[Commuting Hell Liberation Diary]④ "Berlin also faces skyrocketing housing prices due to policy failure... Now public and citizens must take the lead"

Interview with Christoph Vesling, Professor at Berlin Institute of Technology
"Rapid and Appropriate Supply Possible through Support for Cooperatives, etc."

Christoph Wessling, Professor of Urban and Regional Planning, Berlin Institute of Technology

South Korea is not the only place suffering from skyrocketing housing prices. Berlin is facing the same problem. Christoph Wessling, a professor in the Department of Urban and Regional Planning at Berlin Institute of Technology, pointed to two main reasons behind the surge in Berlin housing prices: structural changes in the economy and population after reunification, and policy mistakes by the government that failed to respond adequately. On the 10th of last month (local time), we met Professor Wessling at Berlin Institute of Technology for an interview about the housing market situation in Berlin.

-- Berlin is reputed for its good housing welfare, so why has it failed to control housing prices?

▶ First of all, reunification. Berlin was divided into East and West, each isolated like an island. East Berlin was densely packed with East Germany’s industrial facilities, but they had lost competitiveness. West Berlin had virtually no industrial facilities and was a city mainly driven by the service sector. The sudden merging of these two cities through reunification brought about enormous structural changes. The most noticeable change was the population increase. Major government agencies, media, and medical sectors relocated to Berlin. From the 2000s, the IT industry also began to grow. These changes had an immediate impact on the housing market.

-- The incoming population would want to live in the city center, but there must be no land left to build new housing there.

▶ It is a very difficult problem. Supply is of course important to stabilize the housing market. However, supply does not only mean new construction immediately. Right after reunification, the Berlin city government sold land and buildings it owned to secure funds. This gradually reduced the city’s capacity to supply affordable housing. This was a mistake by the city. The city is now buying back the housing it had sold. Creating room for public intervention in market volatility is also an important issue.

-- Are you saying that the public sector should supply housing?

▶ There is a system that has been in place in Berlin for seven years. When a private investor builds a housing complex of a certain size (over 5000㎡), they are required to supply 30% of the total residential area as public housing. They receive public support such as low-interest loans but have the obligation to build public housing affordably. There are ways to increase supply without the state building directly.

-- Requiring 30% to be affordable housing sounds like a kind of regulation. Wouldn’t regulations rather hinder supply?

▶ Of course, the city also wants construction companies to build more housing. That is why coordination and compromise are important. It is not about ignoring or changing the law, but the city can exercise discretion within the limits allowed by law.

-- How can the private sector promote supply?

▶ Cooperatives can be a good alternative. I understand that Berlin, as well as Germany, has recognized this potential and is preparing more support. Cooperatives are nothing special. It is simply a model where a small group of people who want their own homes come together, and they are supported to purchase land and build houses. It is also the best way to strengthen local solidarity and preserve housing standards.

-- But aren’t successful cases actually rare?

▶ That’s right. The biggest reason is lack of capital. They have to purchase land first, but initially, they inevitably lose out to large corporations and big capital. Once the land issue is resolved, these large entities might build housing faster. That is why policy support from the city and national subsidy policies are necessary. Supply is important, but the public sector cannot bear everything alone. Ultimately, the state also needs partners. Currently, the best partners in Berlin are the citizens themselves.

※This project was supported by the Press Promotion Fund, funded by government advertising fees.