NO RIGHT TO PROFIT, BUT A BASIC RIGHT TO HOUSING
by Sabine Nuss, Blatter Nov 2019https://www.blaetter.de/archiv/jahrgaenge/2019/november/kein-recht-auf-rendite-aberein-grundrecht-auf-wohnen?print
Those who followed the rent policy debate in Berlin in the summer of 2019 witnessed an ideological mud battle: The Berlin Senator for Urban Development, Katrin Lompscher, had presented a draft for a "law on rent limitation in the housing sector in Berlin" as a reaction to the increased rents in the city. Among other things, it envisaged freezing rents for five years, introducing an upper rent limit and possibly even reducing rents. Real estate completed since 2014 has been explicitly excluded, and further special regulations should avoid "unreasonable hardships" for landlords. But even before any law was passed, many a representative of the real estate industry knew that the "left-wing building brigade"[1] would lead the capital directly back to the GDR. This shrill polemic drowned out the debate that should be conducted: a fundamental debate on the ownership of housing.
The reasons cited for rising rents are mostly population growth in the cities and too little new construction. This diagnosis is not wrong. In recent years, however, urban sociologists have analyzed up and down that the reasons lie deeper: at the end of the 1980s, for example, non-profit status for the housing sector was abolished. In other words, the profit restrictions that had previously been in force were lifted for around 1800 housing companies with almost four million dwellings.
In addition, since the 1990s the federal government, the federal states, and local authorities have privatized more than two million dwellings. Social housing construction was gradually dismantled: "Between 1992 and 2012 alone, the number of rent and occupancy commitments in social housing fell from 3.6 million to less than 1.5 million."[2] After the subsidy programs expired, the former social housing was left to the free market. This has led to the abandonment of political options. The market should regulate it from now on.
However, this market, which according to pure teaching always creates supply where there is demand, prefers condominiums to rental apartments. In 2015, less than 50,000 of the total of 217,000 completed apartments were built as rented apartments:[3] "Precisely because the business of rent increases is so attractive, too few new buildings are being built," says urban sociologist Andrej Holm.
Investors only build when they expect a profit. This is why the rents in the new buildings are anything but cheap: in the inner cities of the growing cities, new apartments are offered at significantly higher prices than apartments in older buildings. And that's not all: rents in new buildings are also rising much more sharply than in old buildings. New construction cannot, therefore, offer the urgently needed housing for low-income households - at least not under private sector conditions. For Berlin alone, around 350,000 households at risk of poverty are lacking around 120,000 flats.[4] The
recommendation of opponents of the rent cap - more state incentives for private construction - does not solve the problem of a mass shortage of cheap flats.
Poverty is not a natural necessity
The fact that there are so many such low incomes at all is accepted in the urban political debate as if it were a natural necessity, similar to the weather: poverty does exist. The unequal distribution of income and wealth is an integral part of a market economy. However, the gap between rich and poor has widened in recent decades due to the (politically intended) creation of a low-wage sector.
First, as urban researcher Susanne Heeg has pointed out, the development of the German housing market is embedded in the global changes that have taken place over the last three decades. Its hallmarks include the internationalization and liberalization of the financial markets. Against this backdrop, real estate in particular, especially in Germany, has turned into sought-after investment properties. They are currently regarded not only as the most lucrative, but also the safest form of investment. Rents are therefore subject today to ever higher yield requirements on the part of the owners of the respective real estates.
Secondly, today we are confronted with what Heeg calls "financial self-government of the individuals"[5]: Due to the dismantling of the welfare state, people are increasingly dependent on protecting themselves against fundamental "life risks". Individuals are thus involved in the process of financialization. A particularly momentous example of this privatization of services of general interest is the move away from pay-as-you-go pensions and towards private provision. Contributions to the increasingly necessary private pension provision flow either into pension funds, which in turn invest in real estate, among other things, as capital accumulators. Rent increases are then intended to optimize investors' returns. Or the "self-governing" individuals - provided they have the necessary resources - can buy a condominium for their private pension provision. This multiplies the number of those who use the rent - the income of others - as a means of utilizing their invested capital and securing their provision. The conflicting interests collide head-on, especially when - as can currently be observed - income development does not keep pace with rent development.
