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Is affordable housing in Berlin still possible? | Places.


Is affordable housing in Berlin still possible?

Posted on 30/09/2013 by Ares

Illustration: Cristbal Schmal

by Ares Kalandides

Not so long ago Berlin was considered as one of the most affordable cities in Europe, a fact that was directly linked
to the low costs of housing. It now seems that this statement is no longer true or has at least lost some of its
validity (1). Price increases are by now very well documented and range between 10% and 20% in the city centre
(inside the so-called ring). (s. map 1).

A variety of explanations have been suggested, yet public policy seems at loss with what to do with this pressing
problem. Although I have no final answers myself, I would like to suggest that we look at certain elements that
may help us understand what is happening.

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Map 1: Rental increase by district (2010 2012).

1. Construction of new housing (in particular affordable and social housing) has been extremely slow in the past
10 years (see figure 1). Not enough new dwellings were added to the existing ones since 2000.

Figure 1: New dwellings in Berlin since 2003. Source: GSW Immobilien AG (2012). Unternehmensprsentation August
2013, Berlin.

Source: IBB (2013). Wohnungsmarktbericht 2012, Berlin

2. There has been a double demographic change in Berlin: on the one hand there has been a constant population
rise (mostly through inward migration): on the other there has been a reduction in the size of households, which
leads to a higher demand for dwellings. Since 2004 more than 50% of all households are single ones (s. figures 2
and 3)

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Graph 2: Demographic Changes in Berlin. Figure 2 (top): Population development. Figure 3 (bottom):
Development of houshold size mix (in %). Source: GSW Immobilien AG (2012). Unternehmensprsentation August
2013, Berlin.

Beyond this simple supply/demand calculation there are several other things that I think we need to look at:

3. More than half of the Berlin housing stock was privatized after 2003 with state-owned real estate companies
being sold out partly to hedge funds. Even though several rules applied to the new owners, these were limited in
time. Today, 10 years later, these regulations expire and the new owners are free to seek profit maximization. (For
more information, s. Holm (2)). Today most dwellings are private ones (s. figure 4)

Figure 4: Housing Tenure in Berlin, Source: Karolinski (2013) (3)

4. The tourism boom of the past few years in Berlin (source) has led to the creation of a large number of

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holiday-flats that are rented by the day or week. Even though their total percentage in the city may be low (below
1%) their geographical concentration may produce phenomena of shortage in particular areas (s. map 2)

Map 2: Holiday flats in Berlin. Source:


5. A large number of new Berliners who have been moving to the city in the past few years are used to much
higher rent prices in their cities of origin, and are thus willing (be it temporarily) to pay higher prices.

And finally, local phenomena are rarely really local:

6. There is a well-documented tendency to invest accumulated capital in real estate since the world crisis of 2008.
In particular people with money from crisis-stricken countries would tend to save it by buying property in what
is considered to be a stable and safe economy (the German one) in a city where the price level is, at least from the
western European perspective, quite low.

The problem with examining the housing market is that it has some particular characteristics that distinguish it
from others:

1. Housing has above all use value for its tenants. Exchange value is secondary and depends on political choices
(how the housing market is organized).

2. The housing market does not work as one, but needs to be subdivided in submarkets where the exchanges
between them are neither obvious nor fast

3. Housing always has a geography: the smallest our scale of examination the better are the chances that we will
get some useful data. General discussions about averages are not particularly informative.

4. Supply and demand self-regulation theories generally dont function. a) Land (in particular urban land) is an

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extremely scarce resource and b) the time-span between supply shortage and new construction may be this of
several years.

5. It is necessary to examine the housing market together with land ownership and also find an adequate theory of
rent. All of these are are intimately intertwined.

6. Different countries have very different traditions and cultural contexts regarding housing tenure
(private/public, rent/ ownership etc.). This needs to be taken into consideration when examining the housing

We may be currently heading towards a huge real-estate bubble that is bound to lead to a new crisis. Looking at
the development of the real income of Berliners in the past few years and in particular the growing inequalities
inside the apparently growing average income, we need to question who will be able to afford new luxury housing
(4) . What we may of course be seeing (as is the case in other metropolises) is a spatio-social polarization with
those well-off in the city centre and the poor displaced towards the periphery.

(1) If we were to compare housing prices in other European metropolises (lets say Paris or London) or even some
German ones (Munich or Hamburg), prices still seem low. But such comparisons make little sense, as local
incomes and geographical distributions of inequalities are extremely different.


(3) Karolinski, D. 2013, What are the causes of the shortage of affordable housing in the city center of Berlin? A
case study of the housing policies of the Red-Red Senate (2001 2011), Unpublished Master thesis, Hertie
School of Governance, Berlin

(4) On German income inequalities see here:

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About Ares
Ares Kalandides holds a PhD in Urban and Regional Studies from the National Technical University of Athens. He is the founder

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This entry was posted inand CEO and

opinions of Inpolis, an international
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Kalandides, Berlin, based in the
housing. Bookmark Berlin, Germany and has implement several projects around the
world. Ares teaches Urban Economics at the Technical University in Berlin and Metropolitan Studies at NYU Berlin.
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2 Responses to Is affordable housing in Berlin still possible?

Tilman says:
30/09/2013 at 19:56

From my point of view, the private owners are a driving force for rent increases. As mentioned in the source of Holm they
really changed the power forces in Berlins tentants market and created rent increased and a high pressure on further rent
increases / gains for investors. Through the system of the Mietspiegel all other tentants are also effected by these actors.

Furthermore, I would mention the property policy (Liegenschaftspolitik) of Berlin, which has led to a huge privatization of
public ground. The aim of just creating as much economic profit as possible, gave away the opportunity to use the public
owned ground for building new cheap housing.

Also, there is a lack of public planning (and the capacity) to plan compared to other cities the number of public employes
and planning offices manpower decreased rapidly in the last years. Compared to other cities and nations (Munich, Vienna)
there is a structural lack of good investors policy (Mnchner Modell) and a real problem in the construction of the social
housing system.

Oh you havent mentioned the market oriented policy for public owned housing companies. Till the end of the 2000s, they
had to follow the market price and gain as much profit as possible.

Ares says:
02/10/2013 at 08:39

Very useful ideas Tilman. I will try to incorporate them in a later update of this entry.

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