The core of the conversation with Prof Dr Ramón Sotelo is uncomfortably clear:
It is not „too much market“, but incorrect regulation that is the main reason why housing in cities like Berlin is scarce and incorrectly distributed. In particular, rent indexes, rent controls and misappropriation laws create false incentives that prevent people from moving, block space and slow down investment.
In the 69th Berliner Immobiliengespräch, Achim Amann and Prof Dr Ramón Sotelo discuss how market mechanisms, politics and regulation influence each other - and what needs to happen to ensure that more flats are built where they are needed.
Below are the most important points along the chapter structure of the interview.
02:24 - Briefly to Prof Sotelo
Prof Dr Ramón Sotelo was born in Berlin, renovated his first flat as a student in the 1980s, lived in it himself and later sold it - he used the proceeds to buy his first apartment building.
His profile is characterised by three levels:
Practice: Many years of experience as an investor and player in the Berlin property market since reunification.
Science: Studied at the Free University of Berlin, doctorate, honorary professorship at the Bauhaus University Weimar.
International focus: Long-term stays in Spain, intensive involvement in international research networks (e.g. European Real Estate Society).
Important: Ramón Sotelo expressly sees himself as someone who combines both worlds - academic research and hard market reality. It is precisely from this dual perspective that he criticises current housing policy.
06:52 - Situation in practice: policy measures vs. reality on the market
From a practical perspective, Achim Amann begins by describing the status quo in Berlin:
Tenants cannot find a flat, even if they are solvent.
Tenants no longer move, even if the flat does not (or no longer) suit the stage of life - because the existing rent is extremely favourable and every new letting is significantly more expensive.
Property developers no longer calculate projects, This is because construction and financing costs are too high and political pressure and regulation are making calculations even more difficult.
Ramón Sotelo categorises this:
Economists agree on the Microeconomics (and therefore on housing market issues). The idea that the laws of supply and demand can be overruled by „opinion“ is more of a political phenomenon than a scientific one.
His diagnosis:
In the public debate The dominant narrative is „it's the market's fault“.
In the scientific debate In contrast, there is a broad consensus that poorly implemented interventions in pricing and supply expansion exacerbate the shortage instead of eliminating it.
Politics follows majorities, not truth - that is one of his central statements. This hits a nerve with many market participants who are currently experiencing how well-intentioned interventions stabilise rather than solve housing shortages.
10:34 - Spain example: frozen rents, motives & lessons for Germany
In order to show that rent regulation is not a „left-wing idea“, but above all a populist instrument, Ramón Sotelo leads Spain:
Under Franco, the Rents frozen in 1964 - not out of socialist conviction, but to gain approval in the short term and at the same time increase the ownership rate.
Years later, a socialist government introduced new, market-orientated rental legislation that was roughly based on German tenancy law.
The lesson learnt:
Rent regulation is No left-wing or right-wing project, but a populist tool.
The decisive factor is not the label, but the Regulatory qualityDoes an instrument serve the functional allocation of living space - or the stabilisation of a narrative?
For Germany, this means
Anyone discussing rent caps, rent controls or frozen rents should ask first, what incentives these instruments - for tenants, landlords and investors.
20:30 - Existing vs. new lettings: Delta, „more regulation“ narrative“
A central point of the conversation: the Delta between existing and new letting rents.
In Berlin, the New lettings rents partly 50-100 % above the existing rents.
This delta ensures that tenants can keep their affordable flats hold on, even if they no longer fit - and that others don't even get a chance.
The political reaction to this is often:
„If new letting rents are so high, we need even more regulation.“
Ramón Sotelo reverses the logic:
If rent indices correctly reflected the shortage, the delta between existing and new rents would be smaller.
The market could then use prices to ensure that land ends up where it is really needed.
The rent brake is only necessary because the rent indexes are constructed incorrectly.
In other words:
The problem is not so much „too much market“, but rather a manipulated or incomplete market picture, which is then to be repaired with more and more emergency instruments (brake, cover, etc.).
30:47 - Allocation without a market? Distribution problems & disincentives in the portfolio
Ramón Sotelo is very clear here:
A modern, complex national economy can Do not allocate living space politically, without creating massive efficiency and equity problems.
