The big ones eat the little ones

Dear Reader,

This is the first members’ newsletter after my summer break. Thanks for bearing with me, I hope to bring you some insightful content over the coming months.

This week I’m looking at an eye-catching proposal that's being put to a referendum in Berlin on September 26th - whether to expropriate around quarter of a million properties from private companies and put them into public ownership.

I want to address three questions. 1) Why did this initiative come about? 2) Could it solve the problem it claims to address? 3) Is it likely to happen?


1) ‘Mietenwahnsinn’

The referendum is happening thanks to the hard work of a group called Deutsche Wohnen & Co. Enteignen (DWE). The name is a reference to one of the largest property companies in the country - Deutsche Wohnen, which owns 115,000 flats in the capital - enteignen means ‘to expropriate’.

Rents in Berlin have doubled in the last ten years,” DWE says. “Wages have barely risen in the same period,” meaning people are being pushed out of the city. “Particularly in the inner city, hardly anyone can afford the rents.”

Why is this happening? “Scheming rent sharks” are pushing up prices to pay big dividends to their investors. “Their business model is profit based on pushing up our rents.”

Do these claims stack up?

As I have previously written, the general claim that rents are rising is superficially true, but when put in proper context is actually misleading.

What’s real: if one looks solely at new rental contracts, the average price has almost doubled over the past decade, from €6.65 per square metre in 2012 to €10.50 today. This is most likely to impact young people. Under 30s are driving growth in the city’s population - they are the ones who have to take the new rental contracts.

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