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Comment by endymi0n | Hacker News Reader

Here in Berlin, the measure has large support and I don‘t know why. It‘s mostly because the measure is called „disowning“ corporate landlords, which seems to resonate with everyone being angry at the rents.

Had they called it „paying out the last decade of profits to corporate landlords to keep the rent of 5% of Berliners instead of building new housing to lower the rents of 95% of Berliners“ (which is what‘s planned), I guess it would have way less support. It‘s a populist market rigging measure just as futile as the failed rent control and I‘m not looking forward to the impact on the city.

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I totally don't get it. Why not use that money to build more apartments instead. Why take on the liability with these apartments beiing asbestos contaminated and needing more money to get rid of this. Too me there is the stench of corruption but I don't have evidence. My Hanlons razor is not sharp enough to cut this here though.

This is a standard corruption pattern in Germany. Sell state infrastructure for Cents and buy it back for Euros.

Take for example our Federal Printing Office (Bundesdruckerei).

It's obviously corruption. Corporate landlords get to offload their dodgy property to the government and run away with the cash, without the usual time and expense of selling each property on the market. By cynically cloaking themselves in populist language, they're able to easily manufacture the consent of the public.

To me the consent of the public is even more shocking.

Berlin doesn't care about money. Back when separated by the iron curtain, Berlin always got a special deal in federal/state finances because of its situation. After reunification, Berlin was pumped full of money because it was the new designated capital city and showpiece for unification. Nowadays, some of the special deals still remain, plus Berlin is awarded absurd amounts of money from the "Länderfinanzausgleich" (state finance balancing mechanism), meaning that the richer German states pay for Berlin's deficit.

So Berlin is in the comfortable situation of that one no-good family member on social security who will always find someone to pay their bills. Why change anything, why stop spending all that money, if more keeps coming without any effort in any case?

It’s always easier to spend other people’s money. Is there a competent central auditing department that watches out for this?

There are, but they can only audit and report. Change and punishment would need to happen politically, but that would need a majority of states. Two thirds of the states profit from Laenderfinanzausgleich (to various degrees) and will not change anything.

> To me the consent of the public is even more shocking.

Is there even consent? The referendum (Volksentscheid) hasn't happened yet. I wonder how this haphazard move by the current Red-Green coalition Berlin city administration is even legitimate when the referendum is only due more than a week from now. Unless this was done to pre-empt losing at the ballot box.

Nobody wants new apartments in their neighborhood because the fear is that those would drive rent prices up.

Nobody wants new apartments in their neighborhood because increased density decreases quality of life of those who already live there.

There's no upside _for them_ (remember, they already have apartment, they don't need another), only downsides.

That is like saying more fruit stores on the street will drive the fruit prices up.

This is a complex issue. if you add apartments for the same number of citizens prizes should go down, but that's hardly the nature of the system we are working with here.

If you have a busy highway and add more lanes will traffic jams go down?

This is a complex issue.

https://usa.streetsblog.org/2017/06/21/the-science-is-clear-...

https://en.wikipedia.org/wiki/Induced_demand

> If you have a busy highway and add more lanes will traffic jams go down?

Yes, but perhaps in neighboring/older roads instead of the fancy new lanes on the highway.

All evidence suggests the answer is actually "no".

But this can happen with certain products, including housing, by driving new demand. Imagine your street has a great fruit store that caters to locals and is a bit busy but reasonably priced.

Three other fruit stores see the demand and open up, offering slightly different fruit and other higher margin products like pies and smoothies. People start coming from all over the city for fruit, and tourists come to try local fruit they can't get at home.

Now you have four busy fruit stores, and they gradually raise prices and focus on higher margin items instead of everyday fruits and veg.

This happens all the time with bars and restaurants, too, as a neighborhood gets trendy. And it can happen with housing, because upscale housing brings rich people to the neighborhood, which makes other rich people feel more at home, even in less fancy housing.

People who already own property don't want new apartments in their neighborhood because the fear is that those would drive house prices down. Plus they already got theirs, what do they care about anyone else?

Thankfully it's not really anything like most people who have this NIMBY attitude, just the loudest ones.

Ignoring the corruption question, building housings does NOT lower rent. It’s complicated.

The research I've seen (e.g. [0] [1]) consistently shows a modest decrease in rent prices for existing renters when new housing is built. Are there studies showing the opposite that I'm not aware of? I understand that there are two competing effects at play (which [0] calls an amenity effect vs. a supply effect) but my impression is that empirically the latter seems to reliably outweigh the former.

[0] https://blocksandlots.com/wp-content/uploads/2020/02/Do-New-...

[1] https://doi.org/10.1162/rest_a_01055

I can’t recall the article I read about it - sorry. It probably didn’t cite thorough studies though. It took into account the fact that higher population increases wages (opportunity), which would rise rents. Similar to amenity effect, but iirc it applies to the city as a whole, not just the neighbourhood.

Yes it does

Where did you get that from?

