Keeping the Bubble Alive! The Effects of Urban Renewal and Demolition Subsidies in the East German Housing Market

German urban renewal programs are favoring the cities in the Eastern part since the re-unification in 1990. This was accompanied additionally by attractive tax incentives, designed as an accelerated declining balance method of depreciation for housing investments during the late 1990s. The accumulated needs for comfortable housing after 40 years of a disastrous housing policy of the GDR era were generally accepted as justification for the subvention policy. But various subsidies and tax incentives caused a construction boom, false allocations, and a price bubble in Eastern Germany. After recognizing that the expansion of housing supply was not in line with the demographic development and that high vacancy rates were jeopardizing housing companies and their financial backers, policy changed in 2001. Up to now, the government provides demolition grants to reduce the vast oversupply. By means of a real option approach, it is ex-plained how different available forms of subsidies and economic incentives for landlords lift real estate values. The option value representing growth expectations and opportunities is calculated as an observable market value less an estimated fundamental value. Empirical results disclose higher option premiums for cities in Eastern Germany and a strong correlation of the option premium with urban renewal spending.real option, housing market, East Germany, urban renewal subsidies

What Happened to the East German Housing Market? – A Historical Perspective on the Role of Public Funding –

The paper analyses the development of the East German housing market after the reunification of the former German Democratic Republic and the Federal Republic of Germany in 1990. We analyse the dynamics of the East German housing market within the framework of the well-known stock-flow model, proposed by DiPasquale and Wheaton. We show that the today observable disequilibrium to a large extend is caused by post-unification housing policy and its strong fiscal incentives to invest into the housing stock. Moreover, in line with the stylized empirical facts, we show that ‘hidden reserves’ of the housing market were reactivated since the economy of East Germany became market organized. Since initial undersupply was overcome faster than politicians expected, the implemented fiscal stimuli were too strong. In contrast to the widespread opinion that outward migration caused the observable vacancies, this paper shows that not weakness of demand but supply side policies caused the observable disequilibrium.housing market transition, housing subsidies, housing supply, east germany

Doch keine Heuschrecken? - Kaum Flurschaden nach der Privatisierung kommunaler Wohnungen -

Der Beitrag untersucht die Auswirkungen der aus sozialen Gründen stark kritisierten Verkäufe kommunaler Wohnungen an private Investoren. Die Auswertung des Sozio-oekonomischen Panels von 1999 bis 2006 lässt keine gravierenden Auswirkungen der Privatisierung kommunaler Mietwohnungen auf die betroffenen Haushalte erkennen. Sie liefert insofern keine empirischen Argumente für die öffentlich geführte Kritik am Verkauf kommunaler Wohnungen. Die wesentlichen Ergebnisse aus dieser Stichprobe deuten auf moderate Miet- steigerungen und überdurchschnittliche Investitionstätigkeit nach der Privatisierung hin. Allerdings ist die Gesamtkostenbelastung für die Wohnung nach subjektiver Einschätzung der Haushalte bei den privatisierten Wohnungen angestiegen. Ein möglicher Grund für diese Entwicklung könnte die geringere Mobilität der Bewohner von kommunalen Wohnungen sein

Keeping the Bubble Alive! The Effects of Urban Renewal and Demolition Subsidies in the East German Housing Market

German urban renewal programs are favoring the cities in the Eastern part since the reunification in 1990. This was accompanied additionally by attractive tax incentives, designed as an accelerated declining balance method of depreciation for housing investments during the late 1990s. The accumulated needs for comfortable housing after 40 years of a disastrous housing policy of the GDR era were generally accepted as justification for the subvention policy. But various subsidies and tax incentives caused a construction boom, false allocations, and a price bubble in Eastern Germany. After recognizing that the expansion of housing supply was not in line with the demographic development and that high vacancy rates were jeopardizing housing companies and their financial backers, policy changed in 2001. Up to now, the government provides demolition grants to reduce the vast oversupply. By means of a real option approach, it is explained how different available forms of subsidies and economic incentives for landlords lift real estate values. The option value representing growth expectations and opportunities is calculated as an observable market value less an estimated fundamental value. Empirical results disclose higher option premiums for cities in Eastern Germany and a strong correlation of the option premium with urban renewal spending

