Hundreds of thousands of apartments are missing in the metropolitan areas. The economist Steffen Sebastian wants to fight against this and makes a radical proposal: the previously low rents in old contracts should rise. In an interview with ntv.de, he explains how this is supposed to end the shortage on the housing market.
Steffen Sebastian holds the chair for real estate financing at the University of Regensburg and is deputy managing director of the Real Estate Business School Institute for Real Estate Management.
ntv.de: Mr. Sebastian, you caused a stir with your proposal: higher rents are intended to solve the housing shortage. How does that fit together?
Steffen Sebastian: If a price is very low due to state intervention, then more is consumed. This applies in principle to all goods. And that is precisely the phenomenon that we are observing in the rental housing market. Some of the leases are subsidized by the tenancy law regulation; the affected tenants “consume” more living space than others. This is also nothing new – this has been criticized by science for decades. We are observing this phenomenon internationally on all housing markets where the state is reducing rents. This is also referred to as “hoarding of living space”.
Which subsidies do you mean exactly?
Forbidding an owner to sell a good at the price he can get for it is, from an economic point of view, nothing more than a tax. This means that every landlord who, due to a legal regulation, cannot increase his existing rent to the price that he could achieve with a new rental is in fact subject to a tax. And every tenant who receives a reduced rent as a result receives a tax-free subsidy.
Why is it bad if people who live in their apartment for a long time pay less for their living space?
This system does not provide affordable housing. The tax-free subsidy is distributed arbitrarily to those who have lived in the apartment for a long time. It doesn’t look at whether they’re rich or poor, it’s evenly distributed to those lucky enough to have old leases. And that’s how it is with the landlords: They don’t have to pay this tax because they earn a lot, but because they are unlucky enough to have an old rental contract.
They say tenants in existing apartments are “hoarding living space.” Why is this a problem when people take up a lot of living space?
It wouldn’t be a problem if we had enough living space and if the whole thing wasn’t so expensive. But neither is the case. Living space is a scarce commodity, both ecologically and economically. Creating housing is very expensive and very harmful to the environment in several ways. Not only because of the CO₂ emissions, but also, for example, because of the floor sealing.
The federal government wants to build 400,000 new apartments per year in order to solve the housing crisis. So don’t we need them?
Based on the average living space that is available to us, there is actually no need to build new apartments – not even in the big cities. We don’t have a supply problem on the housing market, but a distribution problem.
How did this distribution problem come about?
The scarcity we are seeing in the housing market is homegrown. Part of the housing shortage was created in the first place by housing policy. There is no doubt that the housing market needs to be regulated. The market alone regulates very little. But the current misregulation does more harm than good.
What misregulation?
We have historically chosen not to protect low-income renters, but to protect low-rent renters.
You want to change that with your proposal. How?
We currently have a system of taxes and subsidies on millions of leases. But they are hidden. We want to replace this with a system that is transparent and linked to income. People who are not in need do not need subsidies. Subsidies need low-income people.
Can you explain your suggestion with an example?
Let’s take a person who lives in 50 square meters. She is currently paying 500 euros and her income is very low. But actually the apartment is worth 1000 euros. According to our reform proposal, she would pay this price, but receive 500 euros in housing benefit. In the end she pays the same, but now it is transparent what subsidy she gets. The landlord, who now earns more rent, then, conversely, also has to pay more taxes.
But that doesn’t solve the problem of the lack of housing.
Let’s take the example of a person who now lives in 100 square meters and pays 500 euros for it. Actually, the apartment is worth 1500 euros. Even if she can afford it from her income, she will think twice about whether a smaller apartment is not enough so that she has more money available for other expenses.
What if she can no longer afford the apartment?
In principle, after a reasonable period of time, as with all funding recipients, you will be asked to move to a smaller apartment. In cases of hardship, e.g. B. very old people, a higher subsidy is also conceivable in exceptional cases, so that the apartment can be retained. Comparable hardship regulations are already known in social law today. However, this would be an innovation in the Housing Benefit Act.
And how should the increased housing benefit be financed?
Instead of the previous unfair taxation, a landlord-soli is to be levied as a surcharge on the income tax for rental income. As is currently the case, this means that rent is redistributed from landlord to tenant, but fairly in accordance with economic capacity.
Is there still a need for tenant protection in your proposal?
In any case. Basically, German tenancy law is not as wrong as it is. On the contrary, it is even very good in an international comparison. We had previously found a good compromise here. But things have been going in the wrong direction for a number of years. We introduced the cap in 2001…
… which regulates by how much the landlord may increase the rent in an ongoing tenancy. In the tight housing market, this is currently 15 percent in three years …
… that was a big mistake because it only protects tenants with low rents. But why should those who have low costs be given special protection? Above all, those who have high costs need help! And even more precisely: actually, those who have a low income should be supported.
So you’re opposed to the coalition wanting to lower the cap to 11 percent?
This is exactly the wrong direction. I’ll say it again: we don’t need to protect low-rent tenants, we need to protect low-income tenants.
Clara Suchy spoke to Steffen Sebastian