agenda, which was recently passed, picked up on the subject. “We will ensure that all stakeholders make binding statements at a ‘housing summit’ that will gather the Federal Government, the German states, the construction and the real estate industry before mid-year 2018,” reads the party program. Since every line and every word in politics tend to be well considered before being articulated, a brief analysis of the foregoing is in order.

Federal Government Calling States and Municipalities to Order

The current challenges on the real estate market are indirectly connected to the recent federalist reform in Germany. For it is as a result of the reform that each state now gets to set its own real estate transfer tax rate. Having been a uniform 3.5 percent nationwide until 1998, the states have since been at liberty to raise the tax rate as they see fit. Bavaria and Saxony refrained from taking advantage of the option, and so the levy on property acquisitions in these two states is still at 3.5 percent, but in Bremen, North Rhine-Westphalia, Saarland, Schleswig-Holstein and Thuringia the real estate transfer tax has gone up to 6.5 percent, nearly twice as high. At 6.0 percent, rates in Berlin and Hesse are also very high.

The introduction of the rent control measure commonly referred to as “rent freeze” (“Mietpreisbremse”) and of historic district protection areas follows the same principle of subsidiarity. The Federal Government only defines the parameters but leaves it up to the states and municipalities to flesh out and enforce the same. This can have grave consequences because some states exploit the legislative leeway granted to them to the maximum extent possible, interpreting it arbitrarily.

A good case in point is the rent freeze. The law was actually tied to measures that should have boosted housing construction, or at least that is what the federal policymakers had in mind. But the states invariably limited themselves to the ineffective rent freeze while ignoring the much more important subsidisation of housing construction.

Another example is historic district protection. Cities and municipalities are authorised to write the latter into local statutes. However, zoning entire towns as historic district protection areas is absurd because it runs counter to the very idea of the social conservation regulation.

That the above statement seeks to include all federal levels in the contemplated housing summit is very much to the point, because all stakeholders need to step up to the plate. For the same reason it also says that the summit “will ensure that all stakeholders make binding statements.” It is hard to conceive of a stronger way to say that the time of unchecked taxation on the state and municipal levels is over. The federal body politic is calling its children to order.

Just Campaign-Trail Rhetoric?

However, a person wonders whether such a housing summit will ever take place and whether things proposed in an election manifesto are not just campaign-trail promises. Here as elsewhere is pays to read closely. The election manifesto states specifically “will ensure.” In politics, the choice of the future indicative tense underscores the fact that not a desire or intention is at issue but actual planning. It says that rather than intending or wishing to do something, the body politic will do it. Accordingly, the incoming government will be expected to measure up to this unambiguous announcement.