7 - Suppressive regulation and lower political esteem: private renting in Germany at the beginning of decline

Summary

Introduction

In contrast to most other advanced economies, where private renting is more or less a residual sector focused on the poor and those unable to buy their home, the German private rental sector is still a cornerstone of housing provision and serves a broad range of households. As in many other countries, though, individual private landlords dominate in the German private rental sector (PRS). There is no doubt that the PRS is a key pillar of the German housing system. In summary, this system is characterised by:

• 1. strong tenancy security for decades, interrupted only by deregulation legislation in the 1960s;

• 2. a system of only temporary subsidies for social housing at moderate profits, which has led to a permanent shrinking of the social housing stock;

• 3. building up of a large rental housing stock via extensive and continuous housing subsidies and generous tax treatment in the past (1949–2005);

• 4. Stop-go housing subsidies since 2006 while maintaining relative tenure neutrality.

In the German case, the author prefers to define the PRS according to ownership. A rental dwelling thus belongs to the PRS if it is owned by a private person, a group of private persons or by a private company. For pragmatic reasons, this definition includes social housing owned by private landlords because only the owner groups, but not the status of the apartments in their respective housing portfolio, is statistically recorded. But this does not affect more than 2 per cent of the sector’s housing stock.

Structure of supply and demand in the private rental housing market

The German housing market is characterised by specific structures that distinguish it very clearly from other housing markets. The essential aspect here is the role of renting and particularly private renting. It is quantitatively and qualitatively quite different from the private rental market in other early industrialised Western countries, where homeownership is more widespread.

Supply side: a very large cottage industry

The most striking characteristic of the German private rental sector from a comparative perspective is its size: almost 80 per cent per cent of the rental market and more than 45 per cent of the total housing market.