Housing situation and housing policy in east Germany

This paper assesses the poor physical state and supply of housing in east Germany at the time of unification and discusses the fundamental transformation of the eastern state‐controlled housing regime to the western, heavily regulated market system. It discusses in detail the inherited problems of physical fabric, housing organisation debt and disputed ownership title. The housing policy regime instituted granted very favourable tax reliefs to investors in real estate, and so created the construction boom, which kick‐started the east German economy. It also instituted a phased adjustment of the extremely low east German rents to the western system and level, with the express objective of attracting investment to modernise the run‐down stock. As the counterpart to the partial alleviation of the inherited debts of the housing associations, privatisation targets were set for rented property, but the Zwischenerwerber model has had to be instituted given the limited interest in the east in owner‐occupation of older apartments and Plattenbau dwellings. The effect of housing allowances in moderating very large rent rises is assessed. Finally, the paper speculates on the potential impact in the east of the housing policy changes planned under the Kohl government in 1997/98.