In January, German actor Devid Striesow – best known for a six-year stint on the Sunday-night cult crime drama Tatort – mentioned in an interview that he’d recently left Berlin, his home since finishing school in the 1980s, and decamped with his wife to Austria.
“We were expecting a baby in 2022, which is why we needed to expand. But Berlin is so short on apartments that we couldn’t find an adequate one to rent. There is still affordable housing in Vienna,” the actor told BZ. “After two years of searching for an apartment in vain, we had to give up – leider, leider, leider!”
In Friedrichshain-Kreuzberg, for instance, prices shot up by 690% in the last decade.
Stars: they’re just like us. If Striesow, a well-known figure who’d spent decades in this city, presumably well-connected and amply funded, couldn’t find an apartment where the price was right, is it any wonder that the situation feels dire to just about everyone?
Berlin was once a tenant’s paradise, famous in the 1990s and early 2000s for affordable rents and an abundance of options that made finding a reasonable flat an easy task (even if the sluggish economy made jobs scarcer). You hardly need to ask the hundreds of people now queuing up for a single viewing to know those times are long gone. Rents are rising fast, while many of those who moved to the capital in the past decade have found themselves bouncing from sublet to sublet amid the desperate scramble for the few proper vacancies.
Berlin urgently needs more housing. In September, the city adopted a new development plan that calls for at least 222,000 new flats by 2040 to provide housing for an expected growth of 187,000 new residents – and also address the chronic shortage already plaguing the city. But so far Berlin has been falling well short of its current construction target of 20,000 new flats each year; in 2023, only around 16,000 were completed, and the city expects to miss the mark again this year and in 2025, according to Berlin’s senator for urban development, construction and housing, Christian Gaebler.
But no matter how many spades the city sticks in the ground, the Berliner dream of a two-bedroom flat for under €600 a month (or a WG-Zimmer for less than €300) may remain a rare find. The most sought-after type of home in Berlin on the real estate platform ImmoScout24 is a two-room, 59-square-metre flat for €617 kalt, meaning without the utilities or extra building operating costs.
Across all of Berlin, the average monthly rent is €7.67 per square metre, including older buildings with existing contracts. ImmoScout24 found that most flat-hunters were prepared to pay a bit more, typically searching for €10.46 per square metre – but the average rent on offer was dramatically more: €18.16.
Source: berlin.de
Despite frequent complaints that developers around Berlin are only building luxury housing, there are at least some trying to build for the Average Joe and Otto Normalverbraucher. Berlin has six state-owned housing corporations, all charged with renting to regular Berliners for generally reasonable rates while also expanding holdings through purchases and new construction.
There are also numerous not-for-profit Baugenossenschaften, or building cooperatives, many of which began as a way for Berliners to collectively build affordable housing themselves. But cost pressures in recent years means that building a regular ol’ flat from scratch now frequently comes at what many still think of as truly luxurious prices. How fast – and for how much – should Berlin be able to build its way out of this mess?
Promised Land
In 2019, the Charlottenburger Baugenossenschaft finished 159 new flats in Spandau’s Falkenhagener Feld neighbourhood, nestled into a large existing housing estate. The land already belonged to the cooperative, a boon given that land prices in Berlin had spiked in years prior alongside rent – average prices jumped eightfold between 2008 and 2022, a Tagesspiegel analysis found. In trendy neighbourhoods inside the Ring, the increase was even more astounding: in Friedrichshain-Kreuzberg, for instance, prices shot up by 690% in the last decade.
“Nobody can afford to build affordable apartments at the moment. Land prices are too high for that,” Markus Viering, a professor of real estate management at the Technical University of Berlin, told the paper last year.
Dirk Enzesberger, board member of the Baugenossenschaft, says the costs for that 2019 project ended up working out to around €3,100 per square metre of living space. Without the need to turn much of a profit on the units, since any income is reinvested by the cooperative, they were able to rent flats at less than €10 per square metre kalt – which works out to less than €600 for that sought-after two-room flat. For those who signed rental contracts during the tenant’s paradise years, that may have seemed a bit steep, but it would be a real bargain by today’s standards.
In the five years since, a whole wave of new problems have washed over the housing industry, driving prices dramatically upward. Supply chain bottlenecks and inflation unleashed during the pandemic pushed up prices for building materials, while widespread labour shortages squeezed the construction sector as well. Workers managed to win higher wages, a benefit for them and their families but something that adds to a building’s cost.
