Nearly 30 years after the fall of the Berlin Wall, Michael Prütz thinks Germany’s capital city is ready for a new socialist revolution.
An insurance broker by day, Mr Prütz is one of the leaders of a bold campaign to expropriate Berlin’s biggest residential landlord, Deutsche Wohnen, and take its 110,000 flats into public ownership.
“We tenants of Berlin are under attack from greedy property companies that seek maximum profit with minimum effort,” he said, accusing Deutsche Wohnen of acting “as if it is California during the Gold Rush”.
Mr Prütz and his comrades plan a city referendum where voters will be asked to back a plan to “socialise” around 200,000 flats, most belonging to DW. Next month they start collecting signatures to support the initiative, which has been fuelled by widespread anger at soaring rents. A January poll in the Tagesspiegel newspaper found 55 per cent of Berliners were in favour of expropriation.
DW thinks the idea is so radical as to be “legally unenforceable”. “You have to look at what this means for Germany and Europe,” said chief operating officer Lars Wittan. “We are essentially saying goodbye to the market economy and replacing it with a different system, be it socialism or communism.”
Regardless of the initiative’s chances of success, it has sent a chill through the investment community. “Everyone knows that a step like that would completely burn Germany’s reputation as a stable business environment,” said Jörg Schwagenscheidt, head of PMM Partners, a property-focused asset management firm.
Socialism seemed to have died when the Soviet Union collapsed in 1991 and the US declared victory in the Cold War. But it has proven surprisingly resilient. In the US, congresswoman Alexandria Ocasio-Cortez, who has floated a 70 per cent top rate of income tax, describes herself as a democratic socialist. Jeremy Corbyn, the hard-left leader of the Labour Party, has an army of enthusiastic young fans.
In Germany, too, socialist ideas still fire the popular imagination. Indeed some have deep roots in law. Mr Prütz’s campaign, for example, invokes article 15 of the country’s postwar constitution, which says land, natural resources and the means of production can be “turned over to common property” for the “purpose of socialisation”.
The article, never applied, is a vestige of an age when the German elite was ambivalent about capitalism. “It shows that the idea of a market economy was not so deeply ingrained when the postwar Federal Republic was founded as it is now,” said Rainer Hank, a business writer.
But the “Expropriate DW & Co” campaign would never have garnered so much public support in Berlin were it not for the state of the city’s rental market.
Just as in London and New York, property in Germany’s capital city is an attractive asset and foreign money has poured in. The resulting gentrification is pushing up rents and squeezing out low-income families. Rents for vacant flats rose 12 per cent in 2017 alone, according to the Berlin Tenants’ Association, reaching a record high of €10.15 per square metre. Property prices in the city jumped by 20.5 per cent in the same year, according to Knight Frank, fuelled by population growth, record low unemployment and robust interest from overseas investors.
DW has become a convenient symbol of all that is wrong. “It’s the most hated company in Berlin,” said Rouzbeh Taheri, one of the leaders of the referendum campaign.
He tells of his aunt, who has lived in the same flat for the past 25 years. For years it was owned by GSW, a public housing association, then by private equity group Cerberus, and then by DW. “Since then it has just been one problem after another — the heating, the drains,” he said. “She doesn’t complain a lot, but even her patience is at an end.”
DW acknowledges that it has an image problem in Berlin. After a decade of quick growth its stock of flats has risen from 25,000 in 2007 to 110,000, establishing the company as the city’s biggest private landlord.
But many of the properties it acquired had been neglected and fixing them took time. Heating systems in some blocks habitually broke down in winter. “This problem was particularly acute two years ago and we didn’t react swiftly enough,” Mr Wittan said. “But we have improved a lot since then.”
DW also has a reputation for renovating its buildings and then jacking up rents. But the company insists its average rent for existing tenants is €6.60 per square metre, just twenty cents more than the average set out in Berlin’s borough-by-borough indicative index of rental values.
“Rental law in Germany is so heavily regulated that companies like ours have very little room for manoeuvre [when it comes to raising rents],” Mr Wittan said. “And we always abide by the law.”
Mr Prütz’s campaign has put Berlin’s leftwing coalition government in a bind. The hard-left Die Linke and some in the Green party support it. A Green member of the Berlin regional assembly, Katrin Schmidberger, called the campaign a form of “legitimate self-defence” for people at the mercy of “speculation and displacement”. “Social peace is in danger and that is alarming for all of us,” she said.
But the Social Democrat mayor, Michael Müller, is more ambivalent. He acknowledged last month that it had been a “mistake” for Berlin to sell much of its stock of council flats to private investors in 2004, and he was in favour of the city government buying back DW’s flats. But expropriation is, he said, “not my way and not my kind of politics”.
His scepticism is understandable. His government estimates DW would have to be compensated to the tune of €28.8bn-36bn if the expropriation initiative succeeded.
“Wouldn’t it make more sense to spend that money on fixing schools, on digital government, and on all the other important priorities Berlin has?” asked DW’s Mr Wittan. “They’ll be spending all that money and not building a single additional flat.”
