Berlin has a housing shortage, and its proposed solution is to punish the people who supply housing.
On the heels of a major electoral victory in Germany’s largest city, the democratic socialist party Die Linke and its potential coalition are discussing “nationalizing” (read: seizing) the assets of landlords who own more than 10,000 apartments. This housing raid would put roughly 150,000 homes under the government’s control — about seven percent of Berlin’s housing supply — in what would no doubt be a doomed effort to curb rising rents.
Luckily, German Chancellor Friedrich Merz is pushing back. On Tuesday, he warned against “experimenting” with property rights. “Protecting property and trust in a functioning market,” Merz said, is “the basis of our market economy.”
Merz is right to lambast the plan, which would cripple the capital’s housing market. Investors won’t want to build more apartments if socialists might snatch them up. Property rights, after all, are the foundation on which all investment depends. Developers risk capital to build apartments today because they expect to make back their money — and, with luck, more — over several years. Adding insult to injury, the Berlin socialists are proposing to spend 16 billion euros ($17.97 billion), or 100,000 euros ($112,000) per apartment, to acquire the properties. That is far below fair-market value.
Rents in Berlin have nearly doubled since 2014, but much of the increase can be explained by an expanding cocktail of regulations. More housing, built by the private sector, is the best way to reduce rents. In a free market, higher rents attract developers seeking profits. New apartments get built. Landlords compete for tenants. And the additional supply puts downward pressure on rents.
But politicians keep messing with every link in that chain. Berlin already tried rent control in 2020, and it was a disaster. One study found that the reduction in housing supply was five times as large as the reduction in rents. Germany’s Constitutional Court struck down the law in 2021.
When rents are not allowed to rise to market rates, apartments are rationed through waiting, connections, lotteries and luck. Existing tenants reap the rewards, but young people and families trying to move bear the costs.
There are countless examples: Catalonia, in northeastern Spain, imposed rent controls in 2024, and the supply of rental housing in Barcelona dropped 23 percent within a year. In St. Paul, Minnesota, rent controls caused housebuilding permits to drop by nearly 80 percent — and rents actually increased more than in Minneapolis, just across the Mississippi River, which did not impose controls.
It’s fitting that Merz criticized the proposal at the inaugural “Invest in Germany Summit.” The country’s gross domestic product grew a meager 0.2 percent last year, when adjusted for inflation, and the chancellor is trying to end a painful period of stagnation. During the Cold War, Berliners saw firsthand the stark contrast in living standards between West and East. They should understand as well as anyone that socialism is a recipe for shortages.
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