Capital Always Wins: Berlin's Housing Referendum
May 9, 2022
Like most other cities throughout the world, Berlin is experiencing a housing shortage along with an unprecedented rise in the cost of renting and sky-rocketing real estate prices. As the hottest real estate market in Europe at the moment, however, Berlin is hit particularly hard by how fast this is occurring. Around €42 billion has been invested in Berlin real estate between the years 2007 and 2020 – amounting to more than that invested in Paris and London combined for the same period. Since Berlin is largely a city of renters, with the second-largest percentage of renters (82.6%) in Europe (Zurich comes in first), residents of this city are particularly vulnerable to becoming precariously housed. One must add to this that many middle-class Berliners are precariously employed and underpaid since wages in the city have remained stagnant even as rental costs have risen.
Yet, Berlin is unique among global cities. And not because it is ‘poor but sexy’ (arm aber sexy), as per the neoliberal slogan of governing Mayor Klaus Wowereit (2001-2014), in order to advertise the city’s cultural attractions while glossing over its impoverishment. Rather what sets Berlin apart from London and Paris is its history as a marginal space during the Cold War years. With its tradition of squatting and leftist movements, Berlin housing activists lead the world in the struggle against corporate real estate capture of the city.
In the past year, an immense victory was won by Berlin activists with the passing of a city referendum calling for the expropriation and resocialization of corporate-owned real estate in the September 2021 elections. Organized by the Expropriate Deutsche Wohnen & Co. initiative, named ironically after the largest real estate company in Berlin, the referendum aimed to expropriate and resocialize, in one fell swoop, around 240,000 apartments for the public good. Specifically targeted are private companies that own more than 3000 apartment units. This amounts to more than ten percent of the entire apartment stock in Berlin. The referendum is believed by the organizers to be legally tight. It is based on Article 15 of the Basic Law of the German Constitution, which stipulates that “land, natural resources and means of production may…be transferred to public ownership” in the public interest. Adopted in 1949 with the founding of the West German state, Article 15 was long forgotten during the Cold War with its tensions between capitalist West and communist East Germany.
International commentators from the left have expressed much enthusiasm over the referendum. Considering it “a potential watershed moment beyond Berlin,” and “catalyst for municipal housing movements across Europe,” Alexander Vasudevan, associate professor in human geography at Oxford, praises Berlin’s referendum for highlighting “the role that ordinary tenants – and grassroots organizing – can play in developing policies for affordable housing while supporting communities increasingly at risk of displacement.”
Despite the high hopes expected from this initiative, the referendum victory in the ballot box will most likely remain symbolic. With the Social Democrat Party’s (SPD) victory in the German elections, and the appointment of the SPD’s Franziska Giffey as Mayor of Berlin, the non-binding referendum is unlikely to be implemented. Giffey herself has expressed her strong opposition to any kind of expropriation, although she has stated, rather disingenuously, that she will respect the result of the people’s vote. Andreas Geisel, the SPD senator in charge of urban development and housing, echoes her sentiments. Although commentators across the world have noted that the Mayor of Berlin cannot ignore this referendum victory due to immense public pressure, it is clear that this is exactly what will happen. In typical German fashion, the implementation of the referendum has been relegated to a commission of experts to study its feasibility. However, as one long-time squatter and activist warned, we should not expect anything to come out of the referendum. Despite the success of other such smaller-scale initiatives by Berlin activists, “their implementation was always stifled by similar committees of experts”.
With the referendum passing, the next step would have been for the Berlin Senate to draw up a law to socialize the housing stocks of large corporations. However, the SPD-controlled municipality has obstructed this process. A committee of experts has been established to study the legal and financial feasibility of implementing the referendum over the next year and a half. In other words, implementation of the referendum has been delayed, even though a similar process was undertaken by numerous independent legal expects in 2020 to determine the referendum’s legality. Indeed, this appears to be a smokescreen devised by Andreas Geisel to derail the entire initiative. Geisel himself appointed two lawyers for the expert commission, whose primary duty will be blocking the implementation of the referendum through legally acceptable means, since their views are clearly anti-expropriation, as housing activists have indicated. Moheb Shafaqyar, spokesman for the expropriation initiative accuses the Senate of trying to “bury” the legal basis of expropriation, Article 15 of the German constitution, through legal manipulation.
Housing activists and referendum supporters, including the die Linke spokesperson for housing issues, argue that the committee should not be disputing the question of if, but how, to implement the referendum. With power in the hands of SPD and Andreas Geisel in charge of urban development, building and housing, it is far from clear that the committee will come up with a clear roadmap for implementation or recommendation on how to expropriate corporations with legal certainty. The most likely scenario is an impasse. And even if a law were to be drafted and passed by the Berlin Senate, some predict that the Federal Constitutional Court would most likely strike it down. Why would the German federal authorities allow a handful of radicals to set into motion such a measure endangering the profits of real estate investors? After all, the entire system of advanced financial capitalism is dependent upon real estate as assets for investing private pension funds in.
Expert committees are yet another bureaucratic weapon in the arsenal of German capitalism. And, the SPD is the German counterpoint to the American corporate Democrats, who spew forth the rhetoric of social justice as a way to deflect from their policies, policies that favor capital. Although SPD politicians employ the rhetoric of democracy, in the end, the voice of the people as expressed at the ballot box is ignored when at odds with the interests of capital. And capital always wins because the legal system is designed accordingly.
