As house and rent prices soar out of the reach of many in Australia, Berlin provides an illustration of how things can be done differently. By Stuart Braun.
Berlin social housing winning the residential race
Reading the Australian news from Berlin earlier this year, I had to laugh when Tony Abbott said that fast-rising house prices were a good thing. Or when Joe Hockey advised those complaining they couldn’t afford a house to get a well-paid job. Such talk would be sacrilege in the city I relocated to six years earlier. Berlin’s state parliament has just passed legislation – supported by the Social Democratic, conservative Christian Democratic Union and Greens parties – that aims to appease a majority of voters who demand affordable housing as a basic civil right.
In the city I escaped to after my Fitzroy flat was put up for auction – the rent doubled soon after – about 85 per cent of residents do not own property. And yet many keep their rented apartment for life. Most tenants are on long-term leases, and can’t be kicked out should an investor want to sell. In Melbourne, landlords can evict renters with one or two months’ notice.
No doubt, rents have risen sharply in the German capital in recent years. But there is focused resistance. In June this year, when an investor tried to evict a Turkish grocery business owner from a building they had bought in the working-class but gentrifying enclave of Kreuzberg, the street was quickly pasted in signs affirming the shop owner’s right to remain. Protesters marched weekly in the lead-up to the eviction, echoing the 1980s protests when the hundred-odd squats in the area were emblazoned with banners demanding “We All Stay!”. The media also became sympathetic. The investor backed down.
In Berlin, rent rises are indexed and the large institutions that own much of the city’s housing stock are looking for a steady return rather than boom-and-bust cycles. By contrast, Australian landlords, many of them small investors looking for a quick return, can raise rents as much as they like, and it can happen every six months in some states.
Berlin has one of the lowest rates of home ownership in Europe because robust tenant protections mean there is no great incentive to buy. Moreover, banks don’t easily lend money and demand a minimum 20 per cent deposit on mortgages. The neoliberal housing policies that have offered significant breaks to property developers and investors in Australia – primarily negative gearing and the halving of the capital gains tax on property instituted under the Howard government – would also be far less effective in German cities where tenants’ rights are a significant part of the equation.
In Australia’s capitals, where about 70 per cent of citizens possess property and nearly all aspire to home ownership, the electorate, along with all-powerful housing industry lobbies, encourage exponential price increases, quick turnover, and a weakening of tenant rights. Those who cannot be provided for in this market – including unprecedented numbers of homeless people – are simply told to get a better job.
After years of housing hyperinflation in Australia, it’s now conceivable that a rising generation may, for the first time ever, have to rent for their entire lives, especially in Sydney, which was ranked third among the world’s most overvalued property markets by investment bank UBS last month, behind London and Hong Kong. But they will do so without the formidable tenant protections Berliners are granted, and will instead face a lifetime of crippling price increases and possible forced relocations.
Some in Australia are starting to look to Germany for perspective. But they remain a tiny minority. Abbott’s quip about the benefit of rising house values was directed at a populace loath to alter the status quo. When the Greens proposed an end to negative gearing – a policy that would save the budget about four or five billion dollars a year, on average, and remove a major incentive for housing speculation – Liberal and Labor leaders were quick to reject the idea.
Australians have long viewed property and housing as a means to wealth creation. The historian James Boyce wrote that the colonisation of Port Phillip, or current-day Melbourne, “was fundamentally a grand property speculation financed on borrowed money. The risks were high, but the potential profits almost limitless.” Little has changed in the 180 years since.
But in Berlin, an urban proletariat has been fighting property and rental profiteers for near two centuries. The Social Democratic Party, which has largely controlled Berlin’s state legislature since World War I, is known as the “party of the renters”. Its housing policies are often murky and compromised, but in June this year it introduced rent brake legislation in Berlin aimed at stopping landlords from raising rents beyond the mandated 4 or 5 per cent a year, which had been previously possible when new rental contracts were signed.
In 2014, a citizen-initiated referendum successfully stopped the planned development of sections of the former Tempelhof airport, a massive open park in the middle of the city that was opened in 2010. Though about 20 per cent of the development was to be reserved for affordable housing, the locals decided to keep their expansive city oasis free of any new buildings. The rationale was that increased supply often only means more luxury dwellings and does not address affordability.
Using direct democracy to stifle property developers and investors would shock many in Australia. Malcolm Turnbull is himself a big believer in a supply-side fix to housing affordability, commonly arguing that governments need to make it easier for developers to get approvals. And yet the tens of thousands of new investment properties in Sydney and Melbourne that sit empty while waiting for a capital gain – labelled “speculative vacancies” by non-profit lobby group Prosper Australia – or which are rented to tourists at highly inflated rates, indicate that the market is not always a panacea for affordability.
Berlin, too, has a problem with profiteers rushing to transform apartments into tourist accommodation. But the government has been pressured to fix the problem and in 2013 passed a law forcing thousands of Airbnb and vacation apartments to go back onto the normal rental market. This again was a very popular bit of policy.
Since autumn 2014, Berlin’s Rent Referendum initiative has been planning to have its affordable social housing law decided during 2016 state government elections. With housing set to become the central issue of the campaign, the Berlin government was spooked into negotiating with the initiative on a compromise housing supply bill that was passed on November 12 and which mandates truly affordable housing for hundreds of thousands of citizens in Berlin.
Many believe, however, that the compromise bill on social housing – controlled, affordable rental housing – does not go far enough. The new law promises to provide 400,000 affordable homes (the Rent Referendum initiative want 500,000); to reduce rents to a maximum of 30 per cent of income via state subsidies (still too high, says the citizens’ initiative, which also wants water and electricity bills included); and to ensure greater tenant participation in housing policy (private housing companies will retain too much power, the activists say).
Dr Kate Shaw, an urban geographer at Melbourne University, is writing a book that compares urban development strategies in Germany, Australia and Canada. Her research notes the strong “role of resistance” in government policy formation in northern Europe which, she says, has less influence in Australia. The differences relate to a weaker tradition of democratic political participation and a top-down policy process that shuns outside advice, in particular from academics. “There’s a very strong strand of anti-intellectualism in Australian political culture,” she says.
The broad church of scholars, activists and disaffected tenants that initiated the Rent Referendum in Berlin began its crusade in 2012 in a protest camp on a square among vast social housing towers at Kottbusser Tor in Kreuzberg. The blocks were among 220,000 publicly owned apartments that a bankrupt government sold to private investors in the late 1990s and 2000s, abandoning decades of progressive social housing policy. As the investors began to heavily raise rents, which, as part of the selloff deal became less and less subsidised, the resulting protest claiming the “right to live in the city” became a focal point for affordable housing campaigners across Berlin.
“There has been privatisation and sale of social housing stock in Berlin,” Shaw says. “But it’s coming off such a high base that their social housing levels are still beyond our dreams in Australia.” Under proposed reforms, half of Berlin’s housing stock could become affordable, she adds, noting that the figure is closer to 5 per cent in Australia.
Shaw is adamant that “infinite demand” for Australian property among local investors can be dampened by removing the discount on the capital gains tax and phasing out negative gearing. Meanwhile, foreign investors who have found a relative haven to park their money should be charged parking fees. The money saved could then be used to build affordable housing. German-style tenant protection will also be vital.
But perhaps, as Berlin’s Rent Referendum initiative maintains, truly social and equitable housing policy can only be enforced from below.
This article was first published in the print edition of The Saturday Paper on November 21, 2015 as "Residential race".
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