Law & Politics
Market regulation in Berlin
Berlin housing policy 2017: regulation instead of new construction
Instead of promoting new housing construction, the Senate is tightening market regulation. Conservation area rules and condominium conversion bans hit owners and investors hard and reduce the supply of apartments for sale.
Peter Guthmann
Growing city, little new construction
Berlin is growing. Last year alone, nearly 60,000 people moved to the capital. The demand pressure on the housing market is high, rents and purchase prices are rising. But this is not a market failure. It is the result of years of misguided housing policy. Rather than improving conditions for new construction, the Senate focuses on increasingly restrictive regulation of existing housing stock.
Historical background
The roots of the current situation go back more than 20 years. From the mid-1990s well into the 2000s, policymakers assumed Berlin would be a shrinking city. To fill budget gaps, large parts of the municipal housing stock were privatized, nearly 210,000 apartments in total. This strategic miscalculation stripped the state of its main instrument for managing the housing market. Instead of acknowledging those past mistakes, the current shortage is presented as the result of speculation.
Conservation areas and conversion bans
The Senate's main instruments are conservation area regulations (Milieuschutz) and condominium conversion bans under Section 172 of the Building Code. Neighborhood by neighborhood is placed under conservation rules. For owners, this has consequences: structural changes such as adding balconies or renovating bathrooms require permits and are often rejected.
The conversion ban prohibits turning apartment buildings into individual condominiums. This mainly affects high-demand locations in Neukoelln, Friedrichshain-Kreuzberg, and parts of Mitte. For investors and existing owners, this means their properties can no longer be sold unit by unit. It affects the profitability of many buildings and slows the market development.
The consequences
Rather than creating new housing, this policy reduces the supply of apartments in Berlin available for purchase. That pushes prices for the few remaining condominiums even higher. At the same time, it becomes impossible for tenants to buy the apartment they live in and build private retirement savings. For owners, the incentive to invest in their property drops because modernizations are hard to implement. The result: the market stalls, housing quality stagnates, and new construction fails to materialize.