The Berlin Housing Crisis and The Right of First Refusal
German Federal Court decision effectively ending the Right of First Refusal leaves residents in limbo
The rain has finally stopped and about 40 people are congregating at the cul-de-sac of a usually quiet residential street in Berlin’s inner-city district of Kreuzberg. A nascent sweet tooth sends repeat customers wading through the growing crowd towards a nearby marquee. The street’s youngest residents are fundraising for the neighbourhood community, exchanging kuchen and törtchen for gold coins, while parents and grandparents keep a low profile to let their offspring get on with the job at hand. Elsewhere attendees nurse cups of glühwein and banter with neighbours or listen to the vocal stylings of acoustic performers on the makeshift stage. Banners hanging from trees and participants holding placards aside, you could be forgiven for thinking this Saturday afternoon gathering was the beginnings of a festival rather than a protest.
The tenants of Naunynstrasse 94A are demonstrating to raise awareness of their situation – along with next-door neighbours in buildings 94 and 95, they are faced with the sale and potential loss of their homes. The buyer, Jebsen Group, a Hong Kong-based investment firm, has already finalised its purchase of all three buildings. The residents hope to bring attention to the nation’s lack of tenant protections in the wake of a bombshell ruling by the Federal Administrative Court in Leipzig, said Naunynstrasse resident, Ben Perry. Prominent voices within Berlin’s political landcape have thrown their weight behind the rally – among those speaking at the event is Greens’ representative in the new Federal coalition government, Canan Bayram.
On Tuesday 9 November, the Court’s decision effectively ended the use of Vorkaufsrecht, or the right of first refusal, a precedent under federal law that allowed local government to intervene in the sale of residential buildings in certain socially disadvantaged areas. The provision allowed municipal governments, which themselves do not usually have the funds to buy apartment buildings, to use their right of first refusal on behalf of a third party, such as a cooperative or state-owned housing company.
In the official view of the district of Friedrichshain-Kreuzberg, the poor and diverse demographics of this particular neighbourhood make it uniquely vulnerable to housing pressures. As a building designated as part of a Milieuschutzgebiet, or social conservation area, Naunynstrasse 49A was eligible for the district to intervene on behalf of its residents. The tenants were in the midst of petitioning to secure the district’s support over the sale when the Court’s verdict extinguished the legal basis for their claim. The rents are currently an average of seven euros per square metre, Johannes Fülberth, historian and Naunynstrasse resident since 2003, told the Tagespiegel, but ‘teachers, carers, artists, pensioners live here, most of them will no longer be able to pay.’
Ben Perry, the US-born editor of a shipping newspaper, lives in the building with his wife and young daughter. ‘I came to Berlin in 1999 to visit a friend who was doing an internship at the time’, he said. ‘I never used my return ticket and I’ve been here for over 20 years now. I think that happens to a lot of people in this city. It’s a unique place and when people come here a lot of them fall in love with it and don’t want to leave and I was one of those people.’
Perry has lived in the area for the entire duration of his time in Berlin, originally drawn there by its cultural vibrancy and rough-and-tumble character. ‘It’s obviously changed a lot in the last 20 years,’ he said, ‘but Kreuzberg is special and Berliners will tell you that. It’s the birthplace of German punk rock, for instance. There’s S036 just down the street and a lot of musicians started here. Iggy Pop lived with David Bowie in Schöneberg, I believe, but a lot of the bars they came to were in Kreuzberg, like near Paul-Linke Ufer and that area.’
Having lived in the building for ten years, Perry notes a profound shift in the relationships between the residents since their lives were upended by the sale. ‘I don’t think the house was especially united until this organisation came up and we decided to get in touch with each other’, Perry noted. ‘I think that’s been a nice side benefit of this is that people in the house got to know each other better than before. Just because of these regular meetings that we have. You know what they say about having a common enemy as well. It brings people together. So I’ve got to meet a lot of people in the house that I didn’t know before.’i
Early in November, the residents became aware that the owner was selling the property and immediately began coordinating their response as a building. ‘We basically started gathering as soon as we found out,’ said Perry. ‘That’s how we knew it was the middle of January. There was a set point when our right of first refusal would run out.’ This was the legal deadline to find a co-operative or state housing company that would agree to match the price of the building as an alternative buyer. Such an outcome would have allowed the residents to stay in their flats, paying social housing rental rates. Instead, Naunynstrasse 54A was among 14 Berlin apartment buildings effectively left in limbo by the Federal Administrative Court’s decision. With ongoing cases dependent upon the right on the right of first refusal, these groups of residents were suddenly left without legal recourse the day the court handed down its verdict, according to Wibke Werner of the Berlin Tenants Association.
‘We don't know how things will continue, we're depressed,’ another Naunynstrasse resident, Barbara, told the Tagespiegel, declining to publish her surname due to concerns about ongoing communications with the property’s new owner. She has lived in the building complex, along with her husband, for 32 years. The residents action group had contacted 300 cooperatives throughout the country - ‘and seven were interested’, the Tagespiegel reported her as saying.
‘When that right got taken away’, Ben Perry said, ‘Vorkaufsrecht, by this court – we had to change our perspective.’ With all legal tools off the table, the residents’ priority has shifted to ‘staying organised and continuing to make ourselves heard.’ The organisation has reached out directly to the new owner, chairman Hans Michael Jebsen. They are seeking an Abwendungsvereinbarung, or aversion agreement that guarantees against future renovations and therefore higher rents. Jebsen Group is under no legal obligation to consider their proposal. Jebsen has not responded to any communications from the residents, Perry said.
