terça-feira, 11 de outubro de 2016

Germany: Berlin’s war on gentrification

Germany: Berlin’s war on gentrification
As demand booms, officials want to prevent the city turning into another London

YESTERDAY by: Guy Chazan in Berlin

Last summer, the residents of Wrangelstrasse 66, an apartment block in the trendy Berlin district of Kreuzberg, received an alarming letter from the owner. The whole house was to be sold to a Luxembourg-registered company called Riva Residential. The tenants had two choices: either buy their flats themselves or face an expensive renovation and higher rents.

In desperation, they appealed to their local council for help — and got lucky. Councillors discovered an obscure legal tool known as a “pre-emptive right of purchase” that allows them to swoop in and stop buildings from being flogged off to private investors. They bought the house for €3.7m and sold it on to a state-owned housing company. Wrangelstrasse 66 is now in public ownership and its tenants can stay.

“We have to do something to save public housing stock and ensure that the social structure of these neighbourhoods isn’t completely destroyed,” says Hans Panhoff, the Kreuzberg councillor who spearheaded the deal.

What happened on Wrangelstrasse is not an isolated incident. It is part of a broad campaign by the Berlin authorities to tame the wildest excesses of the real estate market and protect the rights of tenants, who make up a staggering 85 per cent of the population — compared with only 35 per cent in Britain.

The aim is to prevent Germany’s capital ending up with the same kind of housing crisis as London. “We want Berlin to remain a place where average earners can afford to live,” says Matthias Kollatz-Ahnen, the city’s finance chief. “And rumour has it that that’s no longer the case in London.”

But in their pursuit of a fairer housing policy, the authorities are enacting measures that would make the average laissez-faire liberal blanch. Councils have reinforced rent controls, banned luxury renovations and kicked out Airbnb. They are also considering huge tax hikes to deter foreign investors.

Some see the government’s interventions as slowing Berlin’s natural development into a world-class capital. “If we didn’t have gentrification, we’d all still be living in wooden houses,” says Jörg Schwagenscheidt, head of PMM Partners, a real estate advisory firm.

All over the world, big cities are facing the same dilemma: how to provide enough affordable housing for all their citizens. A wealthy metropolis cannot just be a playground for investment bankers. It also needs nurses, teachers, and policemen who can live within easy reach of their workplaces.

Yet in many places, low-income workers, particularly those in the public sector, are being priced out of inner-city neighbourhoods by spiralling living costs and exorbitant rents. The result is rising inequality and far-reaching changes to the social make-up of urban centres.

Berlin has also suffered from this trend. “Thousands of Berliners who have lived in places like Kreuzberg for decades are being squeezed out and whole neighbourhoods changed beyond recognition,” says Pamela Schobess, a nightclub manager who has lived in Wrangelstrasse 66 since 1999.

Berlin has much more flexibility to pursue policies favouring low-income tenants than London or Paris. It is the poorest of Germany’s big cities, and rents have traditionally been lower there than in places like Munich and Frankfurt, where pressure on housing is much greater. Unlike London, Berlin’s population is lower than it was before the second world war: there is more space for development than in the English capital and land prices are significantly lower.

Even with those advantages, there is no guarantee Berlin’s experiment will succeed. Despite the best efforts of City Hall, rents are on the rise and affordable flats in short supply. A recent report by the think-tank Empirica found the average Berlin rent had risen 57 per cent since 2004.

Everyone loves Berlin

Just like in London, Berlin is a landlord’s market. But it wasn’t always like that. Split in two by its eponymous wall, it used to be a rundown, shabby city that was a haven for squatters, artists and bohemians. Finding a cheap flat to rent was never a problem. At one point last decade there was such a large surplus of public housing that the city actually sold off 80,000 council flats.

The situation has changed radically in the past five years, however. Berlin, which welcomed 12m visitors in 2015 alone, is now the capital of a country at the peak of its power and influence. Some 40,000 people are moving here every year, attracted by its thriving tech start-up scene, creative buzz and relatively low cost of living. They are in addition to the 54,000 refugees who poured into the city last year.

Experts say Berlin must build an additional 25,000 homes every year to keep up with the growth in its population. But last year, only 8,000 were constructed, city officials say.

The Berlin government is determined to solve the housing shortage. It plans to increase the number of affordable flats it owns by about 80,000 to 400,000 by 2026. The city’s six state-owned housing companies will buy 26,600 apartments on the open market and build 53,400 new ones: 30 per cent of those will be reserved for low-income families.

Other measures are far more intrusive. For years, urban planners worried about the number of luxury renovations in central districts of Berlin. Landlords typically raise rents after such upgrades, forcing the original tenants out. The city has sought to counter this by designating some 33 neighbourhoods as “urban conservation areas” where expensive redevelopments are banned. Owners of houses in these areas are also not allowed to convert them from rental properties into condominiums.

The policy is a nightmare for developers. “The problem is most people don’t know what the rules really mean, and where the next one is going to be,” says Mr Schwagenscheidt. The only hope they have is that the protected status of the neighbourhood will one day lapse so they can modernise their buildings. “They will just wait,” he says.

Berlin has also introduced a “rental brake”, under which the rent set out in a contract with a new tenant cannot exceed the local average by more than 10 per cent.

