Charles Kingston, CEO & Editor, REFIRE Ltd.
Most good property ideas (and many bad ones) that originate in the States are generally tried out on this side of the Atlantic, often first in the UK and then - with some delay - in other European markets. Finally somebody in Germany plucks up the courage to have a look at the merits of the new innovation.
Two things have recently caught our attention in the US market. Neither is an innovation per se, yet their successful execution can have a noticeable effect on easing local housing bottlenecks and providing living options for many people desperately seeking more affordable accomodation.
Both have relevance for Germany. The housing and construction crisis in Germany is turning into a catastrophe. Real disaster looms, as the number of permits issued continues to plunge from month to month. The consequent upward pressure on rentals is beginning to cause real hardship, and seriously hinder labour mobility, not to mention the market distortions that are becoming entrenched as long-term tenants and elderly people refuse to vacate or to downsize.
The first is the aggressive expansion into the US of Japanese housebuilders, keen to grab a piece of the highly-fragmented US housebuilding sector. Sekisui House is paying nearly $5bn to buy the listed MDC, itself a Top 10 homebuilder, in the process joining the top five US housebuilders by volume. Along with Daiwa House and Sumitomo Forestry, the three Japanese companies are now becoming powerhouses in US home construction, driven by their efficiency, their aversion to waste, and their extensive use of less labour-intensive technologies. Their access to cheap Japanese capital also helps.
Sekisui is a real leader in prefabricated housing of very high quality - no doubt the leading German companies in serial and modular building keep a close eye on the technologies of Sekisui et al. Their houses, after all, are designed to withstand earthquakes, and have the highest standards of heat insulation and fire and impact resistance. No, we're not pleading with them to come to Germany, we have plenty of similar expertise here.
But what we do need in Germany is a less perfectionistic approach to resolving our housing problems. Germany, like Japan, had to create housing models after WW2 to rapidly provide accomodation for their industrial workers. Compromises were reached to enable workable housing to be erected quickly. Many of those modest properties still exist, providing affordable housing across Germany for hundreds of thousands of people.
Germany does not have a widespread homelessness problem, unlike the US, where it reaches tragic proportions in some of the country's loveliest cities, like San Francisco and Seattle. But there IS a serious housing shortage here in the bigger cities, storing up enormous problems as the population increases through immigrants and refugees.
The reasons for homelessness are many, and complex. But the lack of cheap housing plays a role. In the past, rooming houses, boarding houses and single-room occupancy (S.R.O.) hotels were to be found everywhere, and they picked up the slack for single people looking for a place to stay. The grottiest of them were phased out over the last fifty years, condemned by zoning regulations and other development projects. Many of the rest have simply disappeared. For those in the UK and Ireland, the classical 'digs' as a place to stay has likewise evaporated, defeated by a raft of regulations which insisted on private individual toilets, south-facing balconies, and other idiocies that no right-minded landlady could afford to install.
In Houston, Texas, a company called PadSplit is reviving the concept by offering furnished bedrooms for poorer Americans. It's been described as a sort of "long-term AirBnb for rooming houses", and is different from the now well-established concept of co-living, where (mainly) young professionals share housemates and common living areas. The company is set up as a for-profit operation, but also tries to advance a social purpose. It now operates across 18 US cities with its online platform, which matches furnished rooms offered by landlords to lower-income workers.
Germany has an intractable housing problem, partly because of its rigid laws in favour of tenant protection. Across the country, millions of bedrooms lie empty, because the tenant now has a huge apartment since the children moved out, and while the rent is way below market rent, there is no incentive to move - the next place will cost twice as much for half the size.
Surely out there among the proptech pioneers there is somebody who can figure out how to monetise this glaring market anomaly? Or at least create a business model that would provide an adequate incentive for tenants to consider making one room available to a paying guest, without fear of market abuse. Even in security-obsessed Germany there are technical and human solutions to this. Who'd ever have believed that Airbnb would work as well as it has, or that Uber would become so ubiquitous? The mismatch between housing stock and household size in Germany means too many people, who effectively just need a studio, struggle to find anything affordable to live in. The old Mitwohnzentrale (now known as HomeCompany) used to partly fulfil the boardinghouse function, but that too seems to have gone by the wayside in favour of renting out upmarket short-term furnished apartments. So what's to be done?
Frau Klara Geywitz, the Housing & Construction Minister, could partly salvage what's left of her dwindling reputation if she were to address such a way of providing low-cost housing cheaper and more quickly than her doomed public efforts to build new housing. By 2025 she and her coalition partners will have failed miserably at the homebuilding challenge which was a key campaign priority, and for which Frau Geywitz's job was specifically created, to great fanfare. What’s wrong with a low-tech solution that requires a minimum of political and regulatory upheaval, and which should see fairly immediate results?
At a local level, landlords or tenants could be rewarded for making a room available, or several rooms, by taking in boarders. Sure, it's not perfect, and there'd be plenty of resistance, but that's not to say it should not be tried. Many German pensioners live in poverty - hundreds of thousands could usefully use a few hundred euros extra a month, without being financially penalised for helping to solve a social problem. As a housing solution, boarding may have gone out of fashion, but it's worth the effort to revitalise and regularise it as at least one recovered tool, in the fight for affordable housing.
