Berlin's rental market was under strain in 2014, especially for small, affordable apartments. The influx of students and young entrepreneurs was well known. Less noticed was the fact that other groups were competing for exactly the same housing at the same time.
Who was searching
According to Social Affairs Senator Mario Czaja (CDU), around 1,800 people in refugee shelters had completed their asylum process and were waiting for a regular apartment. On top of that came elderly people living alone on welfare benefits and other low-income households. They all wanted the same thing: small and affordable apartments in Berlin.
This demand pressure from very different sources pushed rents up, even though many of these prospective tenants did not qualify for private landlords due to a lack of credit references.
Political concern
Heiko Thomas, health policy spokesman for Berlin's Greens, warned in the Berliner Morgenpost of a looming "social catastrophe." Politicians faced a dilemma: finding solutions without putting additional strain on the market. The general market development showed the gap between supply and demand was widening.
Why the market had no reserves
The shortage had historical roots. After the fall of the Wall and into the early 2000s, Berlin struggled with vacancy and declining population numbers. New construction seemed unprofitable, and the focus was on renovation. This period of virtually no new building meant the market had no reserves left when roughly 30,000 people per year began moving to the city.
What this meant for owners
For property owners, the situation had two sides. On one hand: low vacancy rates, stable demand and potential for both rent and value increases. Pressure was particularly high in central boroughs with still moderate rents, such as parts of Neukoelln or Wedding.
On the other hand, the debate around affordable housing was growing sharper. Investors needed to keep an eye on the increasing social and political tension. Regulatory measures were on the horizon. In the short term, though, demand for small apartments remained a key driver of Berlin's apartment building market.
