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When German Unions Built Housing for the People

In postwar Germany, a cooperative run by trade unionists created Europe’s largest housing company. Building over 400,000 homes, “Neue Heimat” showed we don’t have to live on the terms dictated by landlords — we can take control for ourselves.

Protesters demonstrate against rising housing rental prices on October 20, 2018 in Frankfurt, Germany. Thomas Lohnes / Getty

In recent months, Germany’s “rent crisis” has captured international attention. This particularly owes to a headline-grabbing initiative in Berlin, where faced with the rising rents, activists are working to force a referendum on the expropriation of the biggest landlords. Even beyond the capital, continual rent hikes and a series of massive demonstrations have urgently posed the need for practical solutions to the housing problem. Yet if today renters are struggling to pay their bills, they didn’t always find themselves in such a bind. For there was a time when Germany was home to one of the West’s most ambitious social housing projects — and it was run by trade unionists.

This was, indeed, no small initiative. Until 1982, the German Trade Union Confederation — the Deutsch Gewekschaftsbund (DGB) — owned the largest housing and construction companies in Europe. Encompassing 400,000 apartments, its portfolio also included swimming pools, shopping malls, office spaces, universities, congress centers and health clinics. It was one of the world’s most significant examples of a cooperative social housing project — one built not in the interests of corporate profit, but from below, in service of residents themselves.

At its peak, the DGB’s Neue Heimat (“New Homeland”) had a turnover of 6.4 billion DM (around €3 billion in today’s money) and employed nearly 6,000 people, with dozens of subsidiary companies throughout West Germany and the world. The idea was to create affordable cooperative housing, democratically owned and managed by the broad sections of the population who lived in them.

This also served a wider social project — the idea of building a permanent “sharing economy” which would serve as an alternative to both the state socialism of East Germany, and the laissez-faire capitalism of the West. As well as building up its own housing stock, DGB used this behemoth to push successive West German governments into implementing increasingly progressive housing policies at the national level.

Neue Heimat’s successes were not to last. In the early 1980s, corruption, scandal, and debt brought the company into liquidation. This put an end to the idea of union-owned urban development, and deeply undermined the grassroots municipal socialism that the trade unions had hitherto driven. The state took the opportunity to abolish the privileged tax status previously enjoyed by nonprofit construction companies, and even today the idea of cooperatives remains taboo within trade union circles. Yet things didn’t have to turn out this way.

Radical (and Reactionary) Beginnings

After the tumultuous events of World War I, Germany’s various socialists, communists, and social democrats were deeply divided in the early 1920s. But what they could agree on was the need to address the question of where workers should live. This problem could not be left in the hands of landlords, nor could it be left up to philanthropists or churches, who thought they could outflank organized labor — and win the hearts and minds of the working class — by building low-cost cooperative housing. Housing conditions were atrocious, and the Left needed to offer a coherent, practical response.

The newly unified Allgemeinen Deutschen Gewerkschaftsbundes (ADGB) trade union federation sought a bridge between its different reformist and revolutionary tendencies, and in 1926 found the answer in the pressing question of workers’ housing conditions. That year, the union began to build democratic worker-owned cooperative housing, in a project which soon extended throughout the Weimar Republic.

These efforts began with the founding of the Gemeinnützige Kleinwohnungsbaugesellschaft Groß-Hamburg (GKB) which built hundreds of union-owned, low-cost housing units. Over the 1920s, the GKB and other local initiatives built several thousand homes nationally. Usually four stories high, they utilized a range of architectural forms, from the expressionistic features included by figures like Friedrich Richard Ostermeyer, to the distinctly classical motifs of Oskar Gerson.

If this was a visible display of the trade unions’ influence in the Weimar Republic, it did not last for long. On May 2, 1933, just months after Hitler had become Chancellor, the ADGB, along with all other trade unions, was dissolved by the Nazis. Its leaders were murdered or imprisoned, and its assets seized. In their place, the Nazi dictatorship established the Deutsche Arbeitsfront (DAF) which served as a key plank in sustaining the regime’s power over the following decade. Hitler awarded the DAF all the assets previously held by the ADGB, including its thousands of cooperative housing units and construction companies. In line with Nazi policy, the DAF centralized the numerous initiatives and firms into a single organization which they named Neue Heimat.

