Social housing subsidies in Berlin 2017: current status and outlook

Berlin's social housing subsidies have a turbulent history, and that history directly shapes today's market for apartments in Berlin. Since 2014 there are new construction subsidies again after a long hiatus, but the city is still dealing with the consequences of earlier political decisions.

Shrinking stock meets new subsidy programs

Of the roughly 450,000 apartments subsidized since the 1950s, only about 96,000 still carry social housing status. A 2016 GEWOS study projects that number will drop to around 61,000 within ten years if no new social housing is built. Demand, meanwhile, keeps rising: in 2015, 27,800 housing entitlement certificates (WBS) were issued but only 6,200 social apartments were newly let. Only about one in four WBS holders actually secured a social housing unit.

The Senate's 2014 housing subsidy regulations aim to counter this trend. The stated goal is preserving the "Berliner Mischung", a socially mixed population, especially in central boroughs like Mitte.

From massive construction to subsidy freeze

Between the 1950s and 1990s, various programs created hundreds of thousands of social apartments. Models such as expense loans and annuity grants provided affordable housing in West Berlin and later in the East. Due to Berlin's strained budget, the Senate stopped new construction subsidies in 1997. In 2003 came a fateful decision: the Senate ended follow-on subsidies for expiring contracts and actively encouraged early repayment of subsidy loans.

Consequences for owners and the Senate

That decision was based on the assumption that Berlin's population would shrink and vacancy rates would stay high. The actual market development went in the opposite direction. With falling interest rates on capital markets, many owners and housing companies found it financially attractive to repay the expensive subsidy loans early. This brought the state short-term revenue but accelerated the loss of social housing obligations.

For some owners, particularly real estate funds, the end of follow-on subsidies led to insolvency. Rents no longer covered costs. The Senate faced unexpected expenses: default guarantees and tenant subsidies that partially exceeded the original savings.

Outlook

In the eastern part of the city alone, around 80,000 apartments will lose their occupancy restrictions in the coming years. Owners of subsidized properties face the question of whether staying in the system still makes economic sense. One option being discussed: adjusting the interest rates on old expense loans to current market levels to make retaining social housing status more attractive. The scarcity of subsidized housing, meanwhile, generates high and stable demand in the lower and mid-price segments, within an increasingly regulated market environment.