Meanwhile, sharp increases in interest rates (hiked by central banks in a bid to put a lid on inflation) made financing new housing significantly more expensive, since builders almost always rely heavily on loans to pay for projects. It can often take years to finalise plans, secure permits and get final approvals for large projects before breaking ground – a lengthy process that builders complain adds further cost. Add that all up, and it’s become far harder to construct new flats that can be leased at the kind of prices Berliners long considered reasonable – even for non-profit and state-owned builders dedicated to providing affordable and social housing.
The Charlottenburger Baugenossenschaft is currently completing a new family-friendly 15-unit building in northern Charlottenburg, and while the final price tag hasn’t been settled yet, Enzesberger says the current calculations put costs at around €5,400 per square metre – without factoring in the value of the land, which the cooperative already owned.
That’s pretty close to what has become the standard cost for German builders; an analysis by the real estate service provider CBRE late last year put average construction costs nationwide at €5,150 euros per square metre. “We’ve seen a price increase of well over 40%,” Enzesberger tells The Berliner. “And all of that means you can no longer actually offer such a building project for rent for less than €20 per square metre of living space, even if you [already] own the land, unless you have the opportunity to get subsidies.”
Affordable housing developers in Berlin complain that there hasn’t been enough funding pumped into subsidy programmes to spur the kind of construction that’s needed in the city. And with budgets tight at both the city and national level, it’s unclear where such funding might come from – especially as even middle-class Berliners increasingly find new market-rate flats outside their budget. “Today, our housing subsidies are often aimed at people on very low incomes … but there are no adequate offers or support for the bus driver or the Kindergarten teacher, for these people, for this target group with their income,” Enzesberger says. “Neither the state nor the federal government has enough money for that, and that is the problem we are facing.”
The Rent Dent
In early September, I watched as a massive bell-shaped garland of flowers was hoisted above a sprawling construction site in Altglienicke, out near the airport. Politicians gave speeches, tradesmen gave toasts. The celebration was what’s called ‘Richtfest’, to mark finishing the frame and roofing on a new 14-building residential quarter that Howoge – one of Berlin’s state-owned housing companies – is constructing on the grounds of a former school.
If everything goes according to schedule, hundreds of Berliners will start moving into the first 211 flats in July, with another 372 – as well as a childcare centre, offices or shops – to follow by September 2026. In many ways, it’s what just about everyone agrees Berlin urgently needs, but, at €13.75 per square metre, might come at a cost beyond what people in Berlin have long been used to. (The Altglienicke project will also include 304 Sozialwohnungen for low-income tenants, with rents starting at €6.90).
Just after the ceremony, I sat down with Howoge’s managing director, Ulrich Schiller, in a temporary construction office at the site to talk about just what, from his point of view, has made construction so difficult in Berlin. “We only have a limited amount of land that can still be built on,” he says. “At the moment, if you look at the land and the construction costs, we are all-in at €4,300 to €4,500 per square metre. And we can just about manage that with the rents we are allowed to collect.” The city imposes limits on the rent municipal housing developers can charge. “If you are 10% more expensive at €4,800 or €5,000, then it becomes difficult. Then the rents have to be correspondingly higher – and that’s when things slowly start to tip.”
The six state-owned building companies – Howoge, Degewo, Gesobau, Gewobag, WBM and Stadt und Land – have announced plans for widespread rent increases early next year, with average monthly rents expected to jump by around 8%. The companies cited the financial strain from renovations and the need to finance construction of new buildings.
During our interview, Schiller casts a look through the window toward the buildings rising from the ground and points to one big thing he’d change if he had his way: a few dozen more apartments stacked on top, the buildings each rising at least a storey or two higher. That would squeeze more units onto each valuable bit of land, and installing heating systems and other necessities would be more cost-efficient in bigger buildings.
But locals, concerned about overcrowding in their Kiez and further strains on local amenities like Kita slots and parking spots, are often wary about infringement. Schiller says Howoge tries to address those concerns by working closely with local officials, but that a reluctance to embrace higher urban density – understandable though it may be – is a big roadblock to building the amount of new housing the growing city needs.
“It is often the case that people in the neighbourhood are afraid that too many people will move in,” Schiller says. There’s a balance to be struck for sure, but part of the issue – at least in his eyes – is that Berliners hunting for a home (and people plotting a move to the Hauptstadt) rarely have much of a say in local development decisions, while the voices of local residents wary of seeing their neighbourhoods change weigh heavily on local politicians. “Have you ever seen a demonstration in Berlin for new construction at Tempelhof Airport?” he adds, pointing to one particularly hot-button housing proposal. “But are you sure that everyone is against it?”