The subordination of municipal services of general interest to the market logic, in conjunction with many other neoliberal developments in recent years, has led to a greater division of society, in which everyone is forced to seek only their advantage. The naive belief of the ruling economy that self-interest, the special advantage of individuals and their private interests are the only power that holds them together and at the same time leads them to the best of all possible worlds has already been ironically paraphrased by Marx: "And precisely because each one thus turns only for himself and no one for the other, all, as a result of a pre-stabilized harmony of things or under the auspices of an allspiffy providence, accomplish only the work of their mutual advantage, of the common good, of the total interest."[6]
No right to the greatest possible profit
Now the Federal Constitutional Court - unsuspicious of socialist activities - has only recently adjusted the relationship between private and overall interests in a ruling on the (largely ineffective) rent brake. There, the court emphasized what many in the exciting debate are currently forgetting: Property obliges. Article 14(1) of the Basic Law indeed stipulates that property is guaranteed. At the same time, however, it says that content and barriers are determined by laws. And paragraph 2 adds that the use of property should "serve the common good". The "common good", however, is an elastic concept, not objectively determinable and therefore always the result of social disputes. In the case of the rent brake, the court ruled unequivocally: "It is in the public interest to counteract the displacement of economically less efficient sections of the population from urban districts in high demand. The regulation of rent levels is also suitable in the constitutional sense to achieve this goal"[7].
Besides, the Federal Constitutional Court states that landlords in the "socio-politically controversial area of tenancy law" must expect frequent changes to the law. They could therefore not rely on "achieving the highest possible rental income with the apartment". This is not protected by the property guarantee. In other words, the constitution protects the right to property, but not the right to the greatest possible profit. The speculation that the rents of others will increase one's capital is therefore exposed to the same risks as investing in shares or bonds.
The fact that individual property is set from the outset and - as in the case of the ruling on the rent brake - only subject to restrictions after the fact is by no means as self-evident as we accept it today. Rather, the current primacy of private property is a historical peculiarity.[8] And it is above all the "private ownership of means of production", to quote Marx, that makes its mark on modern market society and whose effects can now also be seen in the housing market.
This "private ownership of means of production" is concentrated in only a few hands. The Deutsche Bundesbank's wealth survey for 2017 showed that only ten percent of private households in Germany own business assets, including very small ones. This means that larger business assets are concentrated in considerably fewer households: Business assets, according to the Bundesbank, "like equity assets, are concentrated in the upper part of the distribution among wealthy households and are one of the most unequally distributed types of assets"[9] In July 2019, the International Monetary Fund (IMF) rarely made a clear reference to the same facts: "Germany is one of the countries with the highest wealth and income inequality in the world" - and the trend is rising. The big family businesses are responsible for this development since wealth is concentrated there "in the hands of a few".[10]
Thus, the owners of the company assets determine what they use their means of production for, which goods and services are produced with them, how much of them, which intermediate products and raw materials they consist of, and under which environmental and working conditions they are produced. Finally, the goods produced in this way are offered for sale on an anonymous market, but only to increase the capital
invested. A real estate company does nothing else when it renovates houses and sells them, or when it buys houses, renovates them and generates income from lettings.
The satisfaction of needs is therefore strangely turned upside down in a market economy. It is used as a means to make more capital out of advance capital - but then only those needs are satisfied for which it is profitable. Capital can be invested for this purpose in factories, waste, coal mines, restaurants, poison, computers, software and cars as well as in houses or flats. Marx called this the indifference of exchange value to utility value.
Depending on the political framework, this leads to a more or less strong concentration of capital in a few hands. Of course, new apartments are also created in this way and apartments are also offered for rent. But only those that are profitable for the capital; the rent does not only serve to preserve the substance or modernize, but also the return on the capital invested.
Far-reaching room for maneuvers in the Basic Law
Representatives of the real estate industry are also aware of the fact that low-income households are left empty-handed. Here, however, according to the propagated solution, the state must step in: either by supporting the "low-income" with housing subsidies or by subsidizing private housing construction by the state, provided that it offers a certain minimum number of price-linked dwellings. At the same time, it is acknowledged that the market cannot do it on its own after all, or more precisely that it is only in a position to satisfy solvent needs, but not actual needs.
The Federal Constitutional Court is also aware of the effects of private property. First of all, it admits to being allowed to behave in a socially irresponsible manner following its interests. Only afterward is this freedom restricted, for example by environmental regulations or by a rent brake, if the maximization of profit calls into question the basic right to housing. The loud resistance of the real estate industry, whose special interests have been given much room for development in recent decades, is the reaction to this restriction. Against the background of the developments outlined above, it is difficult to reintegrate the polarization and division of urban societies. So what should we do?