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Looking for short-term rental flats in Berlin on Airbnb. (Photo: Know Nothing Enquirer) 

Berlin's Zweckentfremdungsverbot

The new law with the long name might change Europe's big city housing crisis. Yet Berlin is different from other major Western European cities. Rents are relatively affordable, even though this might be changing dramatically. In addition to the 40,000 people that move to Berlin on average every year, the city welcomed more than 50,000 asylum seekers and refugees in 2015. Rents rose by 56% between 2009 and 2014. What will this new law change?

by the Know Nothing Enquirer    04/05/2016

Berlin is a popular tourist destination. 2015 almost 12.5m tourists visited the city - with nearly 40% coming from abroad. Tourist arrivals have been increasing by over 4% yearly in the last decade and will most likely continue to grow as the city is becoming more attractive. On 1 May over 20,000 flats in the city that are rented out via online platforms, such as Airbnb, Wimdu or 9Flats, have become illegal. Renting flats to tourist has become a lucrative business for property owners. Its cheaper than staying in a hotel for tourists. And landlords can charge a lot more than the typical €10 (£8) per square metre per month in Berlin.

 

Tourists staying at an Airbnb flat are not only hurting the hotel industry (that is highly regulated and has high fixed costs) but also increase the rent for Berliners. Since most tourists stay in the trendy neighbourhoods, such as Kreuzberg, Prenzlauer Berg or Mitte, where rents are already very high and gentrification has been a major issue for a long time, calls for the city administration to act have become more vocal. Further, compared to other European countries, Germans are more likely to rent than to own property. Hence the city saw itself forced to act in drastic ways. Landlords that violate the new law will be fined up to €100,000 (£80,000). Renting out single rooms will still be allowed if the landlord lives in the flat. All other landlords will have to apply for special permits to rent their flats to tourists. 

 

According to estimates, over 60% of the entries on Airbnb before 1 May are now illegal. Even though the company has already deleted many of the entries, there are still many online that do not mention any special tourist licence. 9Flats, a German-based competitor of Airbnb, has already previously reacted to the announcement of the law by moving its headquarter from Berlin to Hamburg. The CEO of the start-up, Roman Bach, claims that the new law favours foreign based companies, as they will be more likely to avoid the fines. It took the company, that was founded in 2010, five years to become profitable and now Bach says the law will ruin his business, calling it "bankruptcy by law". In order to avoid the fines, he has decided to move yet again. However, this time not within Germany or the EU but to Singapore. 

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The online form to report violating neighbours on the website of the Berlin city council. (Photo: Berlin.de/KNE)

But what would a new law be without a scandal? To find illegally rented out flats the city is not only relying on their own research. The Berlin SPD faction sent out letters with postcards to all households in the borough of Fridrichshain-Kreuzberg. People who believe their neighbours are illegally renting out a flat can report them on the included postcard. Reporters can send the postcards (postage is obviously paid by the city council) without mentioning any details about themselves. Further, those who report their neighbours without any reasonable doubt - in case they even mention their details - do not have to face legal consequences. A practice that sounds strangely similar to the system of informal collaborators in former East Germany.  

Of course, Berlin is not the first city to introduce legislation to regulate companies such as Airbnb. New York City forced Airbnb to cooperate more closely with the city administration to make its listings more transparent. A proposed council bill would also introduce high fines for those in violation of the city and state laws. According to New York City's short-term leasing law, renting out entire flats or houses is extremely restricted and only permitted in special circumstances. 

 

The drastic actions of Berlin and New York City show that the business model of Airbnb and its competitors is a major concern. The housing markets of the major metropolises are extremely tense and are not showing signs of getting any better. Affordable housing is becoming more scarce. Middle class families are forced to move further away from city centres to afford appropriate housing. Airbnb flats are certainly not helping the problem. Yet it cannot be the only solution to merely increase supply through banning Airbnb flats in cities to keep housing affordable. There are many other examples of prime property in big European cities being used inefficiently. Incentives have to be created to build more affordable housing in central locations as well as limiting increases in rent and housing prices.