Expropriating large housing companies in Berlin could, in the assessment of the Association of German Pfandbrief Banks (VDP), make property loans more expensive – and thus also hit people who want to build a house or buy a flat. “An expropriation could lead to property loans becoming noticeably more expensive,” VDP chief executive Jens Tolckmitt told the Deutsche Presse-Agentur (dpa). The association represents around 50 property financiers, including Deutsche Bank, Commerzbank and several savings banks.
According to their exploratory paper, the Left party, the Greens and the SPD in Berlin plan to expropriate private housing companies with a portfolio of 10,000 flats or more in the capital, with compensation. The companies would be allowed to keep a base holding of 10,000 flats. The exploratory paper caps the compensation sum at 16 billion euros.
The dispute over the land charge
The core of the banks’ objection is the land charge. It serves banks as security in property financing: if a borrower stops paying their instalments, the institution can seize the property. The “Deutsche Wohnen & Co enteignen” initiative proposes letting these land charges on the flats to be taken from the companies lapse. How the three parties intend to handle this question is not clarified in the exploratory paper.
“If land charges lapse without replacement in an expropriation, meaning credit security for banks is no longer secure, as the ‘Deutsche Wohnen & Co. enteignen’ initiative plans, that takes an axe to low-cost secured property financing – not only for housing companies but also for private households who want to fulfil the dream of home ownership,” Tolckmitt told dpa. “Their loans will also become noticeably more expensive.” He told the Süddeutsche Zeitung: “If you take this security away from the banks, that has massive effects on future financing.” It was about trust in the legal and economic system. “And that can disappear for a long time.”
Tolckmitt pointed out: “However, the parties also did not write in their paper that the land charge will be preserved. And that is also a signal.”
A fatal signal for Germany as a business location?
The association head also doubts that the plans will ease the housing shortage. They would exacerbate it further, “since not a single square metre of housing will be created this way and, moreover, private financiers who could do so will be driven away,” he told dpa. “Tenants are ultimately the real victims of this policy.” After an expropriation, banks would “think very carefully about what housing construction they still want to finance”. That was already happening now, solely because of the debate. The Left party counters that low rents in state-owned flats have a dampening effect on the entire market.
Tolckmitt called on the federal government to speed up a planned federal law against expropriations. A “swift clarification at federal level” was needed, he told dpa. The leaders of the CDU/CSU and SPD at federal level had agreed in July to regulate by federal law that nationalisation of private rented housing stock through expropriation laws at state level should no longer be possible. So far, however, there is no draft law, only a decision by the coalition committee.
The debate is already under way before the first draft law. According to the Süddeutsche Zeitung, economists warn on the one hand that investors could be deterred and stay away from Berlin or from Germany as a whole; other calculations conclude that expropriations could slow the rise in rents.
Whether an expropriation actually happens depends first on a government of the Left party, the Greens and the SPD being formed. The parties are currently deciding internally whether to enter coalition negotiations after the successful exploratory talks.
