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Berlin law to make sale of rental apartments more difficult

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Berlin is introducing strict new laws governing the conversion of rented flats into condominiums for private use. The move, which must be fully implemented by the city by 2025, comes following the recent federal Baulandmobilisierungsgesetz, or Building Land Mobilisation Act, designed to ease pressure on tight housing markets, particularly in Germany's bigger cities.

Berlin is using the new law to make it more difficult to convert rental apartments into owner-occupied apartments across the entire city-state, Berlin's Senate, currently governed by a so-called red-red-green coalition, and passed the motion proposed by Sebastian Scheel of the hard-core left party (die Linke) to designate the entire city as suffering from a tight housing market.

Under the new law, the creation of condominiums in existing buildings containing five apartments or more will require official approval. As Scheel put it, "the conversion of rental apartments into condominiums means the loss of much-needed rental accomodation throughout the whole city."

To date, the measure only applied to buildings in so-called Milieuschutzgebieten, or milieu protected areas, designed to maintain the character and social structure of a neighbourhood against the unwanted effects of gentrification.

The new law will allow certain exceptions, such as permitting the sale of an apartment as a condominium to an existing sitting tenant.

The law does not prevent conversions in principle, but by making them subject to approval, they are undeniably made more difficult. In the future, for example, conversions will have to be approved if the apartments are sold to at least two-thirds of existing tenants for their own use, or where the property belongs to a family estate and the apartments are planned for conversion into property for the benefit of the heirs.

Small owners are protected, with the law stating that permission does not need to be granted where the house has up to five apartments. While the nationwide Building Land Mobilisation Act allows Germany's federal states to deviate from this by restricting this to houses with up to three apartments or to extend it to houses with up to 15 apartments, the Berlin version does not permit this.

The law does not prevent conversions in principle, but by making them subject to approval, they are undeniably made more difficult. In the future, for example, conversions will have to be approved if the apartments are sold to at least two-thirds of existing tenants for their own use, or where the property belongs to a family estate and the apartments are planned for conversion into property for the benefit of the heirs.

Small owners are protected, with the law stating that permission does not need to be granted where the house has up to five apartments. While the nationwide Building Land Mobilisation Act allows Germany's federal states to deviate from this by restricting this to houses with up to three apartments or to extend it to houses with up to 15 apartments, the Berlin version does not permit this.

Berlin’s Greens present draconian manifesto

Separately, Berlin's Green party, currently a member of the city's ruling coalition, this week unveiled its manifesto for enhanced rent protection measures for the city's inhabitants. It envisages a strict pact between the state of Berlin and the city's landlords, outlining both parties' rights and obligations.

The Green's candidate for the office of governing mayor of Berlin in the upcoming September elections, Bettina Jarasch, described the so-called rent protection umbrella as a roadmap to the party's goal of "more than 50% public welfare-oriented rental housing in Berlin, as well as drawing a clear distinction not between big and small landlords, but between fair landlords and those who are solely focused on profit maximisation."

"We want to build a political instrument that can be implemented more quickly and with greater certainty than that proposed in the referendum (a reference to the petition to expropriate Deutsche Wohnen and other large landlords which recently received the required number of signatures to be put to the voters in the September elections), said Jarasch.

Among the obligations for landlords included in the manifesto are:

Those agreeing to comply with these obligations would be treated as 'public-spirited landlords' and entitled to avail of a certain favourable treatment by the state. This would include: being considered by the state of Berlin for the awarding of land for building, and at a reduced ground rent; being viewed as a potentially favoured third party in pre-emptive right reviews; the availability of additional grants and loans at more favourable conditions, particularly for housing construction in the mid-price segment.

Jarasch added: "The path we are proposing here can finally bring Berlin's housing market into social alignment and pacify the city. But it is also clear that as long as the housing industry can hope for a government that doesn't demand anything of it, it will not engage in serious negotiations.”

Berlin and Germany's housing associations were quick to criticise the Greens' proposals as smacking of threats and blackmail, with no meaningful offer to engage in dialogue or negotiation with landlords. 

Andreas Ibel of the Federal Association of Free Real Estate and Housing Companies (BFW) said that while the real estate industry would be willing to engage, the Greens' demands are much more in the nature of stipulations than an offer. "A solution-oriented dialogue should not start with threatening private companies with expropriation. The envisaged protection of tenants brings the rent cap (the recently overturned Mietendeckel) through the back door, disguised as a rent protection umbrella", he said.

The local Berlin branch of the BFW pointed out how Berlin's Senate, with the active participation of the Greens, has missed its own housing construction targets by miles, having built only 57,000 units as against the 100,000 planned for the current legislative period. The big problem is the ongoing shortage of rental housing, the BFW stresses, and in order to reach the required 20,000 new units each year, much faster planning and approval procedures are needed, along with much more zoning of additional building land.

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