Berliners are angry with housing. And much of Europe too
(Bloomberg) – During the deep recession of Covid in Europe, millions of jobs were lost, income and livelihoods were destroyed and many feared for their financial futures. Housing has taken a different path.
A boom in house prices has widened the wedge between the haves and have-nots, fueled anger over housing inequalities and accusations that property markets are broken, dysfunctional and unfair. While some have benefited from the rise in values, many are faced with high rents, substandard buildings or soaring prices that prevent home ownership.
In Berlin last week, the frustration escalated. Voters backed a sweeping proposal to nationalize large landlords, an attempt to control rents and resolve a housing crisis in the city. “We Berliners are no longer prepared to finance the profits of big companies with our excessive rents,” said Jenny Stupka of the group behind the referendum.
The housing divide is often divided according to generations, with young people excluded from the market. The uneven economic fallout from the coronavirus pandemic has further exposed the gap. As well-paid white-collar workers took refuge in their home offices, many of those in lower-paying jobs who were already struggling lost their jobs and incomes. At the same time, house prices rose faster than inflation in the 27 countries of the European Union in 2020, a trend that had not been observed for at least two decades.
Since 2010, prices in the euro zone have jumped by more than 30%. Rents have gone up 15% over the same period, putting additional financial pressure on many. The IMF, the International Monetary Fund, has warned that this is a “worrying trend” of growing inequality.
Across the continent, stories of buyers, tenants and other wannabes capture the frustration.
In Berlin, the capital’s once cheap rental market was turned upside down earlier this year when the German Constitutional Court overturned a law that had set a cap. This decision sparked protests as well as the recent referendum aimed at forcibly buying properties from large landlords. Despite the outcome, it is not clear whether the local government will follow the plan, which could lead to lengthy legal battles.
Marie Sakellariou, a 35-year-old single mother living in Berlin’s Neukoelln district, is among those directly affected by the end of the rent cap. Originally from Paris, she moved six years for work. Initially, she says, the move gave her a level of financial freedom that she would never have had at home.
But in April, her rent increased by 300 euros a night. She considered swapping out her 3 bedroom apartment for a smaller one to save money, but that wouldn’t have made much of a difference, so she stayed.
In Germany, where almost 50% of households are renters, the average person spends just over a quarter of their disposable income on housing. Sakellariou now spends almost half on rent – at the expense of some food and her son’s swimming and music lessons.
“Capitalism has failed so many of us,” she said. “Even I, with a good, middle-income job, am struggling, and there are many who are even worse off than me.”
Living at home
Younger people are particularly vulnerable to precarious living conditions, often being trapped in low-paying temporary jobs and less likely than the previous generation to live at home.
Greece, where unemployment still exceeds 15%, is an extreme example, with over 62% of 25-34 year olds living with their parents.
Those who move often have to shell out pennies to survive. Average housing costs are around 40% of disposable income, double the EU average, and 37% are behind on mortgage, rent or utility bills.
Nelly Sotiriou, 36, still lives with her parents near Piraeus, the country’s main port. Health reasons recently forced her to quit a “relatively well-paid” job that earned her up to 1,100 euros per month. It was not enough, however, to afford decent housing. A house with new windows, nice floors and no mold on the walls would have cost 500-600 euros.
For the moment, Sotiriou is looking for a new job, but finally knows that moving is not an option financially, even if living at home comes at a price.
“I have limited choices when it comes to inviting people and the things I can do into the house,” she said. “But I’d rather stay here than live alone just to pay my rent and groceries and not be able to go out or travel.”
- Soaring housing inequality is now a global political fault line
- Global property price boom becomes a dilemma for central banks
Across the continent, Ireland faces its own housing crisis, as well as the long-term scars of its 2008 housing crash.
Homeownership has fallen below 70%, down from nearly 82% at one point during the Celtic Tiger years. A housing shortage is fueling a further spike in prices, and higher rents mean tenants are spending more of their income, making it difficult to save for a down payment.
Carly Bailey, a member of the South Dublin Local Council, and her husband are renting out their house and are unlikely to ever be able to buy again. They struggled to pay off a mortgage around 2010 and worked with their lender until they sold their debt to a fund that bought bad loans.
With their mortgage underwater, the Baileys agreed with their bank to sell their house, with the understanding that they would not sue the couple for the remaining arrears. The fund thought differently and ultimately Bailey filed for bankruptcy in 2018.
“I would have preferred never to have the house at all, than to have a mortgage, to have our own house, to invest so much in it and to lose it,” she said.
The expert opinion:
- BLOOMBERG ECONOMICS analysis shows housing markets present 2008-style bubble warnings, fueling warnings of financial imbalances and worsening inequalities
- The BANK FOR INTERNATIONAL SETTLEMENTS warned in its annual report that house prices have risen more sharply during the pandemic than fundamentals suggest, increasing the sector’s vulnerability if borrowing costs rise.
- The EUROPEAN CENTRAL BANK will begin to consider the costs of owner-occupied housing when assessing inflation in the 19 eurozone countries, as a sign of the upward pressure on prices. Its global peers have been criticized for fueling the risk of a real estate bubble.
Below average conditions
Affordability is only part of the housing story in some countries.
In Romania, one of the poorest countries in the bloc, overcrowding and inadequate heating are just two examples of the difficulties some people face. What is most surprising, however, is that 14 years after joining the bloc, one in five Romanians still does not have a toilet, bath or shower in their home. (Lithuania is second in the rankings with just under 9%.)
Mariana Nastase and her husband Marian have been waiting for years for the sewage system to reach their home in Ulmeni, a village near the Danube about 40 miles southeast of Bucharest. They inherited the place from Marian’s parents when they passed away last year. Without it, they couldn’t get by.
Together, they earn around 800 euros per month and have two dependent adolescents. They are in arrears on a loan they took out for repairs.
“We don’t have a chance to have a better life here. My husband and I work every day and we barely manage from month to month, ”said Mariana. “We considered leaving the country for better wages, but we couldn’t leave our parents and children behind. “
House prices have increased all over the EU except Spain, Cyprus and Italy since the start of 2010. At 130%, Estonia recorded the most astounding increase.
Lauri Kool, 35 years old communications consultant in Tallinn, is a winner in the real estate game. He grew up in a Khrushchevka – a low-cost, Communist-style housing project that had only cold water, a toilet in the kitchen, and 30 square meters (322.92 square feet) for his family of four. .
He was a teenager when the Soviet Union collapsed in 1991, and in his mid-thirties when he bought his first T2 on the outskirts of the capital for 42,000 euros ($ 49,239) in 2013.
He has since traded twice, making a profit of over 60% this spring before moving into a three-bedroom apartment at 176,000 euros in a booming residential area near the city center.
He stays where he is, for now.
“Every homebuyer has probably thought the last purchase was the last – same to me,” he said. But again – if the neighborhood develops as planned with restaurants, a park and access to public transportation, “then it would also be possible to earn enough money from this sale to consider another change of housing.”
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