A bittersweet victory
One of the final cases to successfully use the right of first refusal, just before the instrument was struck down, was actioned by the tenants of Chorinerstrasse 12 in Mitte.
Conrad Menzel, 39, was actively involved in the eight week process. The former journalist first moved into the building in 2010, and lives in a 50 square metre apartment with his partner and eight year old son. A lifelong resident of the area, he remembers the neighbourhood when a no-man’s land separated the western side of the city only two blocks away.
Petitioning for the right of first refusal, the residents of Chorinerstrasse managed to secure the support of a housing cooperative willing to buy the building just in time – only days before the Federal Administrative Court’s decision effectively snapped the door shut behind them. The residents’ elation from the narrow victory was tempered by fear for other Berliners with their cases still in progress, like the Naunynstrasse community, whose pathway of appeal is now severed. ‘The judgement of the Administrative High Court is now of course a shot in the neck for everyone else’, Menzel said, ‘it means that we are really back at zero. There won't be any more aversion agreements, because there is no longer a reason that anyone would sign one, because the risk of the right of first refusal is no longer there. It's a fatal sign for what is going on in the city right now.’
A decade of push and pull
Having fallen into disuse during Berlin’s interregnum years of relatively stable housing prices, the right of first refusal (Vorkaufsrecht) was originally revived in 2015 by Kreuzberg-Friedrichshain’s municipal government – under popular pressure to counteract the effects of escalating rental costs. Representing neighbourhoods once considered the least desirable in the city during partition, the district suddenly found itself at the epicentre of a gentrifying wave. A wave which was already on the ascent by the time former city mayor Klaus Wowereit first delivered his pitch of ‘poor but sexy’ Berlin to tourists and prospective residents.
Today, the rents continue to rise. The Statista portal reveals the average rental cost of a Berlin apartment at approximately EUR 10.50 per square meter, an almost 21 per cent increase since 2016.
The right of first refusal was not originally intended as a solution to resident displacement in and of itself, but as a temporary negotiating tactic. The idea, according to Fabien Steinicke, press officer for Urban Policy Initiative Forum Berlin, was to leverage buyers into signing aversion agreements (Abwendungsvereinbarung). The buyer is contractually obligated to the district not to undertake major renovations which could expose the residents to increased rents. ‘The new owner agrees to protect the stability of the rental situation in the building for a certain number of years,’ says Steinecke, ‘the standard currently is 20 years. They include requirements that they, for example, don’t convert the units into condominiums; that they won't undertake any major modernisation that would have an effect on the rental prices.’
It was Kreuzberg-Friedrichshain’s use of the precedent of Vorkaufsrecht that ultimately became the focus of the highest escalating legal challenge against it. A real estate company, Pohl and Prym, previously sued the district in the Federal Administrative Court after losing the right to a refusal of twenty apartments, Juve reported. The company won its appeal, thereby eliminating Vorkaufsrecht as an avenue for renters faced with building sales.
‘The right of first purchase for a property may not be exercised by the district on the basis of the assumption that the buyer will pursue major changes to the use of the property’, the Court ruled.
‘A tale of three cities’
Just as the right of first refusal was swept away by a federal decision, only the federal government has the power to reinstate it. The Governing Mayor of Berlin, Franziska Giffey, Hamburg's First Mayor Peter Tschentscher and the Mayor of Munich Dieter Reiter (all SPD) have released a joint statement signalling the need for a strengthened right of first refusal in social conservation areas, Rundfunk Berlin-Brandenburg reported.
In the meantime, local politicians must await a federal decision. Sevim Aydin, representative for Kreuzberg in the Berlin state parliament (SPD), grew up on Naunynstrasse – the battleground for Ben Perry and his fellow residents. ‘So many in my constituency are affected by this,’ Aydin said, ‘I am approached about it every day. I support this instrument because it creates the opportunity to prevent displacement and speculation. That is why it needs to remain.’
On the other hand, among the most vocal cheerleaders for ending the Vorkaufsrecht in the state parliament have been the Free Democrats (FDP). ‘Expenditure, costs and benefits are disproportionate and do not help to get the housing and rent problem in our city under control,’ Sybille Meister, deputy chairwoman of the FDP parliamentary group in the Berlin House of Representatives, told RBB24. Among Meister’s party colleagues at the federal level are those in the new governing coalition. Therefore any proposed federal changes to housing legislation must involve the FDP.
Events in the fight over Berlin’s housing market have now become a liability for housing policy nationwide. Now a minister in the Bundestag, Social Democrat representative Cansel Kiziltipi (SPD) once described Hamburg and Munich as the ‘role models’ for Berlin’s adoption of the legal instrument, having endured an affordability crisis in their rental markets for far longer. In specific neighbourhoods within these cities, she told Tagespiegel in a 2015 interview, the municipal right of first refusal was already calculated into the sale of buildings as a cost factor of acquisition. Since November 2021, with the legal basis for the instrument gone, local governments in Hamburg and Munich, too, have been left powerless to intervene in building sales on the behalf of residents. Frustrated, the SPD-dominated administrations of the three cities are now simultaneously lobbying the newly elected federal government led by their partyman, Chancellor Olaf Scholz, to act in restoring the right of first refusal.
