Frankfurt The announcement is short and clear. “In the fight against displacement, municipalities need functioning instruments,” said State Secretary Cansel Kiziltepe from the Federal Ministry of Building a few days ago. The government therefore wants to quickly find a solution to grant municipalities a right of first refusal to protect tenants.
But as strong as the announcement is, it is questionable whether it will be implemented. Because resistance is now forming in numerous groups.
Actually, the government announcements – building minister Clara Geywitz (SPD) shares the plans of her state secretary – sound like the comeback of an old idea. In recent years, the right of first refusal has been a popular tool for municipalities and cities to intervene in the housing market.
In Berlin alone, the districts had acquired 576 apartments with the right of first refusal in 2020 – usually in favor of a municipal housing association or a non-profit cooperative.
But Munich had recently pre-purchased real estate more often than ever before in the past 20 years. In addition, numerous buyers could be persuaded to sign a waiver agreement using the leverage of the right of first refusal. In it, they undertake, for example, to refrain from luxury renovations or the conversion of rental apartments into condominiums.
It was only last November that the Federal Administrative Court overturned the practice in many large cities of intervening in the sale of land or houses in environmental protection areas and buying them yourself. The court ruled that one should not assume that the other buyer could oust the tenants.
Since then, the tenants’ associations in particular have been drumming up a new start. “A watertight and practicable right of first refusal in the building code is essential to protect tenants from being forced out by selling their apartment buildings to profit-oriented investors,” said the President of the German Tenants’ Association, Lukas Siebenkotten, just a few days ago.
Associations are against it
There are signs of resistance from several associations in the real estate industry. “It would really be fatal to grant a right of first refusal based solely on the assumption that the buyer is greedy for profit, ignores tenant protection and will not behave in accordance with the law,” warns Jürgen Michael Schick, President of the German Real Estate Association IVD. “Such stigma drives an even greater wedge between landlords and tenants.”
The current tenancy law provisions and specifications in conservation areas are so narrow that there is no possibility of displacement. Rent increases up to the local comparative rent are hardly possible due to the cap limits, which are to be lowered again according to the coalition agreement.
“Modification of the municipal right of first refusal in milieu protection areas to cases that are not based on urban development appears arbitrary and an excessive intervention in the market,” criticizes Andreas Mattner, President of the real estate association Central Real Estate Committee (ZIA). What would be right, on the other hand, would be to speed up the approval and planning procedures. “Many companies are reporting an enormous backlog and are waiting for their permits.” This is where politics must start in order to achieve the goal of 400,000 new apartments.
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“Pre-emption rights can be part of the strategy where this makes sense,” says Axel Gedaschko, President of the Central Association of the Housing Industry GdW. However, the problem cannot be solved with pre-emption rights or tightening of tenancy law alone – as the past few years have shown. In view of the high property or rising construction and energy costs, the rent would be at the end of the price chain. “Politics must therefore start earlier,” demands Gedaschko. The main goal must be the expansion of the supply of affordable housing through more and cheaper housing.
FDP is against rapid change
The plans of the Ministry of Construction do not meet with approval everywhere, even in the traffic light coalition. Daniel Föst, building policy spokesman for the FDP parliamentary group, is against a quick change. “In the coalition agreement on the right of first refusal, we stated that we would first examine the effects of the BGH ruling,” he told the Handelsblatt Inside Real Estate newsletter. “However, this examination has not yet been completed, which is why it is too early to press ahead with concrete laws now.
He first wants to take a thorough look at various rental policy instruments: “Which measures really work, where are there other ways to do it better?” he said. “If we look at the total amount that Munich or Berlin, for example, invest in the right of first refusal, then I have doubts as to whether the euro is really the best investment there.”
The chairwoman of the building committee in the Bundestag, Sandra Weeser, also considers the plans to reorganize the municipal right of first refusal on the housing market to be rushed. First of all, the traffic light government must examine what scientifically proven advantages such a regulation has for the citizens, said the FDP politician recently. In the coalition agreement, the SPD, the Greens and the FDP only gave each other a test assignment.
Real estate expert Thomas Beyerle, professor of real estate economics and real estate research at Biberach University, believes, however, that the effect of the right of first refusal on the market is overestimated. “Since the right of first refusal only entitles you to enter into the contract of a third party as a buyer, the right of first refusal does not result in an impairment, but this circumstance can extend the time of due diligence,” says the expert. That is why investors would not let themselves be deterred, especially with larger portfolios, “because if the tenant exercises the option, the minimum price will be realized.”
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