On the 15th of July 2019, the tenants living in 670 apartments located on Karl-Marx-Allee, a major avenue in East Berlin, were able to breathe a big sigh of relief. After several months of jitters, the Mayor of Berlin had just announced that the new owners of their homes would not be a major listed property company, as initially planned, but the state of Berlin. In early November 2018, the residents of the apartment complex located near the Alexanderplatz had learnt that their apartments were soon to become the property of real estate heavyweight Deutsche Wohnen, which already own more 100,000 rental properties in the German capital. They were quick to take action, and formed a collective, hung banners of protest from their windows and took the issue up with the city government. The company happens to have a very poor reputation in Berlin. Tenants are only too aware of the way it operates: as soon as the company has got its hands on the properties, the rent shoots up and many of the tenants, particularly the less well-off, are forced to move out of the city.
The Karl-Marx-Allee apartments previously belonged to a state-owned housing provider, before being privatised in the early 1990s. With the objective of “cleaning up” public finances, Germany was busy selling off its council estates to major property companies and investment groups. Between 1990 and 2005, more than 200,000 of Berlin’s former council flats were sold to private companies. And in 2004, the German capital privatised its biggest state-owned housing provider, GSW. It was first sold to the US investment group, Cerberus, before ending up in the hands of Deutsche Wohnen in 2013. “The only goal of the capitalist companies that buy up all these apartments is to make money and pay out their shareholders,” says Katalin Gennburg, a left-wing councillor (Die Linke) at Berlin’s local parliament. (Die Linke is one of the left-wing coalition parties in power in Berlin since 2016, along with the Social Democrats and the Greens.)
The majority of people rent in Berlin, with more than 80% of apartments rented out, a fifth to private companies which see housing as just another market to conquer. But with Berlin’s expanding population (particularly since 2010), an overheated rental market and soaring rents, there is an increasingly-shared view that privatisation is a bad idea. Rents on new leases jumped by a whopping 75% between 2011 and 2016! And although under German law there are limits to rent increases on existing leases, big property companies often use the pretext of “renovations” to raise the rent by 30 or even 50%. “People just can’t take it any more,” says Katalin Gennburg. But new tenant-led initiatives are cropping up all over the city, with about a hundred currently underway.
A campaign for the remunicipalisation of housing
The new housing campaigns began in 2012 in a block of former council flats that had been privatised, this time in the neighbourhood of Kreuzberg. The tenants were facing substantial rent increases which were basically going to force them out of their homes. They decided to do something about it and took action, occupying the neighbourhood, organising demonstrations and meeting councillors. In 2017, the city bought a section of these apartments for 56 million euros, and a tenants council now helps to manage the properties alongside the state-owned housing provider. The counterattack also paid off in Karl-Marx-Allee. “We were the ones that drove the solution, not the city senate,” points out Norbert Bogedein, Karl-Marx-Allee resident since 1996. “That’s how policies should work, from the bottom up. We want ordinary residents to be able to live in the city centre and pay ordinary rents.”
And residents are laying on the pressure. In late 2018, citizens even demanded a local referendum to expropriate Deutsche Wohnen and other big property players that own over 3,000 rental properties in Berlin. This would require the city to buy back 200,000 former council flats, but at a price below market value, and then establish a democratic system of management. There’s a good chance that the initiative will be successful. “A few years ago, the idea of expropriation would have seemed crazy. But right now our initiative resonates deeply with people,” says Rouzbeh Taheri, one of its founders. For years he has been an active housing campaigner, and in 2015 he became the spokesperson for a residents’ campaign that advocated for a citizens’ referendum to protect social housing. In the end there was no need for the referendum, as the city senate went ahead and adopted their project. The initiative to expropriate property firms has already got 77,000 signatures, and was submitted to the city senate last June. The proposal will be examined and the senate will either choose to adopt it or negotiate an alternative. If the two parties can’t reach an agreement, the campaign will need to gather, in four months, the 180,000 signatures required to hold a referendum. If they manage to do this, a vote will be held, and the result will be binding (provided that at least 25% of those enrolled in Berlin’s electoral list take part).
The new real estate profiteers of Berlin
“Deutsche Wohnen is actively disliked in Berlin,” says Rouzbeh Taheri. “This is because it raises rents under any pretext, and because, for years, it has done little in the way of upkeep and repairs. This means that the heating often breaks down in the middle of winter, and the lifts stop working.” In addition, Deustche Wohnen regularly attempts to challenge Berlin’s rent control system through various legal manoeuvres. “People remember how it used to be before their apartments were privatised and how it is now,” adds the activist. It’s really over the last ten years that private property firms have honed in on the German capital. In 2019, Deutsche Wohnen owns 115,000 of Berlin’s rental properties compared to 25,000 in 2012. In 2017, the company, which was created by the Deutsche Bank in 1998, paid out its shareholders over 260 million euros, 80 million more than the year before. In seven years, its share value has quadrupled. But Deutsche Wohnen is not the only company targeted by the housing campaign. There are least six other companies concerned all of which own more than 6,000 rental properties in Berlin: Vonovia, ADO Properties, Covivio, Akelius, TAG Immobilien, Grand City Properties ... Most of these companies haven’t been around for more than twenty years, they’re all listed on the stock exchange where their value has skyrocketed at a faster rate than even the Berlin rents these past years, and many are owned by billionaires.
