How Expropriation Changed the Conversation

This February marked the beginning of the second stage of a referendum on whether Berlin’s major housing companies should be expropriated. For this referendum to take place, 170,000 signatures must be collected by the end of June. If this goal is met, residents will then vote on whether the Berlin government should “initiate all necessary measures for the transfer of real estate and land into public ownership for the purpose of socialization in accordance with Article 15 of the Basic Law” — the part of the German constitution that permits expropriations in certain circumstances. This would mean socializing 240,000 units of housing currently controlled by large real estate corporations.

The mere announcement of this referendum caused an uproar. The Neue Zürcher Zeitung, a free-market-loving Swiss newspaper, expressed the fear that it would open up the “floodgates to socialism,” while the aptly named Manager Magazin described it as a road to “East Germany 2.0.” The conservative minister-president of Bavaria, Markus Söder, joined in the outrage at the initiative’s suggestion that large housing stocks should be socialized: “Expropriations are actually socialist ideas and have nothing to do with bourgeois politics.” Das Grundeigentum — a law magazine and the mouthpiece of the League of Berlin Building- and Landowners — published an issue on expropriation with the image of Hugo Chávez on the front cover, in an attempt to scare readers with the prospect of Venezuela-like conditions.

The Berlin government’s recent decision to introduce a rent cap (now overturned due to a highly contentious ruling by the Federal Constitutional Court) elicited similar reactions. The free-market liberal weekly Die Zeit speculated about “socialism through the backdoor,” while the Wirtschaftswoche wrote of a “giant field test of real estate socialism.” In the Council of Real Estate Experts’ spring 2020 report, the Freiburg economics professor Lars Feld criticized the rent cap as antiquated politics “from the socialist mothball box” and expressed a desire for fewer regulations. In order to solve the housing crisis, Feld argued, what we really needed was to make investments “more attractive for building companies.”

The reactions to the rent cap and expropriation campaign are hardly surprising; both measures would mean drastic restrictions on the existing business model of the real estate sector. Furthermore, as opposed to housing benefits, affordable housing programs, and moderate tenancy law, both would limit the industry’s profitability and even call into question the business of housing altogether. The knee-jerk comparisons of the rent cap and calls for expropriation with East Germany, socialism, and Hugo Chávez stem from a deep-seated anti-communism in the real estate sector — hence, the apparent assumption that these comparisons will in fact scare people.

On this point, the commentators in the center-right Frankfurter Allgemeine Zeitung appear to be one step ahead. Fearing that the “retro-absurdities” of the rent cap and expropriation campaign actually enjoy a “broad consensus,” Rainer Hank fretted in one piece about “academic echo chambers for the overcoming of capitalism” and a left-wing new normal which endangers liberal society. In another, Heike Göbel wrote of what he sees as a “dangerous expropriation mechanism” in Germany’s very constitution and of a “warning sign for private investors far beyond the capital and country.”

This shock at the push for rent caps and expropriations is understandable after more than three decades of neoliberalism, for both demands expand the framework of conceivable demands within the realm of housing policy. However, a glance at the history of the housing question in Germany reveals that major state interventions to suppress market forces are hardly a novelty: in fact, they’ve been on the agenda for over a century.

The Fight Against Housing Feudalism

In 1872, Friedrich Engels traced the exploitative realities of the housing economy back to the principles of capitalism in his pamphlet on The Housing Question. At least since that point, various groups and activists have championed limiting the market logic as the primary solution to the housing question while also advocating for overcoming capitalism.

The purpose of housing management in a market economy is not housing but business. This is precisely why housing is provided in a way that systematically sidelines social and environmental concerns. In their book In Defense of Housing, an analysis of a century of housing policy in Western Europe and the United States, David Madden and Peter Marcuse describe a permanent tension between “housing as home and housing as real estate.” For them, this contradiction can only be resolved by separating the provision of housing from market logics.

The earliest demands for housing policy reform in the nineteenth century were already oriented toward limiting the power of owners and building new housing through nonprofit associations. In particular, the origins of the cooperative movement and the establishment of nonprofit principles oriented around the public interest were based on the underlying idea that business calculations are an inadequate means for providing the poor with housing. Fear of epidemics and revolts drove even bourgeois philanthropists to demand moderation in the pursuit of profit. In his 1892 exhortation on the housing question, the economist and cofounder of the German Economic Association Gustav Schmoller called on “the owners and the educated” to establish cooperative stock companies and foundations for housing construction that would “compete with private building speculation.”