SPD and the Baumafia, and Neoliberalism
Deutsche Wohnen & Co. Expropriation activists have expressed apprehension that the SPD’s Andreas Geisel will remain a major obstacle to implementing the referendum. Born in East Berlin in 1966, Geisel joined the SPD following the 1990 German reunification and made his way up the political ladder in the Lichtenberg district of Berlin. Throughout his political career, Geisel has taken a particular interest in urban development while maintaining close ties with real estate magnates. In his 2016 campaign for election to the Berlin House of Representative, Geisel received donations from the real estate entrepreneur Klaus Groth. The improper nature of some of the donations caused a mini political scandal, although careful obfuscation of the funds diffused any attacks of corruption. Housing activists attribute Geisel’s prevention of a district referendum involving a citizens’ initiative against the construction plans for Mauerpark to his close ties with Klaus Groth. Groth had plans to develop the green space of Mauerpark into a housing complex of 700 apartments. Although Geisel continues to pay lip service to the need to bring the rental prices down for Berliners, his actions tell a different story.
Geisel is not unique however among Berlin politicians for complicity with real estate developers. The SPD has a longstanding tradition in Berlin in this regard. As Nathaniel Flakin of the Exberliner suggests, the SPD has long served as the “parliamentary arm of the Baumafia (construction mafia).” The SPD politician charged with implementing neoliberal housing policies benefitting the Baumafia in Berlin was none less than Thilo Sarrazin, who was finally ousted from the party in 2020 over his anti-migrant sentiments. Sarrazin’s gentrification and anti-migrant policies coincided with the implementation of local austerity that ultimately stem from the greater wave of neoliberalism hitting Europe at the time. After being reelected in 2002, the SPD-led government of Germany began to implement the Lisbon Agenda, a policy devised in 2000 which quickened the pace of neoliberalization in the EU economy. Although the German chancellor Gerhard Schröder had promised to not cut social services during the elections, in 2003 he announced his plans to impose austerity as a way to conform to the EU’s Lisbon Agenda. This policy involved drastic tax cuts to big capital while cutting social services and benefits such as healthcare, pensions, and unemployment.
European austerity politics likewise coincided with Berlin’s financial troubles. In 2001, it was declared that Berlin was on the verge of bankruptcy, with enormous debts equivalent today to over €30 billion. As the SPD Senator of Finance from 2002-2009, Thilo Sarrazin was responsible for managing the financial crisis. In 2003, he sold the largest municipality’s housing company, Gemeinschaft Sozial Wohnung to a hedge fund, resulting in the privatization of 60,000 apartment units. This was followed in 2004 with further privatizations of the social housing stock to large real estate companies. A total of 200,000 apartments run by the city fell into the hands of real estate companies. Yet, it has long been rumored that these apartments were sold at prices to real estate investors as low as $4000 a unit, rumors confirmed by Ercan Yaşaroğlu, a long-term resident and owner of the iconic Kreuzberg cafe, Kotti Cafe at Kottbusser Tor. What is particularly egregious about these scandalously low sale prices—something apparently kept hidden from the general public and not discussed in the press at the time—is that the sell-off of the public housing stock was justified as a way of generating funds for the bankrupt city government at the time. Yet, the question as to why the SPD-Die Linke government coalition in the city allowed the sell-off at under-market prices to large real estate investors remains unanswered today, although much speculation abounds.
The SPD and Anti-Migrant Sentiment
Austerity politics as part of the SPD’s national neoliberal agenda was further reinforced with a new aggressively racist discourse targeting Turkish migrants, in particular, as well as the racialized poor, more generally, who formed the majority of social housing tenants. In 2010, Thilo Sarrazin published a controversial book, Deutschland schafft sich ab (Germany Abolishes Itself) in which he attacked migrants as being non-productive members of society with dangerously high birth rates. He argued that if migration was not restricted by the state, Germany would in fact endanger itself. His arguments pivoting around the failure of Turks and other Muslims to properly integrate into German society later became a basic talking point of the far-right Alternative für Deutschland party which was founded in 2013.
Throughout Sarrazin’s tenure as Finance Senator of the State of Berlin much of the social housing stock in the Turkish neighborhoods of Kreuzberg was sold off to real estate investors at egregiously low prices. This resulted in the loss of low-rent properties and the gentrification of leftist and migrant communities. Today, the district of Friedrichshain-Kreuzberg is unaffordable for many. Kreuzberg is no longer a poor migrant neighborhood ghetto; that honor now goes to parts of Neukölln, home to largely Turkish, Kurdish, and Arab communities. The precise ways in which gentrification rips apart these communities is an under-researched topic. The Expropriate Deutsche Wohnen & Co. initiative’s referendum was an attempt by housing activists to right some of the wrong inflicted on Berlin by the SPD and politicians like Thilo Sarrazin.
Troubles Ahead For Berlin
During the May Day gathering held by the Berlin unions in Alexanderplatz, Mayor Giffey was booed off the stage with the crowd shouting, “implement the referendum (Volksentscheid umsetzen!)”. Just before she fled the podium, an egg whizzed past her. Such is the wrath of the Berliners. Berlin housing activists’ battle against real estate is not yet over.
Geisel’s slogan of “build, build, and build” will not solve the housing crisis. According to the construction industry associations, residential construction in Germany is on the verge of a slump. It is wracked with a set of problems such as the lack of materials and enormous price increases. In the aftermath of the pandemic, and now with the outbreak of the Ukrainian war, housing construction, despite all of Geisel’s assurances otherwise, could plummet in the coming years.
There is a growing sentiment in Berlin that the government completely underestimates the severity of the housing crisis, which is bound to only exponentially get worse. Since there are no other profitable forms of investment, immense capital continues to flow into the housing market which cannot ultimately accommodate this financial demand. Such are the limitations of advanced financial capitalism. The result will be prices rising to absurd heights, and more people, including large swathes of the middle class, becoming impoverished. The political outcomes of this trend, however, remain yet to be seen.