Keeping Berlin Affordable

Deutsche Welle: Mr. Scheel, how has the Berlin real estate market developed in recent years?

Sebastian Scheel: In the last five years, around 220,000 people have moved to Berlin. That means the city is very interesting, it's attractive to people who see its potential. It's an exciting city and people want to come here.

It also means 220,000 people have arrived and they need a place to live. We're struggling with a situation where we aren't able to provide enough new housing to keep up with the influx, and that has triggered exploding rent prices.  We've seen rents rise 9.4 percent on average in the last two years. A lot of people who live here, who call Berlin home and have settled in their neighborhood communities, increasingly have the feeling that they're being pushed out and replaced by people who can afford to pay higher rent. We don't approve of that development, of course.

And what is Berlin doing to stop the trend?

We will need a whole raft of measures to readjust the course. First of all, we're accelerating the construction of new housing. For years now, we have been identifying areas with potential to expand and deciding whether it makes sense to add more buildings in already developed areas or secure undeveloped plots for new housing. The most important aspect is to build housing that is affordable and compatible with the community, and that's where we are putting pressure on our city-owned companies. We have six city-owned housing companies that operate some 300,000 apartments. We want to expand that number so we can continue to have some influence on the market. We signed cooperation agreements with these companies that require them to construct 6,000 new apartments a year. And 3,000 of them will be allocated to residents who are eligible for social housing.

But that still falls far short of the number of social housing needed, right?

That's correct. So we have also arranged other measures: when city-owned apartments become vacant – when a tenant moves out -- sixty percent of those flats will be made available to people with a social housing certificate. We're also working on re-shaping the funding guidelines to make sure new condominium projects include social housing. We want to make sure normal people like police and nurses are able to stay in the city.

Berlin has become a hot brand on the global real estate market as well. What are you doing to ensure that the city is not entirely sold off? 

Berlin is highly attractive, on capital markets as well. That means there are a lot of people coming to this city who don't just intend to create new living space – they're also speculating on property. We're trying to roll back that speculation. We're working to reduce the building permit process from three to two years. And we are also working to preserve the mix of residents we currently have in parts of the city.

An increasing number of young families are struggling to raise the capital they need for a down payment on an apartment. Real estate companies say the government needs to take action to reduce the burden. What's your take?

Berlin is a renters' city, first and foremost. We're concerned to see that more and more rental apartments being turned into condominiums. We want to make sure rental apartments stay for rent, so people still have a place to live. The cost of purchasing an apartment or house is rising far faster than rent prices. So telling tenants to simply buy an apartment is increasingly unfeasible. What do we gain if we replace high rents with exorbitant mortgages that leave people in debt? That doesn't help anyone.

Berlin was undervalued for a long time, and some people believe the developments we're seeing now are normal – that Berlin is simply reaching the level of any European capital. Do you agree?

It's certainly a positive development to see that Berlin has become so attractive to outsiders. It's not just new people arriving, but companies as well. It's true that Berlin isn't like other European capitals, like London or Paris, but it's not our goal to imitate those cities. What makes this city so exciting and charming has a lot to do with the organic mix of people – you don't have large stretches of city land where only the super rich live. We still have a healthy mix of people in every neighborhood, and it's important to preserve that.

Critics argue that the influx of people into Berlin that you mentioned didn't start five years ago but 10 to 15 years earlier. They blame the government for overlooking the trend. Is that fair?

I believe the signs of re-urbanization were indeed overlooked for a long time, and that included important questions like what to do with property – whether to simply sell it to the highest bidder, create something new on that property, or support joint building ventures in shaping urban development. That switch happened too late, and it led to massive protests from residents. So I do believe that policy makers let the trend continue for too long. It really took pressure from our society to trigger a re-think. But we have now arrived at that point, and from here on out we will focus all our efforts on solving these problems together with our residents over the coming years.