The amount of Berlin apartments available for sale is likely to be reduced significantly as a result of the recent decision by the city's Red-Red-Green coalition government to use the Building Land Mobilisation Act (Baulandmobilisierungsgesetz) to implement a de facto ban on the division of rental properties throughout the whole of Berlin.
The Berlin Senate's decision to declare the whole of the city as a "tight housing market" as defined by the recent federal law on land mobilisation means that permission is now required to convert rental apartments into apartments for own-use accomodation.
Although Berlin has the lowest rate of owner-occupied properties of any of Germany's 16 federal states (17.4% in 2018), over the last twenty years that rate has increased from 11% in 1998, and rate of change has been the most dynamic in Germany - largely based upon the conversion of rental accomodation into owner-occupied condominiums - a movement now destined to end by 2025. Statistics show that such conversions occurred 124,421 times between 2011 and 2020.
By contrast, in 2020 a total of 16.337 residential units were built, of which 3,710 were defined as condominiums, i.e. for owner-occupiers. But 19,310 apartments were converted from rental to private sale, up from about 12,700 each in the years 2019 and 2018.
In other words, 84% of condominium sales in Berlin in 2020 were as a result of conversions, while they made up 70% in 2019.
Property owner associations have criticised the Senate's ruling, warning that it will lead to furthering the housing shortage and making property more expensive, as well as making it much more difficult to become home-owners, particularly in familiar neighborhoods in which they have been living.
Opponents of these arguments say the new regulation is fair enough, as many of the acquired apartments remain as rental apartments, and continue to serve a social purpose. Reiner Wild of the Berlin Tenants Association said that "Already today about two-thirds of all converted apartments are rented out. So at heart it's not really about owner-occupiership as a key pillar of old-age planning, but more the same old business model carried out on the backs of tenants."
Jacopo Mingazzini, CEO of The Grounds, a Berlin property developer and long-time CEO of property privatisation company ACCENTRO AG, takes a very different view, saying the ban on partitioning houses into condominiums won't improve anything, but will make the situation much worse.
In a recent media article, he points out that in Berlin there has always been a ten-year notice period after conversion and the first sale of an apartment, with the sitting tenant having right of first refusal. Rented condominiums in divided existing properties were therefore bought either by sitting tenants or by capital investors, subject to the laws governing existing tenant protection.
He cites an official study (BBSR Online Publication No. 11/2020) on the motives of apartment-seekers in four big German cities. One of the least frequently cited reasons for moving, with a share of 2%, was termination by the landlord - whether for purposes of requiring the apartment for a family member, or otherwise.
In other words, eviction happens rarely in practice. The ban on conversion is political window-dressing, with no grounding in reality. The disadvantages, however, are numerous, he says.
The property owner - in most cases a private individual - really only has the option now of selling the whole house in full, or not at all. This makes investment in residential buildings less attractive, and lowers the willingness to invest in housing at all.
The tenant is unable to fulfill his own desire to become an owner of the apartment he occupies, instead having to invest in a more expensivie new-build property probably far away from the built-up inner-city neighbourhood where he wants to continue to live. Or else to buy an already divided unit, itself likely to become more expensive due to the inevitably reduced supply.
Mingazzini also argues that the housing shortage being experienced in Berlin has little to do with the aggregated definition of the housing units in the Land Register (Grundbuch). Even a rented condominium is a rental unit, and many tenants don't even know whether the house they live in is a divided house or not. There would be the same long queues of interested renters at public viewings whether the houses themselves were divided or not.
What really counts in a tight housing market is the ratio of available apartments to the demand for housing, and not the absolute number of privately-owned condominiums on the market, he says.