But in a sign of how hard it is to regulate a market where supply cannot keep up with demand, the brake isn’t working. A recent study discovered a big gap between the average rent paid by existing tenants in Berlin and the price for newly re-let apartments. “In some cases we’re seeing increases of up to 60 per cent,” says Martin Pallgen, spokesman for the department for urban development. “But you’re always going to find people who’ll pay.”

According to Reiner Wild, head of the Berlin Tenants’ Association, a flat-hunter has often spent so long looking that he is happy to cough up whatever the landlord wants — even when he knows it’s above the legal limit. “He thinks: am I really going to start things off here by picking a fight with the landlord?” he says.

Moves are now afoot to toughen the law. The centre-left social democrats, junior partner in Angela Merkel’s coalition government, wants to force landlords to publish the rent they charged the previous tenant, so the new one can see whether — and by how much — it has increased. They also want to introduce stiff fines for property owners who raise rents by more than is permitted.

And while some have slammed the brake as ineffective, there is evidence that the canny tenant can use it to his or her advantage. Last month, in the first case of its kind, a landlord in Berlin was ordered to reimburse his tenant hundreds of euros after a court decided he had broken the rules by charging her €7.60/sq m, instead of the local average of €7.16. Heiko Maas, justice minister, said that the brake was a “paradigm change which is now beginning to have an effect”. Yet such legal challenges are extremely rare.

Landlords are critical of the government’s interventions. “It’s just tinkering with the symptoms, rather than really tackling the root cause of the housing shortage, which is that there are just not enough flats,” says Alexander Gedaschko, head of the GdW, a trade body representing German property companies. “A better response would be to speed up the construction of new housing.”

Taking on Airbnb

Perhaps Berlin’s most radical move has also been its most controversial — a ban on homeowners letting out whole properties on Airbnb. City officials estimate there are as many as 24,000 holiday flats in Berlin. “In Kreuzberg there are more of them than flats for rent, and that’s a serious problem,” says Mr Wild.

Enforcing the ban is difficult, but officials have turned to the public for help. Mr Pallgen’s department has an online form for people to report anonymously on neighbours they believe are renting out their flats on services such as Airbnb. Since May, they have received 3,000 tip-offs. Violators face a stiff fine.

For some critics, the scheme has uncomfortable echoes of East Germany’s Stasi past. Mr Pallgen denies it’s encouraging a culture of snitching. “Tenants who are disturbed by people … making loads of noise, throwing parties and piling up rubbish have a right to complain,” he says.

The law has also been toughened to force websites to hand over the details of property owners suspected of letting out their flats to holidaymakers in contravention of the ban.

Airbnb last week published a study it commissioned showing that home-sharing organised through its platform had “no significant impact” on the Berlin housing market. Its listings account for 0.6 per cent of the city’s housing stock and 63 per cent of listings are rented for fewer than 30 days, it said.

Hemmed in by regulation, real estate investors have to tread carefully in Berlin. But there are still plenty of opportunities, says Mr Schwagenscheidt. “With a detailed asset management approach on the ground, you can still achieve attractive returns,” he says.

Outside the conservation areas, developers are free to buy rental flats and convert them into condominiums, which can be sold for sky-high prices. They’re also free to modernise some buildings and let them out at much higher rents. Berlin, meanwhile, still has plenty of apartment blocks owned by ageing absentee landlords who are unwittingly charging much less rent than they are legally entitled to. Bidding wars for such properties, when the owner sells up or dies, can be intense.

Back in Kreuzberg, Ms Schobess is still hoping Berlin can turn back the tide of gentrification. “The city is sick and tired of investors coming here from all over the world and changing the character of the place,” she says. The biggest risk is, she says, that “Berlin will end up being just like anywhere else”.

Property taxes: Vancouver offers model for curbing foreign buyers
Not many German politicians take their cue from Vancouver. But for Matthias Kollatz-Ahnen, the Canadian city offers important lessons as he seeks to cool Berlin’s red-hot property market.
In August, a new 15 per cent tax on foreign housebuyers in the Vancouver area took effect, the most radical response yet to the sharp rise in house prices in one of Canada’s biggest cities. Berlin is watching closely.
German real estate has become a huge draw for investors frustrated by low interest rates and desperate for yield. In 2009, only 14 per cent of property sales were to foreigners but by last year that had risen to 68 per cent. Berlin is a key focus of that growing interest.
Yet officials want to curb what they see as speculative capital flows that are distorting an already strained market.
“We want people here who invest, who build flats, hotels, offices, factories,” says Mr Kollatz-Ahnen, Berlin’s finance chief. “Not people who just want to use Berlin real estate as a piggy bank.”
Like the government of Canada’s British Columbia, Berlin is proposing some far-reaching reforms of the tax code.
Currently, many real estate transactions are structured as so-called share deals, with one company acquiring the shares of another which owns the property. Such deals are largely exempt from real estate transfer tax. Mr Kollatz-Ahnen wants to remove this exemption.
“Share deals are only attractive when no transaction costs accrue,” he says. “We want them to be taxable.”

He is also working on increasing the real estate transfer tax for second homes that largely stand unoccupied. “These are fine if people actually live in them,” he says. “But if they’re just used to park cash, it’s hard for the city.”

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