Falsche Perspektiven durch die Subventionierung des Stadtumbaus? Realoptionstheoretische Überlegungen zum Handeln privater Grundeigentümer

Die Subventionen im „Stadtumbau Ost“ erreichen vor allem kommunale und genossenschaftliche Wohnungsgesellschaften, während die Instrumente auf private Eigentümer, die vor allem in innenstadtnahen und altbaugeprägten Quartieren Bestände halten, kaum zugeschnitten sind. Impulse für die Investitionstätigkeit dieser Gruppe werden eher von indirekten Effekten der Subventionen für Aufwertungs- und Rückbaumaßnahmen erwartet. Doch die Weiterentwicklung der innerstädtischen Wohnungsbestände stagniert. Der Beitrag erklärt mit einem optionstheoretischen Ansatz die Entscheidungen und das Investitionsverhalten privater Eigentümer. Die detaillierte Betrachtung ausgewählter realistischer Handlungsalternativen zeigt, dass Investitionen heute aktuell unterblei-ben, weil höhere Gewinne erst für die Zukunft erwartet werden. Die Maßnahmen im Stadtumbau führen selbst zu diesen größtenteils unrealistischen Erwartungen. Konsequenz dieser Überlegungen für die Stadtentwicklungspolitik ist, dass für die derzeit von ho-hem Leerstand betroffenen Grundstücke verbindliche Konzepte vorgeschlagen werden sollten, die nachfragegerecht und der Marktsituation angepasst sind. Diese Entwicklungsperspektive könnte durch eine Umwandlung der Rückbausubvention in eine Investitionszulage gefördert werden

Falsche Perspektiven durch die Subventionierung des Stadtumbaus? Realoptionstheoretische Überlegungen zum Handeln privater Grundeigentümer

The subsidies of the German urban renewal program “Stadtumbau Ost” are claimed mainly by communal and cooperative housing companies. The instruments do not fit very well for private proprietors that hold a great part of the older housing stock in central locations, for example in Wilhelminian style districts. Interim evaluation reports concerning the implementation of the “Stadtumbau” program show good results for big housing blocks, but constantly high vacancy rates in the inner city quarters. It becomes obvious that the political targets have not been achieved completely so far and that market forces limit the extensive restoration of historic buildings. The opportunities, economic incentives and the decisions of landlords and house owners will be analyzed with a real option approach. A detailed view considers the different available forms of subsidies, examining its power to affect real estate values and to initiate politically desired urban transformations. It can be shown that the current forms of subsidies fail to promote investment of private house owners because of rising value expectations. Downgrading the building zones to lower density might reduce unrealistic expectations that were identified as a hurdle to invest. As a consequence from this consideration, municipalities should implement alternative urban development concepts and adjust the subsidy policy.

Gefährdet der Stadtumbau Ost Altbaubestände und historische Innenstädte? Empirische Befunde für Sachsen

Different lobby groups that fear a discrimination of the old and historic housing stock with its cultural value recently challenged the success of the urban renewal program „Stadtumbau Ost“. To make the discussion about it more objective, the subsidies for deconstruction and for improvement of the program are examined for the Free State of Saxony. The descriptive empirical analysis shows that the deconstruction of old houses mainly took place in cities with a higher share of old houses. Insofar, the danger of a total loss of the old housing stock may be low. Considering the allocation of the improvement subsidies, it can be shown that areas with old housing do profit relatively more, but not so often like the prefabricated socialist residential areas of the former GDR. The development of the historic housing stock, an explicit goal of the program “Stadtumbau Ost”, has been carried out in a minor degree in favour to the goal of housing market-adjustment.

Doch keine Heuschrecken? - Kaum Flurschaden nach der Privatisierung kommunaler Wohnungen -

This contribution examines the consequences of sales of municipal flats to private investors, which have been criticised strongly for social reasons. An evaluation of the German Socio-Economic Panel Study (SOEP) from 1999 to 2006 reveals no serious consequences of the privatisation of municipal flats on the affected households. It cannot produce empirical evidence to foster arguments for the public criticism of the public housing sales. The essential results from this sample point to moderate rent increases and above-average investment activity after the privatisation. However, the analysis of the household´s sentiment whether the total expense load for the flat is adequate shows that tenants in privatised flats found their flat increasingly expensive. A possible reason for this development might be the lower mobility of the residents of municipal flats.

