Berlin social housing winning the residential race | Hacker News Reader

Berlin social housing winning the residential race

thesaturdaypaper.com.au

66 pointsMz68 comments

Berlin has a housing shortage, and these measures are just workarounds. Before the refugee crisis, a growth of 40.000 people per year was expected, vs. plans to build 10.000 new apartments. The decision against developing the the abandoned Tempelhof airport only makes it worse, and shows some of the social problems in the city. Bear in mind that everybody who got to vote on the referendum already lived in Berlin:

"Though about 20 per cent of the development was to be reserved for affordable housing, the locals decided to keep their expansive city oasis free of any new buildings. The rationale was that increased supply often only means more luxury dwellings and does not address affordability."

"Luxury" here doesn't mean huge, it just means "well built, nice kitchen, 14 EUR/m^2". It's like saying: "I don't want anybody else to buy a car, because they might get a Mercedes, which I cannot afford."

The social housing system is also quite unfair, if you ask me. Social housing apartments are in regular buildings, not separated from the rest. The idea is to counter gentrification, and keep the population mixed. You are only eligible below some margin of income. So far so good, but if you work and earn one Euro too much, you need to pay twice the rent, for the exact same apartment.

What source are you using for the housing shortage? I lived there for a while and in my experience this was not the case - interested to learn more.

Edit: did some searching: http://www.thelocal.de/20150819/germany-building-homes-in-wr...

Quite interesting stuff.

If the article does not make it clear, in East Germany there are many many cities with a shortage of citizens - not a shortage of houses.

http://www.welt.de/wirtschaft/article146994158/So-schnell-en...

Five Bundesländer there had the population reduced from 14.5 Million down to 12.5 million...

What's the alternative to mixed-income housing? The US tried segregated low-income housing for decades, and the result was a disaster. The new system, called Section 8, is a privatized voucher system; it doesn't give tenants lower rents, but by subsidizing rents directly, it has the same fairness impact.

I think the issue in most US cities is capture of zoning boards by property owners and developers. They have made it impossible for supply to meet demand.

For example, new apartment buildings in New York are required to include parking if they are taller than a certain height (I think 6 stories). That drives up the cost unnecessarily, in my opinion.

Mixed-income housing is not the problem, the implementation is: earn a bit more, pay a lot more. There's a similar argument against unemployment benefits: in some cases, unemployed people can earn less by accepting a job.

I don't have a solution, but I think a basic income would set better incentives.

Why not set a gradient percentage of income against the cost of social/public housing?

The hard cut off for social housing benefits incentivizes keeping income below that threshold to maintain the benefit.

Basic income does nothing to increase housing supply, so urban rents would increase as a result.

Presumably the people who set these hard-cuttoffs aren't totally oblivious to the results, Australia has a similar problem with social welfare payments.

My suspicion is this is by design because a certain level of unemployment is required to keep labour costs down - or so the theory goes.

I've met a lot of people who don't want to work, some because they're slackers and some because they'd have to get full time employment because anything casual they're likely to get wouldn't be worthwhile as it eats in to their welfare payments. So the system 'works' for some definition of the term 'works'. It probably also catches a lot of people unnecessarily too.

The government should actively maintain an over supply of housing. This works for food; prices have been consistently low for a long time now. If you can reduce the amount people pay on housing, they'll spend it on items that actually grow the economy (instead of simply enriching land owners).

Just FWIW, Section 8 (in combination with depressed rents) is why for a good portion of the past decade I was constantly awoken by sirens: police, fire and ambulance services coming to take care of the folks renting a condo near me.

Y'know, I really do feel for poor folks, but I'd be just as glad if thieves, prostitutes and dysfunctional alcoholics would live somewhere else (financiers, escorts and functional alcoholics may be just as immoral, but at least they are discrete). It's nightmarish to have one's home turned into a disaster area.

I live on a block with several Section 8 renters, and they all seem like perfectly nice people with families.

We all want the thieves to live somewhere else, but the previous strategy we had for isolating them also involved segregating millions of low-income people and trapping them in neighborhoods without opportunity, child care, safe schools, or, in some cases, even grocery stores.

