By Ed Turner
Last week Red Brick reported on the housing elements of the grand coalition deal in Germany and in particular the agreement to make further efforts to bring rent increases under control.
In this post, Ed Turner reports from Munich. Many of the issues being discussed are familiar to the UK; the issues of supply and affordability seem to be increasingly common across much of the EU.
Ed is Deputy Leader of Oxford City Council and leads on Planning for the LGA Labour Group. He is also a Lecturer in Politics at Aston University (specialising in German politics). The views expressed are his own.
Earlier this week there was a round-table discussion hosted by the Friedrich Ebert Foundation’s “Bavaria Forum” on housing challenges in Munich. Speakers were Dieter Reiter, the SPD’s candidate for mayor next year, Jutta Blankau, Hamburg’s minister for city development, and Maximilian Heisler, who founded an initiative against tenants being priced out of their areas of the city. These thoughts are based on my scrawled notes – so should not be taken as an accurate minute. But there were some rather interesting points which threw up interesting parallels with the UK in the challenges faced, but also contrasts in solutions being sought.
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Major urban areas face a huge housing need – but probably have more fiscal tools to respond themselves. In Munich, for example, where the city is growing by some 15,000 people a year, Reiter set a target of 7,000 new flats a year to be built, including a decent proportion with public support. The city also has first refusal on some social flats sold off by the Bavarian state government (due to concerns about European law which in the end proved unfounded), and is seriously considering buying some of these. In Hamburg, meanwhile, the city owns 130,000 flats, and hopes to build 6,000 a year more, of which 2,000 would be publicly-supported in one way or another.
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Rent restrictions are to be slightly tightened by the grand coalition government, but this is not going to solve the problem of high rents. Currently, in areas declared by the relevant state (Land) government to have a problem with spiralling rents, increases for sitting tenants can be restricted to 20% over three years. This is to be amended to 15% over three years. Moreover, rents for sitting tenants cannot exceed those of average new lettings for similar properties. However, as Jutta Blankau pointed out, these measures still see rents spiralling – as they have done in Munich, in particular, with the “pricing out” of long-standing residents likely to be a top local election issue. This won’t be solved until supply matches demand. There is a particular issue with modernisation of flats, which allows rises to proceed more quickly. Here, there is also to be a new restriction – only 10% of the modernisation costs can be passed on per year (currently 11%), with a new restriction that only the total cost of modernisation can be charged this way. Still, forced “luxury modernisation” of flats remains an important method of “gentrification”. So too does the forced conversion of rented flats to owner occupation (which is banned by Hamburg’s state government but not by the state of Bavaria, where Munich is located). An interesting idea is that, where finance for energy efficiency improvements comes from the state investment bank KfW, there could be further restrictions on the impact on rents.
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Disposals of public land pose a dilemma for policy-makers in Germany. In Hamburg, the Social Democratic state government has introduced new criteria to judge bids for public land, whereby the price offered comprises only one third of the evaluation. There is an obvious tension between state governments needing to raise capital receipts, and seeing social housing maximised.
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Lettings agents’ fees pose a problem – and a familiar solution is being offered. The coalition agreement states that in future fees will have to be paid by the person who engages the agent (normally – but not necessarily – the landlord). This is similar to the Scottish model of letting agent fees.
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Intensification of existing residential areas is hugely contentious. Here, the discussion took a turn which will be entirely familiar to anyone involved in local politics (probably the world over). At a general level, there was a desire to see far more flats built. But when it came to intensified use of land in existing urban areas, all of a sudden the mood changed. Dieter Reiter expressed some frustration that, in all of his campaign trips around the city with local SPD candidates, not one had identified an area ripe for intensification. Such schemes were usually highly contentious and resisted by existing locals.
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Cross-boundary issues pose a real problem. Reiter sees the expansion of Munich (which has a tightly drawn urban boundary – a familiar situation to those who know about Oxford, Stevenage, or York!) as an alternative to intensification, and rightly points out that, given spiralling land values for residential use in Munich, there is a real risk that new housing within the urban boundary will take away much of what is really valued by local people. But some neighbouring local authorities are resistant to development, there appear to be few legal tools to force them to co-operate, and where they do agree development it is sometimes at an inappropriately low density. Hamburg is in a different position as it offers much more in the way of brownfield land for development.
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Existing, well-housed communities sometimes avail themselves of legal and involvement processes to oppose more housing. In Hamburg, citizens have the ability to promote local referendums on issues of concern, these are used to block developments, and the housing minister has had quite some flak for using her powers to over-rule these decisions. She’s also set up fiscal incentives for the city’s districts to agree to development. Citizens additionally deploy legal processes to prevent new housing development. Dieter Reiter pointed to the need for politicians to “lead from the front” on these issues, and take into account all possible interests in the community, not just the loudest voices.
So all in all, these challenges are familiar (and perhaps a riposte to those who suggest that the German model of housing provision would offer a panacea to problems in Britain – at least in high-demand areas). At the same time, the position of housing on the political agenda, the appetite for state action, and the willingness of some politicians to stand up and suffer some short-term political pain for long-term gain was encouraging, and well worth replicating.