Brickbat: Affordable Housing

Berlin's construction industry has come to a near halt, with no new major construction and landlords performing only emergency repairs. The cause is a new rent control ordinance expected to take effect in just a few weeks. The city government plans to freeze rents for five years. Meanwhile, activists are collecting signatures to put a referendum on the ballot to seize the property of larger developers and operate it as public housing. City officials admit that the rental control law is extreme but say it is needed because of soaring rents and a housing construction market that has failed to keep pace with demand.

Comments

[Fist of Etiquette]

You know who else seized real estate?

[BigT]

Alexander the Great?

[Inigo Montoya]

Genghis Khan?

[Inigo Montoya]

No, wait. I know. Robert Mugabe.

[Rat on a train (non donor)]

New London CT?

[Adans smith]

The Fremen?

[Conchfritters]

My brother, when I landed on his hotel on Pennsylvania Ave, and I didn’t have enough to pay, and he took my fucking railroads from me.

[Fist of Etiquette]

Yes.

[darkflame]

nice

[Cyto]

Housing construction doesn't meet demand....... so restrict what developers can charge and threaten to seize their property.

Yeah! That'll work!

Just like convincing me about the Berlin housing market by linking to a Financial Times article that I can't read because I am not a subscriber....

[Rat on a train (non donor)]

A Deutsche Welle article on the same law.
"There is a common understanding that it is necessary to regulate housing markets, because housing markets do not work by themselves," Steenbergen added. "If you don't regulate, there is always a shortage of cheap rental housing, while there is always enough expensive housing and property to buy, because that is where investors can make profits."
How much do you think they will build when they would take a loss?

[Don't look at me!]

Moar regulations needed!

[Cyto]

Yeah, whoever made that analysis for Steenbergen is an idiot.
If there is "plenty" of expensive housing, then the price of the expensive stuff falls.

The reason politicians keep supply tight through all of these controls is that every incentive except for the developers is pointed in that direction.

Politicians get power and votes by "doing something" about high rents via rent controls and housing subsidies. But is that enough?

Maybe... but the real pressure comes from the homeowners. If builders can just come along and fill Berlin with a bunch of high-end condo flats, those people who bought in to the formerly high-end condo building are not going to see their investment continue to skyrocket. In fact, within a few years, they won't be the high-end trendy buildings anymore. They'll be the mid range buildings, and their investment will fall accordingly.

That is why San Francisco and Manhattan keep restricting new housing while complaining about the lack of affordable housing. Because there are lots and lots of homeowners with a huge portion of their wealth tied up in a home that would plummet in value if they freed up the housing market.

Perverse incentives create perverse results.

[Robert]

What could be responsible for this common misunderstanding? I think it's because people fail to think in aggregates. They see expensive apartments, they see cheap apartments, and they think the money has to be in investing in the expensive, because they're thinking about each building at a time, rather than about the entire market of big and small investors.

[Ron]

As a person who is in the trade I see people who see a market in economical homes. some are successful who are determined to fight the system but so many are literally blocked by NIMBY's and regulations that they give up. California is a prime example I can list enough regulations in the last 20 yers that have increased the price of a homes by a min 30% and this years regulations are adding a another 10% and when an "economy" house is $400k, 10% puts that house out of a lot buyers ability.

[Ron]

another prime example. Just to develope land for building a subdivision for four or more house can take up to ten years to get thru the process. few have the financial ability to invest that long before any returns. thats just the land that does not include building the homes.

[JFree]

How much do you think they will build when they would take a loss?

The population of Berlin was almost exactly the same in 2010 as it was in 1990. Not much different than it was in 1950 after the initial post-WW2 rebuild. And quite a bit lower than it was during Weimar and the pre-WW2 Nazis. There is no construction of any consequence for population growth and hasn't been for a century.

[Jerryskids]

Die Schläge werden fortgesetzt, bis sich die Moral verbessert.

[Rat on a train (non donor)]

Die Schläge werden verstärkt ...

[Jerryskids]

Frei Macht Arbeit?

[Rat on a train (non donor)]

Jedem das Seine?

[Cyto]

Mach es sehr schnell. Rein und raus, Magisches schwein! Bis es spritzt, spritzt, spritzt, spritzt, feuer! Aber beklecker nicht das sofa, sofa!

[Robert]

Berlin, Connecticut? Ohio? New Jersey?

[JFree]

This doesn't look at all like a standard rent control thang. This is about concentrated land ownership and a muni/federal conflict.

85% of Berliners rent (very very low ownership % even by German standards) - but very few rental units are owned by small landlords. It's 30 years since the Wall came down. Back then, both parts of Berlin were 'state'-owned - West Berlin as an isolated enclave would have been too risky for big investment and no experience doing condo/coop stuff either and a weak muni govt - and East Berlin and everything surrounding Berlin as commie and state-owned. The apartment housing stock was mostly privatized quickly - and apparently not to investors who only wanted one apartment building or who wanted to go the coop/condo route. It's very possible that land in Brandenburg itself surrounding Berlin was the same. So ownership went from a public/state thang to what has now become a private cartel.

If I were to guess the dynamics here - the initial debt has been rolled over (or is being rolled over), the owners want to gentrify the city (which is now a global alpha-city not a Cold War backwater), and they have the economic power to do so city-wide now and presumably they still have the political clout in former West Germany that allowed them to get the cronyist land deals in the first place. Since they didn't coop/condo anything, they also didn't create any voters who own their shelter (the Jeffersonian 'yeoman' ideal) . The surrounding area is owned by dog-in-the-manger investors who apparently speculate on land price rather than develop anything.

I know I never heard about any modern land reform movement in Germany that followed either the 1923 hyperinflation (where most mortgages 'paid off' with crap money were reverted back to banks/public leaving a legacy of banks that are still allergic to mortgage lending), the Nazis, or the Soviet era. That's a ton of land centralization - with not a peep about getting that back into the hands of small individual owners? So the result is an ideas vacuum where public monopoly reverts to private cartel and now pressure to revert it back to public monopoly.

[crufus]

Ich bin ein Spekulant.

[KiwiLib]

It's Berlin - notorious as the most bureaucratic city in a country notorious for bureaucracy. And they wonder why there isn't enough construction of houses going on. Clearly they need to import another city department to deal with that.