Berlin’s housing election is about what replaces expropriation

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Opinion

Berliners vote on Sunday in an election unlikely to produce either a clear winner or an uncomplicated government. The latest BerlinTrend puts Die Linke narrowly ahead on 21%, followed by the CDU on 20%, the AfD on 18%, the Greens on 16% and the much-shrunken SPD on 12%. With no credible two-party majority and every other major party ruling out cooperation with the AfD, a three-party coalition will almost certainly be required.

REFIRE’s assessment is that the SPD will nevertheless become pivotal to forming that government; socialisation of Berlin’s largest private housing portfolios will probably be stalled but not abandoned; and the eventual compromise will produce several narrower interventions affecting rents, lettings and portfolio operations.

In other words, business as usual is not on the ballot. The election will determine the form and intensity of further intervention, rather than whether it happens.

That distinction matters because socialisation has acquired an awkward political status. Almost 60% of voters supported it in Berlin’s 2021 referendum, but a recent poll found only 37% now regarded the proposal positively, while 46% opposed it. The policy remains too important to Die Linke to surrender, but may have become too divisive for a coalition to implement.

The most consequential outcome for investors may therefore be what Berlin’s next government adopts in its place.

The SPD may decide what happens

Die Linke’s lead candidate, Elif Eralp, has promised a law implementing the 2021 referendum. The initiative targeted private housing companies owning more than 3,000 apartments in Berlin and envisaged transferring their portfolios into public ownership. The party also wants substantially stronger enforcement against excessive rents.

The Greens continue to support implementation of the referendum, although it is less central to their campaign. Their proposed affordable-rents law would reach much further down the ownership scale: landlords with more than 50 apartments would have to offer a proportion of new lettings at least 20% below the local comparative rent.

Those two thresholds illustrate the range of political risk. The 3,000-apartment threshold threatens a relatively small number of very large owners with the most radical intervention. The 50-apartment threshold would impose a less dramatic obligation upon a much broader section of the professional residential market.

Between the two parties stands the SPD. Its manifesto does not make socialisation a central commitment, while lead candidate Steffen Krach has said there would be no expropriation under an SPD-led government. The party nevertheless supports more extensive rent enforcement, including a central rent-checking office and a specialised prosecution unit.

That produces the central contradiction within a possible Linke-Green-SPD government. Die Linke has presented socialisation as a condition of entering office; the SPD candidate has rejected it. The parties might together command a parliamentary majority without agreeing on the housing policy most closely associated with the election.

The alternative CDU-Green-SPD coalition would remove Die Linke from government, but not the pressure for greater regulation. The CDU opposes socialisation and emphasises faster planning, simpler construction rules and additional supply. Yet both the Greens and SPD would bring substantial tenant-protection demands into the negotiations.

The SPD, polling at only 12%, could therefore be indispensable to either plausible coalition. Berlin’s weakest established party may possess the greatest influence over whether socialisation proceeds, disappears or remains suspended over the market for another legislative term.

The federal coalition’s intention to block socialisation by individual Länder does not settle the issue. No prohibition has yet been enacted, and legal scholars dispute whether ordinary federal legislation could prevent Berlin from acting under Article 15 of the Basic Law. A determined Berlin government would invite prolonged litigation rather than achieve a quick transfer of ownership.

That reinforces our expectation: socialisation is unlikely to proceed cleanly after Sunday, but neither will the argument be resolved.

The compromise may matter more than the threat

Property interests understandably present the election as a contest between socialisation and supply. Uwe Bottermann, solicitor and partner at Bottermann::Khorrami, argues that “the election campaign is focusing less on the issue of housing and more on affordable rents and socialisation”. Measures already adopted to accelerate and simplify construction have consequently received less attention than proposals for a “rent police” and public ownership of existing apartments.

Claudius Meyer of CR Investment Management is more direct. “Who ultimately owns the existing flats is not decisive for solving the housing crisis,” he says. Berlin instead needs quicker planning, more building land, infill development and dependable conditions for public and private capital.

Both are right that transferring existing apartments into public ownership would create no additional housing. It would consume political attention, public resources and years of litigation while doing nothing directly to increase supply.

But failure to enact socialisation would not amount to an uncomplicated victory for investors. A coalition unable to agree upon the largest intervention could settle upon several smaller ones: stricter rent enforcement, affordability obligations, tighter regulation of furnished accommodation and stronger controls over vacancy and redevelopment.

Such measures would be easier to legislate and harder to dramatise than expropriation. Collectively, however, they could affect income, expenditure, letting strategy and asset liquidity across a much larger proportion of Berlin’s housing stock.

The administrative machinery is already developing. Berlin’s automated examination of rental advertisements flagged 2,102 of 4,539 checked listings, or 46%, as possible violations. That does not establish that almost half were unlawful, but it demonstrates the scale at which digital enforcement can operate. Several parties want that scrutiny expanded, while even the CDU supports stronger action against unlawful rents.

The real division is therefore not between regulation and its absence. It concerns how extensively Berlin should police the rental market and what additional obligations should be imposed upon owners.

Philip Hetzer of DAHLER Invest argues that Berlin multifamily pricing has lagged the recovery visible in other major German cities and remains around levels last seen a decade ago. He attributes that weakness partly to the city’s political and regulatory overhang rather than to its housing fundamentals.

That is a market assessment, not empirical proof of causation. Financing costs, transaction volumes and changing return requirements also influence pricing. But the diagnosis is plausible: Berlin combines rising rents and acute housing scarcity with an unusually unpredictable operating environment.

If that uncertainty is already reflected in values, Sunday’s result need not produce an immediate repricing. What matters more is whether the resulting coalition offers a settlement the market can understand.

REFIRE: We expect that it will not. Sunday’s vote will begin a three-party negotiation in which socialisation remains politically alive but practically obstructed—too divisive to enact, but too valuable to Die Linke to discard.

The likeliest bargain is therefore a series of narrower interventions affecting rents, lettings and portfolio operations. Such measures would be easier to pass, harder to challenge and applicable to far more owners than socialisation itself.

Who finishes first on Sunday will dominate the headlines. But what matters to the property market will be the compromises demanded by the parties finishing behind them.