This way is better for everyone.

For the most part, the US is still income-segregated. Detroit is the classic example, where the city houses poor, often dark-skinned inhabitants while their lighter-skinned counterparts live in the surrounding suburbs.

The greatest irony now is that traditionally undesirable areas like Oakland are being reclaimed, further marginalizing those low-income people who are unable to adjust to the increased cost of living.

It's true we all want thieves to live elsewhere, but at some point elsewhere runs out, and you're left with a class of people that are permanently enserfed as the underclass.

I'm not sure which way is better.

If you take SFBA out of the picture, the story behind gentrification and its impact on minorities gets very blurry. There are studies showing that gentrified neighborhoods have lower minority turnover than non-gentrified neighborhoods: people leave poor non-gentrified areas more often than they do gentrified ones.

This sort of makes sense when you realize that people who don't make much money aren't a different species, and like many of the same benefits and services as rich people: parks, grocery stores, schools accountable to active and engaged (busybody) parents, &c.

The alternative is a system in which you aren't penalized for earning slightly more. The current system disincentives work in all sorts of silly ways. Just give everybody money directly (i.e. a basic income).

Basic income without rent controls will just be a transfer from taxpayers to landlords.

The UK experience of social housing was less bad than in the US, probably because it was a much larger proportion of the housing stock. There were still some terrible housing estates and I do think mixed-income housing is desirable.

Going from building half of new homes as social housing to subsidizing rents through housing benefit turned out to be horribly expensive. With many fewer new homes being built rents have increased and ever increasing subsidies are needed.

Interesting radio programme on this the other day: http://www.bbc.co.uk/programmes/b06bnbpx

More background: http://www.lrb.co.uk/v36/n01/james-meek/where-will-we-live

Notwithstanding my above comment, this is a valid concern that governments need to address if they move to a 'untied rent subsidy' approach. In my opinion, the best way to address this problem is to take measures that increase the elasticity of housing supply, and reduce distortions in housing and land markets.

So things like: replacing transfer duties with land value taxation, relaxation of zoning regulations, removal of any unnecessary regulations on dwelling density/height etc.

Hell, they could probably achieve a pareto improvement (though probably a lower one) by completely separating government supply of additional housing stock and provision of rent subsidies. In other words, it would be better, relative to current social housing schemes, if the government just built and sold houses at market value while separately providing rent subsidies to the financially disadvantaged.

I don't exactly agree with the rationale, but I don't think your analogy about luxury housing accurately portrays the problem. Larger, better built housing with extra amenities will cost more and almost certainly gentrify the neighborhood. I think the idea against allowing luxury housing is more that this would only help the already affluent population while simultaneously driving up housing costs in the area.

Larger better built houses means those people who want that will give up their current place for that. It will even out and works better than the current system. Granted I'm not from Berlin, but our situation (Stockholm) is exactly the same and the only way out is taking on the risk of buying property in an already over-heated bubble.

edit: There is an alternative and that is to find a second hand contracts where you will have to move out in a year because most co-op boards won't allow the owner to rent out for more than a year.

Problem is that their old place will go back to the market on a new lease and, in popular areas, twice the rent.

Also, if you've been in your current apartment for 5+ years, changing apartments effectively means double rent for you. Everybody I know who has an OK apartment in Berlin stays there, because an extra room etc. would mean 500-1000 Euros rent increase.

If there is sufficient supply, the old place won't go back on the market for a much higher rent. What you describe is what happens when you build a handful of units in the midst of a major shortage.

Have you been following the events surrounding the problems with rising rents in San Francisco? What you're describing is what has already happened here. I cannot overstate the importance of avoiding the mistakes of SF. Refusing to build in a place people want to live in will not lower rents. It only drives gentrification, evictions, and higher rents.

This is precisely the mistake San Francisco has made. I strongly suggest not repeating it.

The problem is that the fallback position tends to be building no new housing at all. This results in the same new people with more money moving in, driving up housing costs and gentrifying the area. No amount of not building housing makes rents low.

