Housing Story

 It's a business story and a housing story.....told by Focus this morning.

Apparently, two mega-giants in the German housing business (Vonovia and Deutsche Wohnen)....are about to merge.

What it amounts to?  Half-a-million apartments across Germany.

The key issue.....if this moves fully ahead?  Well....expropriation.

To explain expropriation?  Around Germany.....thirty years ago....a fair number of urban centers operated 'state-housing' (public housing), and the rent was controlled.  A good example of this today is public housing around Vienna.

In the 1980s....the West German federal government gave a path for cities to slide out of the 'business' and let commercial companies run housing situations.

What we can generally say over the past twenty years....housing (apartment) prices have escalated, and it's hard to find adequate apartment situations in places like Berlin, Frankfurt, or Hamburg.  To be honest, there's probably over forty urbanized areas of Germany where housing is a top-problem.

So there's talk of expropriation....you'd do the paperwork with a judge signing off, and using German law to just grab private housing to become a city or public utility type situation.  The Constitution actually allows for this type of situation....but it's never been pushed to this limit.

If you go around Berlin, I would take a guess that more than one-third of the city is thrilled over the idea, and want the property 'grabbed'.

What happens after the grab?  Legal minds say that you have to compensate the owner for the property.  So an apartment complex worth 100-million Euro?  There's probably an assessment and some judge signing off on the value, and then the city/state would pay the previous owner.  

Do the cities or states even have the money for such a grab?  Well....NO.  This part of the discussion is best done with a bottle or two of Rum, and a six-pack of soda.  The city or state would have to go to banks and borrow the money....owing them some fantastic debt, and increase taxes in some way to run a housing situation, which can't involve the previous levels of rent.  Yes, all of this in the end would mean less cost to the renter, but increased taxation (to cover the act of exportation.

Do the two companies worry about the potential of a grab?  I don't think so.  In their mind....someone has to cough up a fair amount of money, and in the end....there's no loss (unless you are talking about tax-payers somewhere in the middle of this).

As the two merge....somewhere in the management side of the new company....there's going to be cutbacks in personnel, and more profit down the line.  Stocks bumping up today?  Probably so.