[Commuting Hell Liberation Diary]⑦ "Rich live downtown, poor can't live in outskirts... The government will build faster and more"

Interview with Kancel Kichiltepe, German Deputy Minister of Housing, Urban Development, and Construction
"Creating a housing environment in urban areas where anyone can live as needed"

In December last year, the newly formed German coalition government reinstated the Federal Ministry for Housing, Urban Development and Building. This ministry existed from 1949 to 1998 but was merged with the Federal Ministry of Transport in 1998. After undergoing several mergers and reorganizations with other departments, it has regained its status as an independent ministry after more than 20 years. The new cabinet thus recognizes housing market stability and housing supply as urgent tasks.

"The new government’s motto is to provide as many affordable homes as possible for young people and low-income groups," said Cansel Kiziltepe, Deputy Minister of the Federal Ministry for Housing, Urban Development and Building, during an interview on October 12 (local time) at the German Federal Government office located at Unter den Linden 50 in Berlin. He noted that there has been a shortage of housing supply in the German housing market for decades, which has been a major cause of soaring rents.

The German federal government emphasized plans to strengthen various policies to protect tenants while embarking on large-scale construction. In his first interview with domestic media, he expressed empathy for Korea’s housing situation, especially the hardships faced by young people, and said, "I expect that reasonable solutions will be found."

-- In Korea, soaring housing costs have forced young people with limited capital to move to the outskirts, resulting in commutes of 3 to 4 hours. Has a similar phenomenon occurred in Germany?

▶ Actually, Berlin has experienced a similar phenomenon. Young people and vulnerable groups who cannot afford high housing prices have been pushed to the outskirts, which is also happening in Berlin. Perhaps this is a problem faced by most major cities worldwide.

-- How is the federal government responding?

▶ First, it is important to clarify that the situations in Korea and Germany are different. What is the proportion of homeowners versus tenants in Korea?

-- As of 2021, in Seoul, 6 out of 10 households are tenants, and 4 out of 10 are homeowners (according to the Statistics Korea Housing Occupancy Survey).

▶ Berlin is a city of tenants. The tenant ratio exceeds 80%. Because tenants overwhelmingly outnumber homeowners, various institutional measures to protect tenants have been established and improved. Those pushed to the outskirts are mostly tenants. The German federal government cannot overlook the phenomenon where the wealthy live in the city center while the poor are pushed to the outskirts. The goal is to create a housing environment in the city center where anyone who needs to live there, whether rich or poor, can do so.

-- What policies are in place?

▶ There are three major laws to legally protect tenants. First is the ‘Mietpreisbremse’ (rent brake). Implemented in Berlin since 2015, it limits rent increases for new contracts to a maximum of 10% above the standard rent to protect new tenants.

The second is the ‘rent cap’ protecting existing tenants. In Berlin, rent increases are limited to a maximum of 15% over three years. Lastly, the government closed loopholes in rent increases during housing renovation. Previously, landlords could bypass rent caps by renovating, but now increases are limited to 8% even in such cases. The government plans to further strengthen tenant protections. For example, it is considering lowering the rent increase cap from 15% to 11%, and reducing the 8% cap on rent increases during repairs.

-- Despite regulations for tenants, haven’t rents risen significantly?

▶ Rent increases in Berlin have been a long-standing issue since the 2008 financial crisis. Before the rent brake policy was introduced in 2015, it was common for landlords to evict existing tenants and double rents for new tenants. The 2015 legislation controlled this. Although rents have continued to rise since then, the policy has prevented increases from doubling or tripling. Additionally, there has been a fundamental shortage of supply. The number of publicly owned housing units has decreased for a long time since reunification. Our own estimates show that Germany is short of about 2 million rental housing units overall.

-- The newly launched Korean government announced a policy to supply 2.7 million housing units. However, there is much controversy over how to secure land in already saturated city centers like Seoul.

▶ Land shortage in urban housing supply is an unavoidable problem. One direction the federal government has internally decided is to stop selling public land. Moreover, it is necessary to supply as many homes as possible on currently owned federal and municipal land. It is difficult for the government to directly undertake construction. Cooperation with the private sector is essential. However, even if operational rights are transferred to private entities for development, ownership remains with the state. In other words, the private sector is only responsible for construction. Meanwhile, the government actively supports financing such as loans. In return, private developers are obligated to supply 40% of newly built units as affordable housing, including rental units.

-- If 40% of new units must be offered at affordable prices, profitability for construction companies decreases. They might hesitate to build new housing, and supply could even stop altogether.

▶ The government is not forcing losses. Similar systems are implemented in Germany and most European countries, and the fact is that they remain profitable. Construction companies are also obligated to build social infrastructure such as kindergartens and parks. Despite this, they have maintained reasonable profits so far.

-- Despite various policies, housing prices in Berlin have risen significantly. Citizens even launched a housing expropriation movement, didn’t they?

▶ Housing policies have long time lags. Planning, permitting, construction, and occupancy all require lengthy coordination. Especially when implementing multiple supply policies, supply rates do not respond immediately. There is a time lag before effects appear. I think this is where citizens’ anger arises. However, expropriation is not considered a desirable solution. The federal government’s position is ‘the government will build first before expropriating.’ Expropriation inevitably involves compensation and legal and political controversies. Building new housing can be faster. The government wants to make this promise.

-- To build faster and more, the government alone might not be enough.

▶ That’s right. Besides the government and large private construction companies, there are two more groups involved in housing policy. One is the smallest administrative units (Kommunale), and the other is cooperatives where members pool funds to build housing themselves. Especially since October 4, new cooperative support measures have started. When local administrative bodies and cooperatives unite, they can manage local housing markets more stably, less influenced by private capital. In Berlin, about 25% of housing is owned by cooperatives in alliance with district offices. In Vienna, Austria, this ratio reaches 60%. Berlin aims to reach a similar level.

The interview ran well over the scheduled time. Deputy Minister Kiziltepe had to leave urgently for his next appointment. He asked to remember one last thing: "The construction industry is not unrelated to the climate crisis." According to the Paris Agreement (COP21) on climate change, Europe must reduce carbon dioxide emissions from housing construction by 50% by 2030. He emphasized, "Construction must now align with climate protection. Germany is developing alternative materials and technologies such as wooden construction and carbon-neutral concrete," adding, "Climate change is not the future; it is the present."

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