> This is precisely the mistake San Francisco has made.

What is that mistake? Permitting new, nice housing?

If this is your opinion, I cannot agree with it.

Firstly, something like 10->20% of all new residential construction must either be set aside for "affordable housing", or enough money must be given to The City to construct those units on behalf of the developer. Secondly, San Francisco's mistake is to -through a variety of screwups- make it nearly impossible to build new, dense residential buildings in the city.

If a district is able to build enough housing to meet current and expected near-future demand, rents will usually remain stable. See footnotes 0 and 1 at [0] for some info on long-term trends in the area.

[0] https://news.ycombinator.com/item?id=10556534

SF's mistake has been not allowing much of any housing to be built. This is what I'm suggesting needs to be avoided at all costs.

Ah. It wasn't clear from your prose that this was your intended statement. The statement about the fallback position substantially muddied the waters, as it seems that the fallback position described is more-or-less the situation in SF right now. Oh well. :)

It happens! On with life. :)

Yup, yup!

I'm surprised they made the basic mistake of not making the benefit progressive vs. binary.

It has a shortage, but a very recent shortage. Compared to other cities in Europe - Stockholm, London, Paris it's still very easy to find somewhere to live here. Especially if you have money to pay.

Only if you have money to pay.

If you earn average IT salary you need to prepare for weeks, maybe even months searching for a flat.

This is really true. Also what is really bad for all the startup people in here that you are in the worst bracket to be.

You cannot get a social housing -- you earn too much. But than again you (mostly) cannot afford going over 70-80sqm, especially if you are only earner in the family.

This means you're in the most competitive area and for every flat viewing it's you against 30, 40 or even 100 other suckers.

I voted against developing on tempelhof because there are 101 better places in the city to do it that won't take away green space. Berlin could start building up a bit more for one.

Meh. It's not like Berlin currently has actually a shortage of space to build. Remember, Berlin currently has about the same land area as NYC, at less than half the population.

It also has about a million less than pre-war Berlin.

The only thing is during those times the city was criticized for being an overcrowded concrete (well, cobblestoned) dump with many slums.

The city needs to build out instead of up. Current infrastructure can barely hold population density as it is today.

Social housing schemes are very inefficient and, ironically, further entrap their participants in poverty. I can't speak for Germany, but in Australia most state social housing schemes are heavily oversubscribed, and so are rationed. A new participant can spend years on a waiting list before finally getting access to rent-subsidised social housing.

And once you're in your rent-subsidised government owned dwelling, you're tied to that location. If you're offered a higher paying job that would require you to move, chances are you wouldn't because you'd either:

(a) have to go to the back of the rationing queue, or (b) lose access to social housing entirely

In other words, the effective marginal tax rate on additional earnings are well over 100% if relocation is required. Therefore, the rational financial decision is to stick with your lower paying job (or unemployment) to hold on to your rent-subsidy. Hence the social housing 'poverty trap'.

From a 'whole of economy' perspective it's even worse. In the aggregate, social housing impedes labour mobility, in turn lowering economic output and increasing the rate of structural unemployment/under-employment. Furthermore, it saps land market efficiency, as older social housing locations (that were previously on the outskirts of the CBD) are now in 'inner-city' areas (due to metropolitan expansion). As a result, land that could be put to much more productive use is tied up by social housing tenements.

Although the above is a bit of a simplification, in the final analysis social housing is a complete policy disaster that creates bad economic outcomes for both the financially disadvantaged and society overall.

It would be far better if social housing (and the land it is situated on) was sold on the private market (at market value) and the money put towards direct rent subsidies (that taper as income rises). Although this still causes higher effective marginal tax rates (due to payment tapering), the system can be designed so that EMTRs do not come close to 100% and there are actually positive incentives for those receiving rent subsidies to relocate if offered a higher paying job.

Sorry the article is full of nonsense. Rents are rising quickly in Berlin, and the government is not paving way for enough new housing to compensate for the demand. Limits on rents are also a reason why fewer housing is being built.

As for the protesters on the street - yes, it happens, but usually they are not successful.