The high rents at another new Howoge project in Brandenburg drew criticism in August, with BZ running the headline: “Why are state-owned flats so expensive?” The article noted that one-room flats (48 square metres) would cost €912 per month, including all utilities and costs, while a four-room apartment (96 square metres) would come in at €1,887 warm per month.
“A family of three would have to have a [monthly] income of €5,600 for a four-room flat, while a single person living alone would have to earn around €2,700 for a one-room flat,” complained Berliner Mieterverein managing director Ulrike Hamann-Onnertz to the newspaper. “The policewoman, the nurse, the university lecturer can’t keep up with that.” That’s largely true, given that the median Berliner working full-time earns €3,806 a month before taxes, while salaries for BVG bus drivers start at €2,800 per month.
A Howoge spokeswoman, however, was quick to note that hundreds of potential tenants had already expressed interest – and that average rents for the 221 flats in the development would be €14.32 per square metre kalt, below the limit set by the Berlin Senate for municipal housing. Expensive enough to get mad about – but also at the lower end of what developers agree that new buildings can be offered at, even without making a profit.
Back in the construction office, Schiller offers me a bet. He points to a row of apartment buildings across the street, each of which have new rooftop flats that were added=later. Despite the community pushback now, he reckons that in a few years, there’d be interest in adding similar rooftop units to Howoge’s new complex.
Construction Obstruction
For private developers who have to buy up land on the open market, the costs can add up even higher – before adding in a profit for the investors, who take risks on lengthy building timelines and fluctuating expenses. That often means new buildings carry kalt rents well north of €1,200 a month for the elusive two-room flat – which is at least part of the reason for-profit developers have mostly focused on the higher end of the market, as the premium price of luxury flats offers an easier way to offset the cost of land and reliably make money.
“We just completed the most recent new flats in Berlin-Steglitz four weeks ago, for example. They are extremely nice flats, the most beautiful we currently have. They cost €13.20 [per square metre] kalt,” says Enzesberger. “Two streets away, people who had applied to us told us there’s a similar construction project [from a private developer], not quite as nice. Very similar flats are being offered for €25.”
The calculus may be distinct for publicly-owned and non-profit builders, but many of the cost pressures are the same. “As a municipal company, we are no different [from private firms] in the respect that we also have to pay our bills. We also have employees who say: ‘Listen, everything in the supermarket has become more expensive. I need more money.’ So, we also have to offset the costs with income,” says Schiller.
Builders like Howoge plough any leftover rental income into new construction and buying existing buildings back from private owners, tasks mandated by Berlin’s government. This means that public housing tenants in effect carry much of the burden of financing new construction, a financial model that some critics decry as unfair. The Berliner Mietverein and others have called for those costs to be socialised more broadly through public funding, instead of hiking rents at city-owned buildings to raise revenue.
A report in July from the left-wing Rosa Luxemburg Foundation earlier this year, authored by the well-known urban sociologist Andrej Holm among others, found that rents of just €5.50 per square metre would be enough to cover the costs of maintaining and operating existing apartment buildings across the city. The report highlighted the public housing system in Vienna, where a separate municipally owned and funded housing developer builds affordable housing, allowing rents to be kept relatively low in existing buildings. But either way, the financing has to come from somewhere.
Enzesberger said his cooperative looks to run a very small surplus on new buildings, with plans to put that money toward costly renovations currently pending at other co-op owned buildings. Rents across the cooperative’s roughly 7,000 flats, most of which are in buildings decades older, rent for a kalt average less than €6 per square metre.
Some of the most intense price pressures have eased a tiny bit in the past year – energy costs have dropped, some of the material shortages have eased, interest rates are being cut and land prices in Berlin have fallen back slightly. But Enzesberger, like others in the building sector I spoke with, doesn’t expect any kind of dramatic shifts to erase the changes from the last five years. “It will no longer be possible at all in future to build a new building for under €14 or €15,” he says. That’s double or even triple what many tenants in Berlin are paying. “We’ll remain at a price level that is much higher than we were used to in the past, and we’ll all have to live with the fact that rents in a new building are unaffordable for many people.”
