16 billion euros for around 160,000 flats: the agreement reached in Berlin’s exploratory coalition talks between The Left, the Greens and the SPD provides a financial framework for the planned socialisation of large residential portfolios. However, it remains unclear whether the figures will add up for the current owners, the future operator and the state budget. Whilst BILD questions the financing via loans and rental income, former Vonovia board member Klaus Freiberg examines both sides of the proposal in a LinkedIn comment: what will the owners actually receive, and what will remain for the new company to cover day-to-day operations?
In mathematical terms, the proposed compensation cap of 16 billion euros for 160,000 flats equates to 100,000 euros per unit. Freiberg contrasts this figure with an estimated market value of around 170,000 euros. Another question is how the compensation would be paid. The exploratory paper does not yet specify this; a financing plan is not due until 2027. Freiberg therefore bases his analysis on the model set out in the initiative’s draft bill: a bond bearing 3.5 per cent interest and repayable over 100 years. These terms have not yet been agreed upon by the potential coalition.
The difference is significant: compensation paid out over decades must be assessed differently in economic terms from an immediate payment. According to Freiberg’s calculations, such a bond with a nominal value of 100,000 euros would, under the assumptions he used, be worth only between 72,000 and 79,000 euros today. After 50 years, therefore, around 85,000 euros of the original debt would still remain outstanding.
On the owners’ side, the existing financing of the properties must also be taken into account. Freiberg argues that, in the event of an unencumbered transfer, the liabilities secured by mortgages would first have to be settled. For a debt ratio of 28 per cent – which he cites for Deutsche Wohnen – he calculates a remaining economic value of between 24,000 and 31,000 euros per flat. Based on the Vonovia debt ratio of 46 per cent he cites, his model suggests that practically nothing would remain. At the same time, he points out that unsecured group liabilities, such as bonds, would not automatically be transferred to the new entity along with the flats. The actual consequences would depend on the specific financing structure and the relevant legal provisions.
Freiberg’s calculations also suggest that the future operator would face tight financial margins. Based on an average Vonovia rent in Berlin of 8.26 euros per square metre, he deducts 3.73 euros per square metre per month for property operating costs. This leaves 4.53 euros for debt servicing. He sets this amount against a cost of 4.94 euros arising from the assumed bond. The calculated shortfall amounts to 41 cents per square metre per month. With a starting rent of seven euros – as used in the study he cites – this shortfall would be correspondingly larger. The forthcoming financing plan would need to confirm these assumptions or set out an alternative basis for the calculations.
BILD raises the same fundamental question: Ines Schwerdtner, federal leader of the Left Party, describes loan financing with repayment from rental income as budget-neutral. However, borrowing alone does not demonstrate that the scheme can remain self-financing over the long term. Assuming an interest rate of four per cent on 16 billion euros, the annual interest costs alone would amount to 640 million euros; at five per cent, this would rise to 800 million euros. Principal repayments and property operating costs would come on top of this. This illustrative calculation must be distinguished from the model of long-term bonds.
In addition to the financial risks, socialisation raises significant organisational issues. As Freiberg points out, the transfer of land, buildings and tenancy agreements does not in itself result in a functioning housing management system. Caretakers, tradespeople and emergency heating services are no more automatically available to the new operator than IT systems, billing data and technical documentation. Binding arrangements for these transfers would first have to be put in place. Responsibility for servicing, safety and maintenance, on the other hand, would apply from day one. Setting up a new organisation would therefore require additional funds and staff, without this resulting in a single additional flat being created.
“Socialisation is the wrong approach. It ties up considerable financial and human resources, but does not create any additional housing. At the same time, management, maintenance and modernisation must be financed on a long-term basis. As the report by the Kiel Institute for the World Economy shows, the money would be better spent on building additional housing: in the scenarios examined, this would lead to a noticeable moderation in asking rents whilst requiring a comparable level of funding. Policymakers should therefore facilitate new construction and mobilise investment. This would also benefit those who have so far been searching in vain for a flat,” says Jacopo Mingazzini, CEO of The Grounds.