As housing construction and the rental business were virtually unregulated in the nineteenth century, housing conditions were dictated by owners under “freedom of contract.” In light of their despotism, Ernst Engel, director of the Prussian Bureau of Statistics, described this situation as “housing feudalism.” At the time, tenant interests were expressed primarily in the form of street protest. The rapid growth of the city of Berlin and the emergence of its densely populated workers’ neighborhoods from the 1860s onward were characterized by regular confrontations between tenants and owners. Evictions in particular led to outright street battles on several occasions, with neighbors coming together to prevent the forced removal of their fellow tenants.

Historian Axel Weipert identifies the so-called Blumenstrasse riots in 1872 as a high point in the tenant-landlord conflict. This revolt was set in motion when several thousand people spent days physically battling the eviction of a carpenter family whose home was to be torn down to make way for a new construction project. The intensity of this confrontation is evident from the fact that over a hundred police were injured — to say nothing of the far greater number of protesters injured by police sabers.

As these forms of self-defense against landlord despotism were taking place, so too were the first tenant organizations emerging in order to represent tenant interests in a coordinated manner. In 1888, the petty bourgeois Association of Berlin Tenants was established with the primary goal of providing legal advice. The demand for universal tenant rights would go unheeded for decades until the passage of the Reichsmietengesetze, or “Imperial Rent Laws” of 1923.

The Weimar Republic era was characterized by extensive state interventions in the housing sector. The goal was to remedy the postwar housing shortage and implement the right to housing guaranteed in the new constitution, which promised all people “a healthy dwelling” and “all families a home appropriate to their housing and commercial needs.” The provision of adequate housing was thus elevated to a goal of society and public responsibility.

With the Housing Shortage Law of 1920, the Imperial Rent Law of 1922, and the Tenant Protection Law of 1923, every aspect of housing management came under public control, all the way down to the price of rent. Additionally, the introduction of the rental income tax in 1924 created a permanent fund for subsidized housing. At the same time, in the overwhelmingly indebted buildings that were constructed before 1918, the state set aside over 40 percent of the rent it collected as a tax to cover the financial needs of Germany’s federal states and municipalities, and to subsidize housing in particular. From 1924 to 1932, the rental income tax financed the construction of 1.8 million subsidized apartments and over 80 percent of all new housing.

Better Living, East and West

State interventions in Germany’s housing sector resumed apace after 1945. East Germany institutionalized a state-run construction and real estate branch in which communal administrative bodies oversaw the provision of housing. Due to its constitutionally guaranteed right to housing and strict rent limits, the German Democratic Republic (GDR) was characterized by high levels of housing security. Residents could only be evicted if they were provided with alternative accommodations, and the average tenant paid only about 5 percent of their income in rent.

Social scientist Jan Wielgohs has noted in retrospect that “rent price policy and tenancy law in the GDR were unilaterally designed to be tenant-friendly.” However, East Germany also suffered from a housing shortage that was never solved. As older buildings in particular suffered from neglect and often fell into disrepair, the extensive new construction projects were insufficient to provide everyone with adequate housing.

On the other hand, West Germany implemented measures such as housing rationing, an affordable housing subsidy program known as social housing, and a sector of nonprofit housing companies. Under the auspices of the so-called social market economy, almost 7.9 million units were subsidized between 1950 and 1990 to enable as many people as possible to experience the housing-related effects of prosperity. Even without a constitutionally guaranteed right to housing, housing policy in the early years of the Federal Republic was oriented toward the needs of the vast majority of the population. The Second Housing Act of 1956 defined affordable housing as “units intended and suitable for the broad strata of the population in terms of size, amenities, and rent or rent burden.”

It was not until the elimination of the nonprofit housing sector in 1989 that West Germany stopped taking responsibility for providing housing as a public good. Entirely in the spirit of the market, the subsequent implementation of the Housing Subsidy Law of 2001 restricted housing subsidies to “households unable to provide themselves with housing and in need of support.”

Put into historical perspective, the notion that the provision of housing should be primarily regulated by the market is relatively young. Nevertheless, many current debates portray it as without alternative. In particular, housing policy in the interwar period and West Germany until 1989 reveal that state interventions in the housing market do not necessarily imply a socialist program.

Transformative Approaches

Housing policy is a contested field, where different approaches have competed against each other for over a century. The first debates on the subject already involved confrontations between technocratic, reformist, and socialist positions.

Technocratic solutions to the housing question have typically proposed changing the organization of housing provision and urban development without calling into question the market or competition itself. They include building-code requirements and tenancy law regulations aimed at securing a minimum standard of housing and mitigating housing insecurity. Among such market-based proposals, so-called “demand-side” subsidies such as housing and building benefits are a perennial favorite of the housing industry and conservative parties. Demand-side subsidies are intended to raise the rent-paying capacity and purchasing power of low-income households and enable them to afford housing at the market rate.