The improvement of housing conditions in post com-munist Germany - Market Mechanisms and Subsidy Impacts

The objective of this paper is to explain the mechanisms that have lead to the remarkable improvement of the East German Housing Market during transition after the political change in 1989 and the reunification of Germany in 1990. Theoretical analysis suggests, that housing policy of the former GDR did not maximize consumer`s utility. Socialistic housing and construction policy limited the welfare with and distorted construction costs and rent control. The reason for that was not alone a lack of quantity but also a lack of quality and diversity. Therefore we argue that diversification of quality and te-nure in the post communist era enhanced the welfare of consumers. We propose that welfare on the East German Housing market was significantly increased by creating a new variety of housing types and qualities which fits better with different preferences of the households. A filtering model predicts theoretically the observable trends of seg-mentation and the development of a higher diversity of housing market segments. But additionally to the transition a bunch of subsidies were set up during transition. There-fore the paper is focused on the interdependency between housing market subsidies, the supply cost function, the qualitative development of the housing stock and the choice of demand. Empirically we observe the change and qualitative improvement of housing conditions in East Germany during transition and quantitative effects like increased vacancy risk in a shifted hierarchy of housing qualities

Nachhaltigkeitsindikatoren für die stadtregionale Entwicklung

Prosperierende Großstadtregionen stehen vor erheblichen Herausforderungen. Steigende Flächennachfragenfür Wohnen, Arbeiten und Infrastruktur zulasten der Landwirtschaft erhöhen den Druck auf die RessourceLand. Die bisherige Siedlungsentwicklung und die je nach Szenario unterschiedliche expansive Fortsetzung von Landnutzungsänderungen haben einen Einfluss auf die Nachhaltigkeit. Die Auswirkungen sind u.a. in höheren Infrastrukturkosten, größeren Pendeldistanzen und dem Verlust von Kulturlandschaften vielfältig spürbar. Sie resultieren oft auch in funktionellen Störungen des Stoff- und Energiehaushalts und wirken somit sogar auf das Klima (Rienow et al 2018, 8). Das Ziel der Nachhaltigkeitsstrategie der Bundesregierung, die Inanspruchnahme neuer Flächen für Siedlungs- und Verkehrszwecke bis zum Jahr 2020 auf 30 ha pro Tag zu begrenzen wird aller Voraussicht nach verfehlt (Beckmann & Dosch 2018, 10). Ein Blick auf Satelitenbilder zeigt deutlich, wie die Siedlungsentwicklung insbesondere das Umland der großen Städte verändert. Diese Entwicklung hält an, insbesondere durch Zuwanderungen in diese prosperierenden Ballungsgebiete, die durch Jobs, Ausbildungsmöglichkeiten und vielfältige Kultur- und Freizeitangebote attraktiv sind. Überdurchschnittliches Bevölkerungs- und Siedlungswachstum wird auch für die Kölner Region, die Teil der dynamischen Rheinschiene ist, vorausgesagt. Nach den jüngsten Prognosen wächst die Bevölkerung in Kölnvon 2018 bis 2040 um 15,8% und im angrenzenden Rhein-Erft-Kreis um 6% (IT NRW 2019). Abbildung 1 zeigt die Veränderung der Landnutzung in Köln und dem angrenzenden Rhein-Erft-Kreis seit dem Jahr 1975. Neben der fortschreitenden Siedlungsentwicklung sind deutlich die Flächennutzungsänderungen durch den Braunkohlentagebau erkennbar. Der sich gegenwärtig abzeichnende Strukturwandel (geplanter Ausstieg ausder Braunkohle) wird im Zuge einer bevorstehenden Neuansiedlung alternativer Arbeitsplätze wiederrum eine veränderte Landnutzung zur Folge haben (vgl. Braunkohlenkommission 2019, 88f )