Regulation of housing: from the Fordist tenement city to subsidized sell-out
Approaching Berlins historical housing policies and struggles remains incomplete without mentioning the deep changes in ownership structures when it comes to real estate and lands at Berlin.
For decades the geopolitical isolation of Berlin, its industrial decline and class composition – a high concentration of unemployed and precarious as well as migrant and subcultural populations – kept real estate less attractive for capital investment. At the same time, extensive public programmes for social housing and a high level of legal protection of tenants kept housing affordable and reduced profit margins. In Berlin, a Fordist regime of urban governance remained persistent over the 1980s, also due to its special role as a receiver and administrator of subsidies from the central government (Heeg 1998). At the same time, as we have seen, strong urban movements such as squatters’ initiatives challenged the technocratic Fordist planning and finally achieved participative rights. Aforementioned programs of “careful urban renewal” (Bernt 2012: 3045) set boundaries for profit-driven modernization. In Eastern Berlin, meanwhile, real estate was fully state-owned and centrally distributed (ebd.). “Berlin was not only a tenement city, Berlin was the city of social-housing construction par excellence, on this side as well as the other side of the Wall. (…) In both cities of Berlin, rent was subsidised to a degree that is no longer imaginable” (Bodenschatz, quoted and translated by Uffer 2011: 93f.). It was exactly this “oversupply of affordable living space“ (Hung 2012) up until the late 1990s that contributed to the image of Berlin as a realm of alternative lifestyles.
In the 1990s, Fordist policies started giving way to an „entrepreneurial form“ of urban governance that tried to redefine and „re-vitalize“ Berlin as a metropolitan center in a globalized economy (Heeg 1998). The formerly state-owned real estate of Eastern Berlin was radically privatized and „restituted“ to private landlords while regulations and rent controls were successively abandoned in both parts of the city (Bernt 2012). Social-housing units in the Western part were privatized on a large scale while the housing companies that remained state-owned changed to market-oriented policies. Selling to the highest bidders, institutional short-time investors were systematically favoured in the privatization process. As a result, the ownership structure on the Berlin real-estate market radically changed. A large number of private institutional investors entered the market by real-estate private equity funds (Uffer 2011: 105). Local regulatory shifts have thus prepared the terrain for the recent dynamics of financialization. “The combination of the effects of local regulation and global accumulation strategies created the perfect storm. It was a mutual reinforcing mechanism“ (Uffer 2011: 104).
3. Boom and Crisis in Berlin Real-Estate: Financialization as a “glocal” phenomenon
As we have seen, it was local neoliberal de-regulation as well as a new global dynamics of capital accumulation that has radically changed the sector of real estate and housing within the last decades. The most recent phenomenon is the “boom” in Berlin real estate that has been pushing prices and rents up shortly after financial and economical crisis 2008 and raises the fear of a speculative bubble[iv]. It is directly linked to financialization as a political strategy that is exposing the real estate and housing sector to market volatility and the pressures of value extraction. At the same time, it accounts for the various ways in which the situation of Berlin is linked and entangled with transnational dynamics of crises. It can thus be considered as an example for the new geographies of neoliberalization producing „increasingly „glocalized“ configurations (Brenner/Theodore 2002: 363).
The “underprized” metropolis as a safe haven for Crisis Capital?
The demand for Berlin real estate by private as well as institutional investors has massively increased over the last five years. A similar trend can be observed in all big cities in Germany, but the rate of change in Berlin is clearly above average (Hintze 2013).This process is driven by a new desire for real estate as an asset for speculation and capital accumulation. In the course of the global financial and European debt crisis, many investors have lost faith in capital assets and started looking for a safe haven for their money. The constantly low interest rates for capital assets by the European Central Bank, as well as numerous local incentives such as low taxation and special contracts, are another incentive to switch to real estate – “Betongold” (concrete gold) as it is called in recent discussions. As the German and especially the Berlin market is considered to be “under-priced”, they appear as a profitable investment (Hintze 2013, Ahr 2012). Since 2007, prices for real estate in Berlin went up an estimated 72%, while rents – which are supposed to repay the investments and create profit – have gone up by an average of 28% (Jensen/Syrovatka 2013). Gentrification that has started in the inner city areas is now expanding even to outskirts of the city and has been leading to the displacement of poor (but also middle class-) populations (Holm 2013). The fact that rent increases are immense and yet do not reach the level of other European capitals points to the previous forms of regulations and struggles that have kept rents unusually moderate.
