Berlin’s expropriation push moves closer to reality

Berlin’s expropriation debate has shifted from abstraction to executable law. The "Deutsche Wohnen & Co enteignen" initiative has released a detailed draft to socialise about 220,000 apartments from the city’s largest private landlords. Four years after 59% of voters supported the idea in a referendum, activists have delivered a bill that is legally coherent, procedurally actionable and already reshaping investor risk assessments.

The core of the proposal is a compensation model that breaks with market practice. Affected landlords, roughly ten to eleven companies, would receive 40% to 60% of market value. The valuation is based on a modified land-value formula that excludes most price gains since 2013. Total compensation would fall between €8 billion and €18 billion. Instead of cash, owners would receive 100-year bonds at 3.5%, financed through rental income rather than the city budget. For landlords accustomed to IFRS valuations and normal asset yields, the implied write-downs are substantial.

December’s expert hearing introduced a new angle: banks might also be in line to take losses. Economist Michael Voigtländer (IW) noted that in several cases the proposed compensation is lower than the outstanding debt on the relevant portfolios. Vonovia’s Berlin holdings, booked at €22 billion with €11 billion of debt, would under the draft be compensated at only €7 billion. The Left’s argument that lenders knowingly financed “speculative models” and must therefore bear part of the consequences did little to calm concerns.

Opponents warned that socialisation would damage Berlin’s credibility with capital. “Capital is mobile and goes where there is legal certainty,” said BFW regional chairman Michael Kranz, arguing that the plan would erode trust, raise borrowing costs and slow development pipelines. Voigtländer added that financing costs for the city itself could rise in unrelated areas if investors perceive a broader shift in political risk.

Political divisions sharpen as Berlin pushes ahead

The initiative’s representatives defended the draft in equally clear terms. “Our city is not an investment product,” said spokesperson Armin Rothemann, insisting the law is self-financing, socially necessary and legally sound. He rejected the idea that new construction alone would ease rents, arguing that stabilisation would require vacancy rates far beyond anything Berlin would accept. The initiative maintains that it supports new build but sees socialisation as essential to correcting market failure.

Politically, the Senate remains divided. The Left and Greens backed a motion to advance the draft. The SPD, CDU and AfD opposed it. The government’s own framework law is behind schedule and widely viewed as a procedural diversion. A new legal opinion claiming Berlin lacks constitutional authority was disputed by constitutional lawyer Isabel Feichtner, who argued that Article 15 of the Basic Law already provides the necessary mandate and that state-level constraints cannot override it.

SPD frontrunner Steffen Krach has taken a more decisive stance. He called the expropriation debate “fatal”, warning that Berlin cannot meet its 20,000-unit annual construction target without private investors. He has proposed tough enforcement measures against abusive landlords, including limits on furnished lets, stricter rent supervision and action against illegal subletting, but rejects asset seizures outright.

The initiative, however, is no longer waiting for parliament. It will complete consultation, begin collecting signatures in 2026 and push for a 2027 referendum. If the proposal passes, the law would enter into force immediately. This would trigger constitutional litigation over competence and civil litigation over compensation. Multi-year uncertainty would follow.

For institutional capital, the deeper significance lies in the template Berlin has now placed on the table. The city is prepared to legislate large-scale socialisation at 40% to 60% of market value, financed through century-long bonds. It is also willing to draw major landlords into a constitutional experiment that could take years to resolve. Whether or not the courts ultimately uphold the law, this willingness alone alters Berlin’s political risk profile and forces investors to rethink valuations, refinancing assumptions and exit strategies. Banks face exposure if compensation falls below outstanding debt, and the referendum path ensures prolonged uncertainty.

Set against the industry’s message at the Housing Industry Day (which we report on in this issue) where the focus was on rebuilding supply and restoring investor confidence, Berlin’s course points in the opposite direction. The result is a widening gap between a national push to fix the housing system and a city willing to test its limits.