The Housing Market Under Pressure

This political intervention was, in fact, inevitable. Although Berlin remains relatively affordable in comparison to other European capitals and even —German cities such as Munich, it has seen the fastest rate of increase anywhere in Europe. The average rent per square meter was around €10.90 by late 2018, meaning it had almost doubled compared to 2009 (when it was €5.82 per square meter). This increase weighs heavily, considering that only 17.4 percent of Berliners own residential property and the average income in Berlin remains modest. With an average annual income of €19,719, the capital ranks just eleventh for income among the country’s fifteen largest cities.

Most of the people in Berlin are exposed to market dynamics, and the market is booming. According to the real estate company JLL, Berlin had the highest investment volume in residential housing in Europe in 2018. Capital is flowing into the city, and its profiteering strategy — also visible around the world — is obvious. As geographer David Harvey describes it, capital in a post–financial crisis world currently lacks real economic investment opportunities. So, it instead searches for a safe haven in the built environment and real estate markets (Betongold, i.e., concrete gold). The aim: to find cheap investment opportunities, the value of which can later be raised by various instruments, such as modernization.

For years, Berlin provided cheap development opportunities for real estate companies and offered a big “rent gap” — the discrepancy between rents before and after investment is put in. While some of the capital ownership structures are hidden anonymously in transnational complexes, others become very tangible. One striking example: your landlord in Berlin could be a pension fund, speculating on rents paid by the pensioners living there. In this absurd situation, pensioners are put to shame by their private pension insurance, for it makes other citizens, in some cases even their neighbors, poorer.

The international interest in Berlin and the flood of investment capital into the city has provoked a harsh transformation of the urban landscape: it’s not only the cost of rent that has doubled since 2009. Formerly poor neighborhoods are now among the most in vogue hotspots of the city, which is thus facing a profound restructuring of its inhabitants and environments. Many inhabitants are forced to move to the outskirts, and even those who can remain now find the amenities unaffordable. In addition, rising land prices are exerting increased pressure on investors to develop every available square meter in a financially profitable way. The result: an undemanding, aesthetically homogenous architecture that places little interest in the common good of the city.

The Politics of Space in the New Berlin

But how could Berlin — a city where, for decades, space seemed inexhaustible and rents so low — get into this situation? As an exhibition held by architecture magazine ARCH+ showed last year, the recent urban transformation of Berlin is rooted in the specific situation of the city after what was heralded as the so-called end of history: the fall of the Berlin Wall. Through the transformation from socialism to capitalism, the city entered into a chaotic situation. In the former East Germany, property structures were unclear, and the city center was close to undeveloped. For conservative planners and elites, this was an outrageous situation — a wound to be healed and normalized.

In Berlin, where the ideological powers had so long collided geographically, capitalism was to win over socialism not only ideologically, but also spatially. New development strategies aimed to transform Berlin into a global city by wooing foreign capital. In doing so, neoliberal reforms such as the “new public management” approach were being implemented. Large and important parts of the city were privatized in the years following the fall of the Wall, mostly behind closed doors and without any democratic control. Hence, since 1991, more than 50 percent of the municipal housing infrastructure left public hands, while at the same time, less social housing was built.

East Berlin in particular became an El Dorado for investors, as the architect Florian Hertweck described it. Tragically, this material transition of the city was blurred by a superficial discourse on the architectural identity of Berlin, which mostly dealt in crude aesthetic categories of “good” and “bad” architecture. East German modernist architecture was often erased, while neohistoricist architecture experienced a boom. In many places, famous architectural symbols of the German Democratic Republic (GDR) — such as the Großgaststätte Ahornblatt — and public housing infrastructure built only two decades previously in the form of Plattenbauten (prefab construction high-rises) began to disappear from the urban landscape.

However, the expected Global City boom lagged during the 1990s, and Berlin developed only slowly. It was only in the early 2000s, after a deep corruption scandal chased the conservative government out of office, and Klaus Wowereit, a Social Democrat, became mayor, that Berlin’s recent success story began. Wowereit, who still fostered austerity and privatization policies, understood how to reshape the image of the city as “poor but sexy” (Arm aber sexy).

The openness of the situation after 1989 not only created an opportunities for investors but also opened up space for subcultures to rise. And while conservative governments treated those subcultures as a thorn in their side, they also helped the city position itself as a cultural hub for creatives from all over the world from the early 2000s onward. Finally, Berlin had its boom — not caused by the harsh privatization measures taken by the post-1989 political elites, but rather through soft and endogenous factors.

Together, the massive neoliberalization and privatization of urban space, the municipal pullout of social housing, and, further, the constant demographic growth of a hip city built the basis for Berlin’s current urban realities — not least its housing market.

Cleaning Up the Mess

In their 2015 book The Dialogic City, Berlin architects Arno Brandlhuber, Florian Hertweck, and Thomas Mayfried assert that Berlin is on the way to becoming a homogenized city, both socially and architecturally. Their proposition rang out: “Berlin should become Berlin again” (Berlin möge wieder Berlin werden) — what it had been until the changes of the last two decades.

But how is the city to be taken back? We argue that the Mietendeckel rent “lid” can be a first big step to re-regulate the city as a living environment in times of neoliberalism. Our aim must be to politicize the public against privatization, and to reestablish the city as a place for the many, not the few.

The reality that the struggles for a right to the city — and therefore for housing — are a class conflict became evident once again in the months before the rent-cap law was passed. A coalition of real estate pressure groups and liberal and conservative parties built up a common discursive front against the Mietendeckel, often polemically invoking the idea that a Senate with a left-wing majority is somehow trying to recreate the German Democratic Republic — the old East Germany.

Their most popularly used argument against the rent cap is the claim that it would endanger modernization measures, since landlords would not be able to reinvest — even though the rent-cap law includes the possibility for modernization exceptions and offering help to landlords who get into financial distress. Another commonly used argument states that inhabitants of “good” addresses would profit from the law in equal terms, and that this would be socially unjust. Frankly speaking, the latter critique is true — at first glance. But in the long run, such measures can lead to an increase in social heterogeneity of the urban fabric: if the rent is low everywhere, people can afford to live everywhere. Berlin could become Berlin again — an “archipelago of decentral concentration, of mixed usages, of social and physical accessibility,” where the development of the city is a political task and not left to private investors.

Meanwhile, the opposition on the Right has announced its intention to take the rental cap to court. There is much at stake. This is about nothing less than the question of what kind of city we want to live in. A city for everyone — or a city where only the rich can afford inner-city locations, and where urban space is commodified and privatized. Driven by strong social movements and the recent experience of losing the city to capital markets, the state government of Berlin has asserted its regulatory power in an overheated housing market.

And the good news is, Berlin isn’t alone. All over the world, people are talking about municipal strategies and the possibility of overcoming political impotence, using the tools of state intervention and the rule of law against a neoliberalism that works against the people. The Berlin state government has decided there is no right to a return on investment, because the German constitution guarantees a basic right to housing. This right has to be secured by intervening in the market. With the rent cap, we are finally getting back to the idea that social responsibility imposes limits over property. This is just the beginning of a political turnaround — and the creation of a city for all.