It's really weird to see Berlin cited as an example for successful housing policies.

It may be so that if you can stay in your flat, you are in a relatively good position. But there are many people moving to Berlin, and people having kids can also not always stay in their old flat. So that policy only helps a few old residents.

> It's really weird to see Berlin cited as an example for successful housing policies.

Still better than Munich lol. In Berlin you can at least find a run-down shared punker flat or occupied house if you're OK with that, in Munich you're straight outa luck if you aren't best friends with a RE broker.

LPT: If you ever have the chance to befriend a broker, do so - it might save your ass in the future.

These things exist in Munich, too :-)

This article covers Berlin. How is it in other cities and states in Germany?

Berlin, as far as I know, has a unique history so that it's not always representative of Germany as a whole, in general terms.

That's to say, while Berkeley, CA, has some interesting politics, it does not reflect state or national policies. Meaning, what works in Berkeley (or Berlin) may not be transplantable.

Meaning that while interesting and worthwhile to study as a way to address housing shortages, it may or may not hold a viable answer for other jurisdictions who don't share some of the reasons making this policy viable under particular circumstances.

What's the state of affairs in Hamburg, Essen, Frankfurt, etc.

From a law perspective the situation is very similar. Tenants can't be evicted easily. In areas of high demand rents are (mostly) indexed as well.

Compared to Hamburg, Munich and Dusseldorf Berlin is still rather cheap. I have apartments both in Hamburg and Berlin and pay roughly ~1.5 as much per square meter in Hamburg, though the one in Berlin is in a much better location.

Munich here. Most expensive city in Germany in absolute prices and second expensive relative the the average income (Freiburg is top there). 12 Euros per square meter average rent. In good locations, 20 is asked regularly. More than 30 for small 1 bedroom appartements.

Statistics says, 3300 Euros per square meter buying price. We try to find a good place since 3 years, and we have never seen anything below 7000 Euros (in good central locations). 10.000+ is asked for regularly. The market is standing still because few people can afford these prices any more. Berlin prices would be a dream come true here.

Laws are the same as in Berlin. But since there is much more money to win, there is more aggression to get rid of old tenants and thus raise prices and/or build new houses. We have seen places, where the real estate dealer did not tell us how nice everything is, but calculated how much we can make, if we rent to Engineers who work for big companies like BMW or EADS. In cash and percent interest rate for our investment. Never heard that anywhere before.

Does that mean Berlin's approach to housing is unique to Berlin and that the policies which make renting both the preferred housing option as well as making it economically rational, not the case in other large metro areas?

I'm curious because people point to Berlin as a model (for providing affordable and desirable housing) but it would not be a good model if it does not work elsewhere. But conversely soul be a good model to study if it were viable elsewhere (especially booming cities -- where the issue is pronounced)

To my knowledge, the law is the same everywhere in Germany. Berlin makes a good example with still low prices because of its history. But there is certainly more protest against investors in Berlin compared to Munich. And more protection from the traditionally less conservative government. In Munich it counts as embarrassing not to be rich.

There are a few things in regards to housing that are specific to Berlin like how much low income housing is build etc. but most of it isn't.

Renting is and has more or less always been the preferred option in Germany. The reasons that make it also a good idea economically have less to do with laws and more to do with a declining population, people moving to larger cities and culture. Unless you have a place in a large city, which you probably can't afford, it's going to lose value. Also you may want or need to be flexible in regards to where you live and work, owning property doesn't help with that.

It's widely different there are a few large cities booming. Some cities are losing a lot population.

In East Germany you can see around Berlin islands of stability in larger cities. The rest of East Germany is losing population:

http://www.handelsblatt.com/images/k_prognose-einwohner/8552...

The red areas are gaining and the blue areas are losing population... the main factors are jobs, jobs, jobs and attractive infrastructure/cultural life/... Dense urban areas in the big cities are especially attractive.

I'm in full support of some housing/rental market regulation, but such regulation is not without its cons.