I don't get why he's being downvoted - although maybe too general of a statement, I can completely see how new development in an area could actually drive rent prices up - development also affects demand - from gentrification to things like opening business and infrastructure scaling making the area more attractive.

I've seen this happen in my city - there's a really renowned developer building high quality mixed residential-buisiness complexes - as soon as they started building a new site the surrounding prices went up, this happened in all of their projects I've looked into.

But they are the most extreme example. I'd guess that most of the neighborhoods that are seeing active development are increasing prices faster than the rest of the market.

Possibly the stupidest thing I've read

But it's also a symbolic value, that something is fundamentally changing. 15000 apartments isn't that much for Berlin but a billion is.

Of course more apartments are needed and Berlin needs to grow in height and diameter. But also there is no point in landlords hardly putting any efforts in to keep apartments in good shape. Needed repairs and modern upgrades are labeled as luxury renovations which is just a total distortion of reality. At the same time there are small, non-corporate landlords which put in more effort, are more approachable but who in reality invested in a casino-like asset. IMHO real-estate makes only sense for institutional investors, private or governmental because any single error can be financially disastrous and needs to be averaged out.

That's why I backed the bill but I hope everyone is working towards something better...

If these corporations don't keep their end of the bargain (ie. they don't maintain the buildings), then sue them and/or fine them. No need to buy them out.

Sure, but it's more than frustrating to go to a lawyer for a service you are supposed to just get, even if you can get free consulting through an insurance. That's why most people don't jump through those hoops and work-around it themselves. (I.e. do nothing usually which is bad for both parties)

Also there has been a general official agreement so far that modernizations justify higher rents. Which is just nuts because why would a one-time investment justify a basically indefinitely going increased rent...

> Sure, but it's more than frustrating to go to a lawyer for a service you are supposed to just get [...]

Of course. In a healthy market (low transactions costs and sufficient number of participants leads to sufficient volume and price discovery, and thus competition, which eliminates economic rent seekers) you simply stop using the bad provider and switch to a good provider. Of course people hate moving even more than contracting an attorney.

And that's why advanced economies need consumer protection bureaus/agencies to counteract these inefficiencies. So they should bring the lawsuits to weed out the bad providers and incentivize keeping the terms of the contracts.

Unfortunately in the US these agencies are either non-existent or pretty weak, and their place was taken by class action lawsuits brought by opportunistic law firms.

> modernizations justify higher rents.

Well, a rental unit is like a field in a farm. Or maybe compare it to a greenhouse. If you replace the insulation on the greenhouse to something better now you can cultivate more/better plants, which means you make more money.

Investments (by definition) increase the capital value of the asset. More capital produces more output, so it can be exchanged for more money. For a housing unit the output is hedonistic value (aesthetic value, comfort value, better soundproofing, better plumbing, adding AC).

> Which is just nuts because why would a one-time investment justify a basically indefinitely going increased rent...

... it permanently increases the buying price of the unit. Just like with a house. If you renovate it you can sell it for more. If it's empty you can rent it out for more (in perpetuity).

The simple fact that there's a tenant doesn't change this.

Of course one must also consider amortization, but almost all rental agreements mandate that the owner actively maintain the unit, so its effect should be net zero, but if the market price of maintenance increases (because raw materials, plumbers, painters, etc. become more expensive) then it's not unreasonable for the rent to increase too. (And since the cost disease is especially affecting things manufactured/built/provided locally ... housing is getting a lot pricier. [0])

Also there's inflation. Which just by itself makes nominal rent increases a necessity.

[0] See https://phenomenalworld.org/analysis/the-class-politics-of-t... and http://web.archive.org/web/20191015142434/http://rationallys... ( https://www.stitcher.com/show/rationally-speaking/episode/ra... )

The "disowning" part is somewhat different from the current transaction though. It will be decided by referendum if the "disowning" actually happens and at least the proponents say that Berlin should not be paying market rates for the apartments.

The article mentions a different deal that was struck separately without a referendum. I think there is not much support for buying back apartments for such prices.

Problem is, "not be paying market rates" will never happen. Market rates will be paid, because disowning anyone for the public good is only constitutional, if market rates are paid as restitution. There have been lots and lots of cases around disowned people lost by the state because of that.

There are often ways around that. For example the state can manipulate the markets, or offer an alternate choice, for example to never raise rents ever.

Lowering rents was part of the plan anyways, I think. Market manipulation through rent caps has been tried before and (in the Berlin version) declared unconstitutional.

It's constitutional, it was just ruled it wasn't a municipal faculty

It depends on how much they will pay. There are studies showing that it does not have to be that much. The Grundgesetz (German constitution) allows not paying market value in certain cases.

https://gentrificationblog.files.wordpress.com/2021/08/ag-so...

> Here in Berlin, the measure has large support and I don‘t know why.

This fits perfectly into the recent “eco, socially responsible, ev, wind and solar power, fridays for future, throw the baby out with the water green party support, take from the rich-give to the poor, 100kph Autobahn speed limit, we need to be the best example in the world at whatever cost” mental state of Germany. It doesn’t have to make sense. It is what it is.

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