How was social housing turned into a “commodity” in West Germany during the 1980s?

The legislation of the Federal Republic of Germany has always defined housing primarily as a commodity including social housing. Take, for example, the protests of the renters at Berlin’s Kottbusser Tor, which have been attracting national attention since 2012 and you find that their situation results from the legal definition of social housing as a temporally limited agreement on occupancy rights and rent control. Once this agreement expires, the housing units at stake are again subject to the rules of the free market, which means they can be rented out at a maximum profit. This is precisely the situation with Zentrum Kreuzberg (formerly Neues Zentrum Kreuzberg, or NKZ) at Kottbusser Tor. Here, an apartment building originally financed with state funding and “socially” operated is no longer subject to the original residency requirements just as real estate prices in the area are rising.

But in West Germany, this definition of social housing as a temporary exception (today for fifteen, earlier for thirty years) had an important complement until 1989, the Gesetz zur Wohnungsgemeinnützigkeit (Housing for the Public Benefit Act), or WGG. This law guaranteed a legal buffer between the free market and social housing by granting tax privileges to housing companies operating in the interests of the public benefit, which thereby had a competitive advantage. This privileging of housing for the public benefit was abolished alongside changes to the tax law introduced in 1990. Since then, German legislation has been lacking a clear concept about defining access to high-quality housing for middle-class and low-income households as commons: as something which occupies the core of the general public interest.

What was the result of the disappearance of the Housing for the Public Benefit Act (WGG)?

The disappearance of the WGG has helped to promote real estate speculation and monopoly formation on the German housing market since the early 2000s. It set the ideological framework that privileged housing as a commodity over housing as a use-value. This ideological framework is held together by three principles. First, the market can better control urban development than any politician can; second, housing supply and demand consist of equal partners; and third, home-ownership is the only correct economic form of housing and thus is a kind of ethical‒moral commitment.

The pure form of this ideology can be found in neoclassical economic theory as early as the 1920s, in essays by Friedrich Hayek or later by Wilhelm Röpke in the 1950s. Another interesting aspect of these texts is the psychological stigmatization of renters of social housing as dependent on the local authority and as freeloading beneficiaries. Actually, the situation is precisely the opposite: those who profit most from the deregulation of the housing market are those who are already property owners. At the same time, the number of renters is an indicator of a society’s affluence rather than the other way around. Think here of Switzerland, with one of the lowest housing ownership percentages in the world (2014: 37 percent).

What caused the discrediting of public benefit housing in the 1970s?

The symbolic decline of public benefit housing links closely with the cultural and structural transformations that took place during the 1970s and the incapacity of the large public housing corporations to react appropriately to these changes. The economic, cultural, and political failure of the non-profit housing organization Neue Heimat is an illustrative example of this. Economically speaking, Neue Heimat pursued a model of expansion that depended on lasting production and an economy of scale. Until the end of the 1960s, this model was profitable, but as of 1972, the costs of construction and credit rose dramatically; and the interest rate of the Bundesbank reached a historic high of nine percent in 1973.

As a consequence not only did a large mountain of debt drastically accumulate, but also the rental prices to cover the cost of new constructions increased, making rents much higher than they were in older housing stock. Almost overnight, a production model that had worked for just over thirty years became unprofitable. At the same time, in 1974, the supply of housing stock and the number of households reached parity for the first time since the First World War. Now, the issue of housing shifted its emphasis from quantity to quality and became a question of differentiating life choices according to social models. This affected above all those who did not fit the model of the nuclear family with mother, father, and two children: older people, singles, single parents, students, and gays and lesbians. At the same time, social housing began to lose its attraction due to rising rents and increasing subsidies for middle-class self-owned single-family homes.

Here, the cultural and political reasons for this failure become clear. In the historically significant moment of qualitative differentiation and the increasing privilege of property, Neue Heimat was not any longer able to articulate its own political benefit to its owner, the German association of unions Deutscher Gewerkschaftsbund. It was also unable to define housing for the public benefit except by referring to the standard arguments of quantifiability and comfort and hygiene. This was compounded during the 1980s by the corruption scandal around Neue Heimat’s chairman of the board Albert Vietor. Both the urban planning model of the large-scale Fordist housing estate and the political concept of housing for the public benefit were increasingly being reduced to the lowest common denominator and jointly discredited through these processes during the course of the 1970s and 1980s.

What should sensible public benefit housing look like, today and in the future?

A contemporary definition of the public benefit could begin with both a housing and a financing model, without necessarily having to link the two together. In 2014, the number of households occupied by singles, single parents, and same-sex couples in Germany overtook the number of households occupied by heterosexual couples. At the same time, the demands of the labor market were increasing mobility among highly qualified employees. In this situation, various forms of joint living are becoming a realistic model among increasing sectors of the population.

On an economic level, praise of the social renter could reverse their neoclassical defamation. The political protection of renters of social housing and their integration into a territorial politics of urban development could put a stop to the social‒spatial polarization of cities and support equal opportunity within society. This is a central benefit for all that can be especially effective when real estate prices are rising. The protection of social renters insures that life opportunities are not fixed from birth onward, by family, place of residence, and property.

As far as the link between form and economy is concerned, there are models and pioneering projects on both levels. They are being taught at German architecture schools, published in specialist journals, and implemented as a political project, for example by the housing cooperative organization Mietshäusersyndikat. What is still lacking in the urban-policy discourse is mediation, among architects, the marketing concepts of social housing corporations, and a definition of the public benefit in municipal politics, which could lend such projects greater political weight.

What does the privatization and “financialization” of the housing market entail for housing itself?

The relatively low rate of private property ownership in Germany (52 percent) might seem like an indicator of stability in an international comparison, because the mere number reveals neither a massive mortgage crisis nor a radical push towards privatization. However, in actuality, the en-bloc sales of social housing to transnational private equity corporations since the mid-1990s have fundamentally changed the status of the private rental apartment in Germany.

In the meantime, the German rental market is dominated by monopoly-like consortia like Vonovia or Deutsche Wohnen AG, which are similar in scale to Neue Heimat, but politically speaking, the former are primarily dedicated to maximizing profit. Due to their size, such companies can set rules and criteria for urban development that have a negative impact on overall social coherence. The goal of a financialized rental market is to offer cost-reduced, that is, poor-quality products at the highest price possible. The decoupling of the product of housing from its use-value has fatal consequences for renters and for urban housing policy as a whole.

Discrimination and stigmatization of poor neighborhoods in Germany have not reached the same level as in the French suburbs or in the American ghettos, where racial and religious conflicts also compound residential segregation. Here, German cities will need a political intervention in the future, and it is precisely here that a model concept of housing for the public benefit could prove effective.