Similar to Berlin, in New York, tenants have very strong rights. For instance, if a tenant stops paying rent, the landlord can't evict that tenant for 6 months. This sounds nice--helping someone in need instead of the greedy landlord--but the overall effect is largely negated (as usual, the market seems to always adjust when you mess with it). It's now MUCH harder to get an apartment in New York in the first place. You need a large income, guarantors, or lots of savings, in addition to credit checks, bank staements, tax statements, etc. I'm pretty sure the same people that the law was meant to help are now unable to rent in the first place.

One idea I have is, instead of messing with the free market, create a futures exchange whereby renters and landlords can lock in rent. This market is possible because there are just as many people concerned about rent going up as there are rent going down.

If you want to keep renting, but you don't want to hedge yourself via the futures market or via buying a place, you'll just have to accept the risk that you'll be priced out of your neighborhood someday.

>create a futures exchange whereby renters and landlords can lock in rent.

Can't you just sign a longer lease?

Good point. If you're interested in living in the same place continuously, signing a longer lease is perfect.

I think a futures exchange is a bit more flexible though because: 1. Longer leases are often not available 2. People often want to move apartments after, e.g., having a baby

Considering you and the landlord have opposite goals(you want to minimize rent, she wants to maximize it), it is unlikely you would find a situation where long residential leases are offered.

Why is that? You might be right, but your argument isn't intuitive to me.

Landlords are afraid of rent going down, and renters are afraid of rent going up, so a long-term contract would be nice because it could simultaneously reduce stress for both of them.

These are the trades that create value--trades that reduce risk for everyone!

Each party has different acceptable levels of risk, and different outlooks on the market. Imagine a hot market. What landlord would sign a long term contract? Imagine if a landlord in silicon valley rented a house out on a 20 year lease 15 years ago. Big mistake.

This happens in other futures markets all of the time. The price/month of a long-term lease ends up being a bit more than the price/month of a short-term lease.

The same thing happens in interest rate markets: if you want to borrow money short-term, the interest rate is pretty low; long-term borrowing is scarier for the lender, though, so the rate charged is much higher (https://en.wikipedia.org/wiki/Yield_curve).

"Considering you and the landlord have opposite goals..."

They don't. Both want long term stability although some owners don't know that this is what they want :o). Landlords who try to maximise the rent face quick change of tenants (who don't stop looking for affordable places) and less care for their property. The price and stress overhead of finding new tenants is not worth the gain, in my experience. Not to forget, that real estate dealers often try to take money from both sides.

Berlin has rent control, if you stay in the same apartment the rent can only go up a certain % every year. It's also almost impossible to throw out a tenant here.

The main downside to renting is lack of control over stuff like renovations, modifications in the apartment, etc.

Two years ago I moved to Berlin from a different country and it took me 6 months to get my own apartment. Which was pretty good, because I knew someone who was leaving and he vouched for me. Then I understood that I subletted from someone who was subletted from another one who rented from company who rented from owner.

Normally you need credit score, letter of recommendation from previous slave-own^Wland lord. Then you can try to rent one. By which I mean you go there with 20 other people and land lord does... casting. They pick the best tenant out of quite big group.

Truly, the best way to rent!

I'm living this nightmare. If people thinks that renting here is easy they're just wrong. Laws are just trying to fix a situation that is about to get much worse.

It's gotten a lot worse in the past two years, more like 60 people showing up for attractive places and the whole job / income / vouching paperwork dance even for small apartments in the 500 Euro range.

What is the vacancy rate in Berlin? Is it at all possible to actually get your foot in the door and rent a cheap apartment?

The typical argument against price controls is that it reduces returns and discourages investment and new development, which can make it extremely difficult to find an apartment. The article didn't touch on this much, but this one line suggested that developers were still happily involved.

"...the large institutions that own much of the city’s housing stock are looking for a steady return rather than boom-and-bust cycles..."

Of course low vacancies happen in aggressively pro-development cities too. Canada has similar pro-homeownership policies to Australia and Vancouver's real estate market is similarly high priced as Melbourne's. New condos in Vancouver are being developed aggressively and yet the vacancy sits at 0.5%.

