It’s even Worse … On the ZIA / IW Real Estate Policy Survey

Published on 2013/06/25
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It is a laudable thing for the IW Economic Institute in Cologne to undertake a comparison of the elections manifestos of Christian Democrats, Liberals, Social Democrats and Greens in regard to real estate issues on behalf of the ZIA German Property Federation.

I could not agree more with the overall tenor of the survey. The demands raised by Social Democrats and Greens imply a hefty burden for landlords as well as for the real estate industry in general, and will exacerbate housing shortage issues rather than alleviating them.

In truth, though, the portents are even worse than the survey suggests. It seems that the latest statements by Chancellor Angela Merkel and other leading Christian Democrats on the subject of “rent control” were not added to the survey until the very last moment. The survey summarises the core statement by the Christian Democrats as follows: “Open for rent pricing of new leases” (which probably refers to the rent control issue).

The survey is quite right when stating: “International examples document impressively what sort of ramification this (regulating the rent of new leases, R.Z) may have […] At the same time, many small-scale private landlords are pulling out, permanently weakening the rental markets and precipitating far-reaching consequences.”

The survey is also quite right to slam the ramifications of the reintroduction of the net worth tax demanded by Social Democrats and Greens.

Other aspects, however, are sadly missing from the survey, such as:

  • General social security: The real estate industry underestimates the issue of the proposed general social security for all (“Bürgerversicherung”), and has yet to comprehend what it will mean for landlords. The innocuous term hides the fact that landlords, too, will have to pay into the distressed social security system.
  • Rise in income tax: This is another scheme that will have disastrous consequences for property owners, because it will burden income from letting and leasing with a top tax bracket of more than 50% – with the net worth tax and the levies for the general social security insurance to be added.

So it would be a good idea to expand the laudable survey. Another good idea would be to do a specimen calculation to match the landlords’ burden as contemplated by political parties with an actual figure.

About the Author

Dr. Rainer Zitelmann is one of the leading experts for the strategic positioning and communications of companies.