After Germany was liberated from Nazi rule in 1945, the DAF’s assets were, in turn, seized by the Allies and eventually returned to the newly established DGB union. After the division of Germany into two states in 1949, the DGB eventually acquired the of Neue Heimat, along with a number of smaller DAF housing projects. This titanic project quickly became the single most important actor in the reconstruction of West Germany in the 1950s — permanently altering the skylines of almost every city across the country.

Postwar Growth

The postwar DGB believed that workplace organizing had to be accompanied by dramatic improvements in urban living. For the DGB, it was an “instrument of trade union structural policy” — a tool to develop a popular “sharing economy” within West Germany. The successes shouldn’t be understated. After 1945 Neue Heimat was perhaps the most important tool for urban reconstruction in West Germany. The 400,000 housing units, small towns, clinics, and urban districts they built across the country rivaled the living standards of workers anywhere in the world.

While Neue Heimat built a number of now infamously ugly “relief cities” — low-quality housing designed to quickly replace the housing stock destroyed during the war — internal reviews and consultations with residents pushed it to move away from what senior advisor Alexander Mitscherlich called the “uniformed monotony of the residential block.” In some areas it instead began to develop innovative urban landscapes with Weimar-style buildings, sufficient green space, parks, and amenities. Serious efforts were made to involve residents in the active running of their own urban spaces, and most Neue Heimat projects included elected tenant councils to represent residents’ interests. These organizations usually pressed for the inclusion of more sports and social facilities as well as receiving funding for independent tenant newspapers from the cooperative itself.

Rents were effectively at market price, but Neue Heimat’s tax-free status also made purchases cheaper. They were calculated to be affordable for single-earner households, and when the administration set costs it paid close attention to the wage rates set in each round of collective bargaining. While Neue Heimat could not afford to make its properties as cheap as public housing, it remained a less expensive alternative to private renting.

Unmanageable

But there were other problems with “Neue Heimat,” visible even in its name itself, inherited from the Hitler years. Indeed, the Nazi era had left problematic structural imprints on the organization. While the original GKB had been a separate company headed by dedicated socialists like John Ehrenteit and Ulrich Bannwolf, it was nonetheless still accountable to an independent, democratically controlled oversight committee controlled by the ADGB. Neue Heimat had no such mechanism.

Not only did the DGB fail to decentralize the Neue Heimat company, but its director Heinrich Plett centralized the project even further; unifying all construction and housing assets held by the German labor movement into a single nonprofit company.

There was another concern. Neue Heimat had established itself as one of the core forces in the reconstruction of postwar housing, outpacing regional governments which proved incapable of developing the necessary municipal infrastructure. State governments of all parties wanted to hand these lucrative contracts to Neue Heimat, but its status as a nonprofit prevented it from taking them on. In order to bypass its own principles, it founded a number of commercial subsidiaries like Neue Heimat Kommunal and Neue Heimat Städtebau. This allowed it to build for-profit shopping centers, office spaces, and other municipal buildings on behalf of local municipalities. Despite the pressure to develop greener, more beautiful urban development projects, skyscrapers were more profitable, and concrete much cheaper.

By the 1970s, Neue Heimat’s progressive façade hid a complex patchwork of for-profit construction companies and housing stock, managed by a board who seemed largely unaccountable to their own constituents as well as the ideals they were supposed to represent.

The Scandal

This arrangement could not last. In 1982 Der Spiegel magazine revealed that a number of members of the board, led by “King” Albert Vietor, had been personally enriching themselves while running the company into debt, siphoning off rent and deposit money, and using “strawman” companies to get rich from lucrative contracts. The company was, contrary to its image, heavily indebted, as a result of serious mismanagement.

Despite efforts by DGB chairman Heinz Oskar Vetter to fire the responsible individuals and to distance the union from the scandal politically, the damage was already done. With Neue Heimat now in massive debt and with the DGB, receiving no help from the government, the federation was forced to sell the entire national housing stock to the Berlin Entrepreneur Horst Schiesser for the symbolic price of one DM. Though the courts undid this sale a month later, the stock that had once been the hallmark of trade union housing policy was nonetheless split up and sold off to private landlords. The bulk of it is now held by the big private companies “Vonovia” and “Deutsche Wohnen.”