And yet the tens of thousands of new investment properties in Sydney and Melbourne that sit empty while waiting for a capital gain – labelled “speculative vacancies” by non-profit lobby group Prosper Australia – or which are rented to tourists at highly inflated rates, indicate that the market is not always a panacea for affordability.

Is that not just a glut that hasn't yet taken hold? If there really is over-supply, the investors will eventually end up competing with each other once they try to realize their capital gain.

I don't mean to suggest that a growing glut of empty properties ending with a bust is the best way for this to go, but it does seem to me that on a long enough time scale, supply & demand principles will still hold true.

"Empty" doesn't necessarily mean that it still owned by the developer and not yet sold on. It can mean that it has been purchased, but that whoever has purchased it has no use for it other than as an investment.

We've had this problem in London for years now, mainly in the west towards Vauxhall and beyond, but there are pockets of it all over, and it doesn't seem to be going away any time soon. Large new tower blocks containing "luxury apartments" are built, purchased by and often marketed solely to foreign investors and offshore companies as a way of parking large amounts of money into what is seen as a relatively safe investment, with several tax loopholes: Unlike many other investments, property in the UK is not subject to capital gains tax, inheritance tax etc. Also, if the property is owned by an offshore company rather than an individual then stamp duty (5% on £675k or more) is not payable. AFAIK this last loophole was closed last year, but only for properties over £2 million (and, I think the tax is only payable on the remainder that exceeds that).

As well as adding to an existing under-supply in the market for actual houses in which actual people can live in, the speculative feedback loop caused by this only drives up property prices further.

A punitive (%3 ?) long-term unused property tax is the solution to this.

If you want rents to go down, you need to incentivize builders to build more property.

Some regulation is good, but if there's too much in favor of the tenants, building more property becomes unprofitable, and you're stuck with the same problem.

> It's like saying: "I don't want anybody else to buy a car, because they might get a Mercedes, which I cannot afford."

It's funny how often envy is a motivating factor behind socialism.

Pretty much the only way to be kicked out in Berlin is if the owner needs the apartment for themselves (or a close relative) to live in. It is called Eigenbedarf.

The way markets boom and bust so frequently these days, one could almost interpret this as unveiling how ludicrous purely free markets can and probably will behave if they're given free reign, in the modern world, to "discover" market value.

Instead markets are in many ways indistinguishable from casinos anymore.

yes but markets these days are anything but free - with the fed (and its equivalents around the world) fixing the price of money then doing their Quantitive Easing tricks I would argue that we have a highly manipulated market now. On top of that the bailing out of banks etc also show that the market isnt free.

Very true. I think I was mostly attempting to point out "Shiny Object Syndrome" and how it applies to financial markets, and how quickly (in today's world) it can reinforce itself given the real-time nature of how information is distributed and consumed.

http://impossiblehq.com/shiny-object-syndrome/

As soon as all day traders (not just my circle of friends, but every single active investor in the world) get word that the new big trend is going to be real estate in Brisbane Australia, that's where we're going to put our money, which is going to push the price up, which in turn is going to attract additional investors, which is going to push the price up even more, etc..

That is until the market starts to turn. In which case all people who have bought into the real estate market craze in Brisbane Australia (who don't actually live in Brisbane Australia) pull their money out, which in turn causes prices to drop, which in turn causes everyone else to start pulling their money out. Because they all knew it was way over priced. It's not their fault after all. It's not illegal. They were just riding the bull as long as they possibly could. Doesn't matter what kind of devastation they leave behind because they don't live there and won't feel its effects.

Oh, and by the way... Now that the Brisbane Australia bubble has popped, I heard the next big thing is going to be tulip bulbs. Great, I'm all in!

> And yet the tens of thousands of new investment properties in Sydney and Melbourne that sit empty while waiting for a capital gain – labelled “speculative vacancies” by non-profit lobby group Prosper Australia – or which are rented to tourists at highly inflated rates, indicate that the market is not always a panacea for affordability.

Easy solution: for any period longer than 3 months in which the property is not rented with a minimum lease time of 12 months, the owner has to pay a fixed sum per square meter of the property; said sum should be based on the asked rent price.

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