A House of Cards
For most Berliners, the big housing crunch has only hit relatively recently, but all this has, in fact, been building for a while now. Cranes sprang up just after the Wall fell as part of a construction boom in the capital of newly-reunified Germany. But when the massive Berlin bonanza so many investors anticipated in those frothy days failed to materialise, and the Hauptstadt actually started shrinking instead, the building stopped.
“The expectation was that the population in the new capital of reunited Germany would increase rapidly, but it didn’t happen. So, by the beginning of the 2000s, people were quite pessimistic,” says Konstantin Kholodilin, a long-time observer of the Berlin housing market and a research associate at the German Institute for Economic Research (DIW) in Berlin. “They were saying that the population is shrinking and it’s going to shrink further within the next few decades, so there’s no need to build new housing.”
It also left the city ill-prepared when growth somewhat suddenly – and unexpectedly – kicked off around 2010, fuelled not by a sudden Berlin baby boom but by Germans moving to the capital from smaller ftowns and cities as well as a surge in other Europeans relocating, many nudged by dim job prospects in their home countries amid the euro crisis. Big waves of refugees – including the 2015 influx from the Middle East and North Africa, and then Ukrainians fleeing Russia’s all-out invasion in 2022 – added further boosts to the city’s population.
Source: 2023 Tagespiegel analysis of land value data
Construction rebounded, but not enough to keep up with growth in demand. Compounding the issue? That Berliners, like others around the Western world, have tended to seek out bigger flats, while living with fewer people. Wanting more space is certainly understandable, but it also means that a modest-sized flat that decades ago might’ve housed an entire family is now more likely to be home for a couple, or someone living alone.
Increasingly strict building standards – especially aimed at climate change – have also added to the cost of new construction. Regulations require newly-built flats to be safer, more accessible and energy efficient. That might well make them nicer and make a small contribution to avoiding the looming climate catastrophe, but it also comes at a price.
Requirements that large landlords – including the Baugenossenschaften and the state-owned housing companies like Howoge – retrofit older buildings to reduce energy use, eliminate fossil fuel-burning furnaces and make them climate-neutral also weigh on the overall budgets, setting up a tug-of-war over euros that could be spent on new flats, retrofitting flats or keeping down existing rents – but not all three. Enzesberger, for example, said the Charlottenburger Baugenossenschaft has stuffed its plans for a couple of further projects in the drawer for at least the next few years as they wait to see how much the required renovations on their older buildings will cost.
Schiller tells a similar story: “At Howoge, we don’t just have the challenge of building new buildings. We also have to make our existing flats climate-neutral. That also costs a lot of money,” he says. “If we modernise buildings today towards climate neutrality, then we are replacing windows that are not even 10 years old. I don’t know if that makes sense.”
Building up Hope
Despite all this, there are some very cautious signs of optimism among builders. A number of large housing companies, including many state-owned ones, have been exploring a new standardised style of modular apartment buildings where units could be bulk manufactured at a factory and then assembled at the construction site. Although promoters are usually quick to draw differences from the mass-produced postwar concrete Plattenbau that powered a hasty effort to address massive housing shortages in the bombed-out city after World War II, the hope is that mass production could both speed up the process and slash the price tag of a new flat compared to labour-intensive traditional construction.
There’s also the possibility that the worsening housing crisis across Germany will prompt a major political response on a scale far larger than we’ve seen so far, and a wave of public money will pour into public housing construction and subsidies for affordable development. Just where that money might come from, however, seems uncertain. Both the Berlin Senate and the Bundesregierung have been grappling with budget cuts.
Kholodilin, the economist, doesn’t imagine that costs will ever go back down significantly, although cutting back regulations could make building new housing at least a bit cheaper. But flats could still become more affordable if earnings for workers can outpace future rent hikes. (Currently nearly one in six Germans pay 40% or more of their income on rent, according to a new DIW study – a dramatic rise from one in 20 in 1991.) “What’s important for people is not how much a square metre costs, it’s how much can you afford, right? And that depends on your income,” Kholodilin says.
The housing market, once a draw, has become one of Berlin’s ugliest features, miserable enough to drive at least some long-time residents away and dampen the city’s allure. “I think Berlin has been hit hard by its own attractiveness. When a commodity is scarce, unfortunately it always will be more expensive,” Schiller says. “I once also wanted to come here. I’m part of the problem.”
They say if you build it, they will come; in Berlin, we’ll see if everyone can manage to stick around until they’ve built it.
