German Tenants: REITs - poison for social housing

Knut UNGER, 2006

Ruhr District Tenants Associations did not like to become the hunted. In Sept. 2006 they wrote a long letter to treasurer Steinbrück:

“REITs are poison for social housing and cities in Germany!”

In a summary they highlighted the following consequences of REITS:

The permission of REITs…

• creates extraordinarily favoured taxation conditions for the massive transfer of housing and other real estates into this asset and thus provides substantial incentives for the sale and privatisation of publicly and institutionally hold housing companies,

• thereby exclusively serves the interests of large financial investors, who look for high real estate profits and try to escape from the breaking real estate bubble in North America,

• offers a profitable and welcomed exit for the short term investment by international Private Equity Funds, which bought over one half million dwellings in Germany in the last years,

• puts a burden of very high net yield expectations on transferred housing stocks, which will get realized by personnel reduction of employees, violent rent increases, transformation and replacement of low-priced dwellings, neglect of maintenance, notice and evacuation of financially loss strong tenants,

• threatens the living security of millions of tenant households, heats up the rents and sacrifices the few still existing public instruments on housing markets and in town development,

• thereby even indirectly leads to a substantial reinforcement of economical pressure on housing real estates and the so far relatively safe German housing markets, which within in short period will deliver into the cycles of global speculation,

• leads to substantial loss of taxes, which could be compensated only short-term at the price of a gigantic consumption of public fortune in consequence of the heated up privatisations,

• leads to a substantial concentration of market power on housing markets and thus to a fundamental shift of the political balance of powers, which will lead to a loss of public influence and rental protection,

• continues to dis-embed markets from society and by heating speculative real estate bubbles leads to risks for the entire economy,

• is redundant because of the closed and open ended real estate funds in Germany.

REITs are suitable to destroy the remainders at social housing industry which we still have in this country. They serve the interests of financial investors, who invest not into productive plants, but speculatively cannibalise social fortune.”¹