Following the collapse of Neue Heimat, things changed for the worse. Through the 1990s Gerhard Schröder’s Social Democrats (SPD) and the governments that followed oversaw the privatization of German housing stock. Indeed, with the threat of union-owned social housing gone, private capital soon organized its counterattack. Six years after the scandal, the Bundestag abolished the tax privilege for nonprofit housing associations and strengthened the power of private owners — gradually changing the law to allow 11 percent of their refurbishment costs to be passed on to tenants, pushing rent prices up 4 percent per year on average, and reducing public housing to only 8 percent of all housing in Germany. A meager 6 percent is still cooperatively managed. In February this year, the Supreme Court ruled that social housing still subsidized by the state could be put back on the market under certain conditions — a ruling likely to reduce these numbers further.

The second effect was the complete retreat of trade unions from any serious intervention into questions of housing and urban development, pushing them back within the confines of the workplace. While the DGB voices a litany of progressive housing policies, calling for federal rent caps, shifting modernization costs onto landlords, and the construction of 100,000 new social homes, it has no real way of implementing these demands. Despite token participation in larger forums such as the Alternative Housing Summits, its strategy largely centers on a progressive government eventually doing something on its behalf.

Yet if the destruction of the union threat to private landlordism has left a vacuum, it’s now being filled by mass popular mobilizations. The demonstrations of residents in Berlin calling for the expropriation of large private residencies has gained national and international attention. Calls for the large landlords to be nationalized, now backed by Berlin’s “red-red-green” coalition government (SPD, Die Linke, Greens), has now inspired similar movements in Cologne, Frankfurt, and Munich. But where exactly is the union in all of this?

Making Demands Reality

A DGB mass meeting in Essen last November asked ““Affordable living space must be provided — but how?” Members of the DGB and its affiliated unions met with tenants’ associations, housing cooperatives, party members, and residents to discuss solutions to the housing crisis. The open question that served as the meeting’s title perhaps revealed a crisis of confidence in its own strategy. Yet the union’s openness to revisiting wider social alliances, including cooperative and tenants’ movements, may mark an important step in overcoming the original sin branded on the federation by the Neue Heimat scandal.

In 2017 the DGB in Munich turned a corner by offering its vocal support to the newly established Stadtwerkschaft housing and construction cooperative. In the two years it has existed, Stadtwerkschaft has grown to a staggering 9,000 members (whether those claiming residency rights, or “solidarity members” who invest in the projects without living there). This cooperative owns 600 apartments and is currently in the process of building 500 new units. By 2025 it aims to have completed a total of 1,700 new apartments.

The size and rapid growth of this project is noteworthy in and of itself, but the support of the regional DGB, citing it as a potential model for future urban development, deserves particular attention.

The SPD’s own foundation, named after Friedrich Ebert, has also begun to look overseas for trade union experiences with cooperatives, particularly in the platform economy, which it notes are “important since German and European actors still play a marginal role in the platform economy compared to the USA,” while the leader of the Jusos (the youth wing of the SPD) Kevin Kühnert, has embraced calls for major German car manufacturers to be collectivized. It seems there is a general shift in the zeitgeist — and there’s no reason for this to be a slow transformation.

Efforts to revisit the Neue Heimat project have also found sympathy in wider society. A recent exhibition in Hamburg explored the successes of the project throughout the post war decades, and asked visitors to consider the need for a new cooperative enterprise. It is difficult to know for sure whether or not the DGB is ready to reengage with the concept of union-cooperative housing. Despite local exceptions, the idea itself remains a sore point for those who remember.

New Strategy

The German trade unionists and Social Democrats of the 1920s had it right. Housing is a key battleground for the hearts and minds of the working class, and a key element of our material conditions. It can’t be abandoned to enemy forces. It has taken three decades for the German labor movement to revisit the idea of cooperative housing, and it is doing so cautiously. But this may be a good time to do so, at a key junction in the struggle for affordable quality housing.

German trade unions are today steadily declining, locked into industry-level bargaining which covers ever fewer workers. But with housing now firmly back on the national political agenda, the DGB and its affiliated unions have a golden opportunity to assert their relevance as a force not only for better conditions in the workplace, but for the transformation of society, extending democracy to the household.

With its immense resources, power, and expertise, the DGB could once again lead the push for cooperative worker-owned housing. The negative end point that Neue Heimat reached is far from simply a black stain on the idea. Rather, this experience gives trade unions a deeper and far more comprehensive understanding of the potential dangers of such a project. And it’s never too late to change the world.