Taking into account the blindness of the market to social realities, reformist approaches seek to limit the drive toward profit and expand nonprofit housing options. However, they do not attempt to abolish the commodity logic of the housing market. Past proposals for housing reform have included everything from state-initiated expansion of transportation infrastructure in order to mitigate rising costs of building plots by increasing supply, to public housing for civil servants built on cheap municipal land, to the establishment of housing cooperatives.

The subsidy programs involved in West Germany’s social housing policy constituted another important instrument in the reform category. Such programs involved the assumption of the “unprofitable costs” of housing by the state, such as those involved in construction and financing. This made it possible to maintain low rents while simultaneously ensuring the economic viability of affordable housing construction for private companies, which the state guaranteed a fixed return on equity of up to 6.5 percent via the subsidy agreements. However, the problem with these programs was that the rent-control agreements were only valid for a limited term: after the legal subsidization periods expired — normally after two or three decades — so, too, did the affordable status of housing built under subsidy programs, which could then be rented or sold at market rate. Ever since the 1950s, all West German (and now reunited German) governments have maintained that affordable housing programs should only be a temporary intervention until the market is capable of regulating the provision of housing itself.

Transformative approaches toward housing policy have generally aimed at redistribution and the decommodification of housing altogether. Here, an underlying goal has been to abolish the alienation that results from tenants’ dependence on private owners and their economic calculations. For this reason, most transformative interventions have attempted to expand collective and socialized ownership structures in the housing sector, including self-managed cooperatives and housing projects committed to the interests of their members, nonprofit housing companies with a permanent social goal, and publicly owned housing companies. All three of these ownership structures are oriented not around profit but the fulfillment of housing needs.

Historically, the subsidy programs for public and cooperative housing companies in the 1920s, the construction of affordable housing by nonprofit companies in West Germany, and state-run housing construction in East Germany provided the most effective means of increasing the share of housing stock exempt from market pressure and of breaking the cycle of skyrocketing housing costs.

What Makes a Housing Policy Socialist?

Friedrich Engels wrote in 1872 that “in order to make an end of this housing shortage there is only one means: to abolish altogether the exploitation and oppression of the working class by the ruling class.” Thus, he rejected all proposals for housing policy reform, arguing that no solution to the housing question could be had without the abolition of capitalism. By analyzing housing shortages as stemming from relations of private property and the profit logic of capital, he articulated an approach to overcoming them. Ever since, socialist proposals for solving the housing question have sought to change property relations and move beyond market logics.

Left-wing parties throughout history have generally sought to nationalize the housing sector. However, state-organized housing policy has at least three weaknesses: paternalism, standardization, and dependence on the political climate. Most state interventions in housing and state-run construction programs are subjected to bureaucratic rules and regulations that limit possibilities for individual actors within society — including the initiative of individuals who seek to assume responsibility for their particular living circumstances. This is a relevant concern today, as the political challenges posed by climate change in particular can only be met with a genuine transformation of our modes of living and forms of housing in which as many people as possible are actively involved.

Seeking to avoid the pitfalls of nationalization, urban protest movements since the 1970s have increasingly emphasized elements of self-management and participation in housing. Especially during the height of the squatters’ movement, activists developed new forms of collective responsibility and management in the context of a growing number of self-organized housing projects. However, at least in Germany, this practice never transcended the subcultural realm and remained a niche phenomenon.

The latest housing crises and tenants’ movements across Germany have reinvigorated debates around self-governance. Precisely because tenants in a number of buildings have transformed themselves into micro-collectives to prevent the next rent hike, the transformation of their rental apartments into condos, or various other “modernization measures” threatening to force them out, the desire for collective control over housing conditions has now reached a new social base.

Overcoming inequality, alienation, and resource waste in housing requires a comprehensive transformation of the housing sector. The basic elements of a contemporary socialist housing policy can be described as a triad of public responsibility for the provision of housing, socialization of as large a segment of the housing market as possible, and the expansion of opportunities for resident control and participation.

In addition to massively restricting rent increases and transferring housing stock into public control, as the expropriation campaign demands, a socialist housing policy must seek to expand new public housing construction. If housing is to be understood not as an economic good but as a social infrastructure, the prerequisites and structures for new public housing construction must be developed and implemented. As a glance at history shows, public control of the housing sector, and even extensive new construction projects not subjected to market logic, is possible. Successfully translating these approaches into the present and developing new strategies for organizing housing under public responsibility has to be the benchmark of any left-wing housing policy.