Financialization of Real Estate as a political strategy and a new social practice
As apparent in the case of Berlin, financialization cannot be understood as a merely economic process. The re-organization and re-definition of housing as an object of financial speculation rather than a (private or public) good has been actively promoted by political actors on the national and local level. Moreover, it is reproduced by a growing number of individuals who act as investors or homeowners in the financialized field of real estate. Financialization should therefore be analyzed in the context of the finance-dominated accumulation regime, in which financial criteria increasingly become the dominant benchmarks for political, economic and social institutions (Aglietta 2000). Liberalization and privatization policies have created new means of accumulation and turned public goods and services into objects of speculative investment. At the same time, the deregulation of labour markets and the cut-back of social services have increased insecurities and risks for people. These are interpellated as self-reliant subjects who should adapt to these changes by rational and calculated forms of risk provision (Heeg 2012: 77f). Heeg links these strategies of responsabilization to the financialization of real estate, as homeownership is currently enforced as a social norm and a form of taking care for one’s future security and wealth. This is apparent in new incentives, subsidies and credit offers by state and finance institutions that encourage individuals to buy real estate or invest in real-estate assets (ebd.: 80). Moreover the vast influx of private savings into capital markets increases the activities of institutional investors such as pension funds and insurances. In their constant search for profitable investment, they tend to invest in those real estate funds that are boosting the current boom on the German real-estate markets (Heeg 2012: 81f.). The role of real estate as a means of private risk provision is yet more evident in the growing number of individuals who seek for investment in real estate on their own account – also in the case of Berlin. Many of the private persons currently investing in Berlin real estate are trying to find secure investment for their savings (e.g. for their retirement provision) while others simply try to escape the skyrocketing rents. These private investors come from various geographical backgrounds. Interestingly, it is especially the upper middle classes of Southern European countries who try to secure their capital from the turmoil of the financial markets (Ahr 2012, Spiegel-Online 2012). Berlin has thus become a target not only for young migrants from the European South and East that are looking for affordable living and job opportunities, but also for “crisis capital” from institutional as well as private investors.
The pace and pressure of the current real-estate boom can thus be traced back to the pressures of finance-driven accumulation. In this process, new subjectivities emerge that operate on a terrain of constant insecurity. Housing thereby has changed its meaning and has been turned into an object for profit-driven speculation as well as individual risk-provision.
4. Gentrification as new conditions for social struggle
If financialization of real estate is a glocal phenomenon, then so are struggles around the urban. It might be helpful here to not only emphasize the specific histories and developments, but to grasp how Berlin, as many other global cities, is experiencing a brutal change, gentrification in times of austerity – a change that is reshaping the terrain for social struggles.
Austerity refers here to policies dealing with various financial and political crises at Berlin. We want to highlight one recent, the “Berlin Banking Scandal” (at the 1990es and early 2000s): Through rescuing the corrupt and bankrupt Berliner Bankengesellschaft and the call for a “extreme budgetary emergence” the retreat from local programs has been justified.[v] Since then the main goal of politics has been a balanced city budget, long before the so-called debt brake was introduced into German constitution at 2011. Some consequences have been stated before and will be looked upon again, through the lens of social struggles under new conditions: Gentrification.
“Belated” Gentrification and its costs
Gentrification has been an object of scientific interests but also of political debates in the last years and takes us back before crisis became a popular point of reference. Gentrification describes urban developments of both constructional and economic up-valuation and a cultural revaluation that leads to the exchange of populations in affected residential areas (Holm 2009). Displacement and change in neighbourhoods are simultaneously the principle and goal of those reorganisations, regulating social participation trough money and origin (Twickel 2010: 5). We suppose that a further understanding of Gentrification need to acknowledge both, Berlin’s and Germany’s peculiarities and the phenomenon of gentrification, being both, global and diverse (cf. Holm 2013).
This process is strongly linked to racism in German society. Not only does being migrant still matter for getting good marks at schools, jobs or an apartment at Berlin[vi]. Today’s “Gentrification Hot-Spot districts” Neukölln and Kreuzberg have been accused for being “Ghettos” or “Parallel societies” (compare Friedrich/Gürsel/Kahveci 2013). Through these affective discourses specially migrant and social disadvantaged populations have become (again) a political problem and object, thus preceding the first stage of gentrification[vii]. That’s why the politically demanded and desired “social mixture” in Berlin has become a paradigm to unidirectional claim for gentrification – with racist undertones.
Even if the leftovers of German welfare system may have slowed these processes at Berlin rents costs are becoming an existential threat. Berlin is still a “Mieterstadt” (city of tenants), more than 80% of its population lives in a rented apartment. It shows the most intense increasing of rents in Germany.[viii]