Vonovia was established in 2015, in the wave of post-1990 privatisations and following several mergers. It has become one of Germany’s largest property companies, owning more than 40,000 rental properties throughout the capital. Grand City Properties, a Luxembourg-registered firm owned by billionaire Yakir Gabay (with a net worth of over three billion dollars according to Forbes), owns 84,000 rental properties throughout Germany, 7,500 of which are in Berlin. Covivio, which has over 15,000 rental properties in Berlin, is a company linked to Italian billionaire Leonardo del Vecchio (with a net worth of over 22 billion dollars according to Forbes), through his family-owned holding company, Delfin, which has a 25% stake in Covivio (subsidiaries of French banks Crédit agricole assurances and Crédit mutuel assurances also have shares in Covivio). BlackRock is a company with shares in Deutsche Wohnen (as much as a 10% stake in the company), Vonovia, and the company TAG Immobilien (over 9,900 rental properties in Berlin). Another big player is Akelius, a company active in Berlin since 2006 and which currently owns over 13,000 rental properties in the German capital. Through companies based in Cyprus, the group is linked to the Akelius Foundation, which just happens to be based in the Bahamas, a tax haven with an even worse reputation than Luxembourg (see the 2018 annual report of Akelius Residential Property AB, p.138). The rents charged by Akelius are the highest among all these companies. Its tenants formed a collective in 2019 and even drafted a 150-page report on the firm and its dubious operations in Berlin .
Local activists take on a property giant
For years these companies kept their operations under wraps. It was not really until the tenants got involved that the companies’ names, shareholders and their ways of operating were brought out of the shadows. It was thus a group of activists that met in the Syndikat, a neighbourhood bar and gathering that has been around for over thirty years, which happened to bring the issue to light. After doing a bit of research, the group revealed that Pears, a major British property firm, was heavily present in Berlin.
After receiving an eviction notice in July 2018, the Syndikat attempted to negotiate a new lease with the company acting as intermediary between them and the corporation that has owned their building since 2014. These attempts proving fruitless, the Syndikat’s managers began to look into the company that had bought their building, and found the Luxembourg-based company “Properties S.A.R.L”. They also found a dozen other companies with similar names at the same Luxembourg address, all property companies that own buildings all over Berlin; basically empty shell companies. These were all traced back to Pears, the British property empire owned by a family of billionaires, which used a handful of different companies to buy thousands of rental properties in Berlin. The media kept probing and found that Pears were able to capitalise on their property companies not only by registering them in Luxembourg but also by basing them in Cyprus and the British Virgin Islands, both tax havens. According to a 2017 version of the Pears Global site, it would appear that Pears owned over 6,000 rental properties in the German capital. And yet, before the neighbourhood bar lifted the curtain, no one at Berlin’s city senate had any idea that the real estate empire had moved in to the city.
Protecting cities from speculators
But what can a city do about these property vampires whose only interest is to make a profit? Berlin has, over the last few years, taken a step and begun rebuilding social housing complexes. “But it’s not enough to build them; these properties also need to be protected from speculation,” says Die Linke councillor Katalin Gennburg. That seems to be where the German capital is heading. In 2017, it established preemptive rights over the city and its neighbourhoods so as to protect tenants from having their homes bought by property companies. In the wake of the decision to renationalise part of Karl-Marx-Allee, the social democrat Mayor Michael Müller had plans for the city to buy back some 60,000 of the former social housing properties. But it would have to pay market prices, which are a good deal higher today than they were fifteen years ago, when they were privatised. “If we buy back properties off Deutsche Wohnen, the company will make even more money because it’s going to sell them at a much higher price than it bought them for. Then there’s the risk that it will use this money to play its real estate game in other German cities,” says Katalin Gennburg. Or even in other countries, like the leading property firm in Germany, Vonovia, which is already has its eyes on properties in France. This is why the citizens’ initiative to “expropriate Deutsche Wohnen and co.” is so important. The campaign hinges on two articles in German Basic Law. Article 14 states that “expropriation shall only be permissible for the public good”. And Article 15 states that “Land, natural resources and means of production may, for the purpose of nationalisation, be transferred to public ownership or other forms of public enterprise by a law that determines the nature and extent of compensation authorised for the common good.” “Article 15 was adopted not long after the Second World War when nationalisation was still on the agenda,” says Rouzbeh Taheri. But the Article has never been put to use in Germany. It’s similar to the French law of 1945 that provides for the requisition of properties, but which has almost never been used. “Article 15 is about more than just a change of ownership. For us, the expropriation of big property companies needs to go hand in hand with the involvement of both tenants and the city senate,” adds the activist.
The initiative estimates that it would cost the city between 8 and 14 billion euros to buy back the properties and have them renationalised. “A good part of this sum could be paid for through loans. The rent received from the renationalised properties could then go towards paying back the loans. Berlin’s state-owned housing providers are in good financial health,” says Rouzbeh Taheri. But even if the initiative doesn’t make it to the referendum stage, it has already had a significant impact on the city’s policies and is being discussed. In June 2019, Berlin announced that it will freeze rents for five years. Once voted in, the rent freeze will be retroactively dated, effective from 18 June so to avoid any rent increases before the law is ratified. Berlin’s current leftist government also seems to want to protect those with less resources from being relegated to the outskirts of the city. “There’s real social diversity in Berlin: the builder can live next door to the university professor in the middle of the city,” explains Rouzbeh Taheri. “Even though this diversity is still alive and well, it’s under attack. That’s why we’re fighting back.”