BERLIN (Reuters) – Posters posted by potential tenants looking for housing have become a common sight in Berlin’s wide streets. Viewings of homes attract long queues of hopefuls, although rents have far outpaced salaries in recent years.
In the German capital, where cheap and plentiful apartments have been a magnet for artists and young professionals for a decade, the vacancy rate is now less than 1%. The cost and difficulty of renting make it difficult to attract talent and force some residents to leave, even though companies are in desperate need of skilled workers.
While the local government says Berlin has enough space to build more than 100,000 apartments, there is no sign that the housing crisis sweeping the city will abate.
Rolf Buch, CEO of Fonovia, Europe’s largest landlord, cited factors including record-high interest rates and rent controls to explain the chronic mismatch between housing supply and demand.
“New construction doesn’t make sense for many projects these days because with 5,000 euros per square meter and 4% interest someone has to finance it,” he told Reuters.
“When I go to the bank, they say, ‘Mr. Buch, come back when you’ve done the accounts again, because you can’t even get interest on the rent.’
The sharp rise in borrowing costs has already pushed some German property developers into bankruptcy. It also keeps potential homebuyers in the rental market, despite the recent decline in home prices after years of rapid growth.
With construction projects on hold, the government announced a 45 billion euros ($47 billion) support package for the sector and measures to encourage house building, including tax incentives.
But with Europe’s largest economy heading into recession, economists warn that rising rents will fuel inflation and reduce household consumption.
“Rent increases lead to a redistribution of income, with the poor paying more and the rich earning more,” said Konstantin Kholodilin of the DIW Economic Institute.
In Berlin, local opposition has thwarted construction plans, while regulations have created a two-tier rental market that is cheap for some long-term tenants and expensive for new ones.
Marwa was excited to move from San Francisco to Berlin with her husband and daughter after she was offered a job in July as a strategist at a technology company.
She backed out after finding that renting a two-bedroom apartment would take more than half of her six-figure salary, which is high in Berlin but less than she was earning in California.
Marwa told Reuters, “90 percent of the reasons for not accepting the job are due to the difficulty of finding an apartment and the high cost of rent.”
to divide
About 85% of Berliners rent their homes, according to the International Tenants’ Union – well above the Eurostat figures of 53% for Germany as a whole and the EU average of 30%.
In the past seven years, rents in Berlin have jumped 44%, while the city’s average wage has risen just 30%, federal and local data show.
It wasn’t always like this.
After the fall of the Berlin Wall in 1989, the city suffered from a decades-long housing glut, a legacy of its division after World War II. The West and East German governments pumped money into building accommodation, reflecting the city’s position at the center of competing Cold War regimes.
“It was a divided city and all of Berlin was supported,” Buch said.
Expectations that Germany’s new, unified capital would grow quickly saw more construction in the 1990s, “but not as many people came as we thought,” said Monica Neugebauer of the Berlin housing cooperative Vungenosenschafts.
In 2004, the city of Berlin sold its debt-laden social housing unit GSW and more than 65,000 apartments, many of them vacant or in need of renovation, to Goldman Sachs (GS.N) and private equity firm Cerberus (CBS.UL).
The city’s population began to grow again in 2005, with rising birth rates and life expectancy and increasing immigration. Foreigners now make up 24% of the population, and their numbers have nearly doubled between 2011 and 2023, according to data from the Berlin Statistical Office.
High demand for real estate has led private companies to develop luxury apartments that offer a higher return, partly because, Buch said, government permits for affordable housing projects have been too slow.
Neugebauer said selling land to the highest bidder had narrowed the scope for social housing construction.
opposition
Since then, some construction projects have faced local opposition, while a recent attempt to limit rent increases backfired.
In 2014, plans to build 4,700 apartments and a commercial building at the former Tempelhof Airport, which closed in 2008 and is now mainly a public park, were rejected in a local referendum.
Housing cooperatives, which offer some of Berlin’s most affordable apartments, have canceled two-thirds of new construction projects after the city government announced a rent cap, saying it makes them unviable.
The cap was introduced in February 2020, was declared unconstitutional and was repealed 14 months later. At that time, rents were reduced by 7.8%, data from the real estate portal ImmoScout24 shows, but the number of available apartments fell by 30%.
“Competition for apartments on offer has intensified significantly,” said Jessa Crockford, managing director of ImmoScout24.
A German law that limits the number of times a landlord can increase prices keeps rents lower for long-term tenants than for newcomers and gives them little incentive to move.
“Asking rents in Berlin are sometimes twice, and in some cases three times, higher than current rents, due to the very limited supply,” said Berlin government spokesman Martin Balgen.
This in turn means that housing stock is being used inefficiently, with growing families squeezing into smaller apartments and downsizing by people whose children have left their homes.
Anna Hohenrath, a 27-year-old account executive from Valencia, Spain, moved into her boyfriend’s 36-square-meter apartment in April as a temporary measure until they could find more space.
Their search took eight months, after applying to view more than 100 apartments and having offers rejected in eight months.
“You start to wonder if you’re doing anything wrong,” Hohenrath said.
(Reporting by Matthias Inverardi) Editing by Matthias Williams and Katherine Evans
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