His thought experiment:
Let's imagine that the whole of Berlin is „set to zero“, everyone moves out, everything is distributed by the state.
Who will get the flat on Kollwitzplatz, who on Ku'damm, who in Reinickendorf, who the five-room flat, who the two-room flat?
Every occupational group would seem to have „good reasons“: carers, police, professors, start-up entrepreneurs, pensioners, etc.
Without pricing, all that remains is political allocation - and thus a system of permanent privileges, waiting times, relationships and a lack of transparency.
The result of today's regulation:
Hoarding of existing flats at favourable prices,
Overconsumption of living space (e.g. singles in 4-room flats),
Blocked mobility: Professional, family and social changes no longer lead to relocations because the financial loss would be too great.
Ramón Sotelo refers to studies from Stockholm and Zurich:
There, large deltas between existing and new letting rents mean that existing tenants pay an average of around 15 % more space than they would consume in a functioning market. Applied to Berlin, this means
A significant proportion of the existing flats would be Theoretically free, if the incentives were set differently.
35:14 - Separate three pots: Object promotion, subject promotion, occupancy rights
A core proposal of the dialogue: Separation instead of mixing.
In Germany today, everything is often mixed into one product:
Object promotion (cheap construction through subsidies),
Rent control (favourable rents),
Occupancy rights (who may move in).
Ramón Sotelo argues in favour of the clear separation of three „pots“:
Object promotion (expansion of supply)
Objective: more flats in certain segments (e.g. family-friendly 4- and 5-room flats).
Instrument: One-off grants or low-interest loans for developers to create certain types of housing.
Subject support (housing benefit & co.)
Objective: People with lower incomes should be able to afford market rents.
Instrument: Housing benefit directly to households, not to properties. This maintains incentives and fluctuation on the market.
Occupancy rights
Objective: Particularly disadvantaged groups (e.g. single parents, refugees) are given access to housing that they would otherwise not have.
Instrument: The public sector buys occupancy rights on the market - for a limited period of time and subject to conditions (e.g. income, household size).
Important:
As soon as households exceed their income limits or their living situation improves, the special rights and subsidies are cancelled. This creates incentives to release space again and does not permanently block flats.
39:20 - Rethinking the rent index: incorporating fictitious fluctuation rates
Ramón Sotelo's criticism of the current rent index system is fundamental:
In Berlin, rent indexes form a closed portfolio that is barely mixed through new lettings from.
Existing rents in particular are included, while rents for new lettings have hardly any weight given low fluctuation.
This does not reflect the real shortage - and the rent index cements a distorted picture.
His suggestion:
Fictitious fluctuation rates into the rent index - e.g. 7 % per year - even if they are currently empirically lower.
This would mean that new lettings rents would be systematically included to a greater extent in the calculation,
and landlords could participate at least partially in the market development, as envisaged in principle by the Federal Constitutional Court.
This would return the rent index to what it should be:
A reflection of scarcity and market conditions - not a politically driven price stabilisation instrument.
43:35 - Tax lever: abolish property tax, shift to land tax (argumentation)
One of Ramón Sotelo's most „radical“ proposals is of a fiscal nature:
Abolish property transfer tax,
the missing revenue entirely to the Shifting property tax.
The logic behind it:
Real estate transfer tax is a Transaction tax, which inhibits mobility and makes changes of ownership more expensive.
Property tax is a Inventory tax, which occurs regularly and distorts land utilisation less.
Consequences:
The purchase and sale of property would become more favourable,
Relocations and stock adjustments (e.g. from too large to suitable) would be facilitated,
the allocation of living space would become more dynamic.
Even if property tax rises significantly, Ramón Sotelo believes this makes more sense from a regulatory point of view than „nailing people down“ with high ancillary purchase costs.
52:43 - Supply & urban development: allotment gardens, „faster building“/building turbo law
When it comes to supply, things get very specific:
Areas such as the Tempelhofer Feld or large Allotment sites with underground railway connection would be classic development sites from an economic point of view.
In Berlin, the allotment garden areas exceed the size of the Tiergarten many times over.
Ramón Sotelo criticises:
The political refusal to seriously discuss such areas for housing is an expression of a conscious scarcity policy.
At the same time, construction turbo and fast-track building laws give the impression that the aim is to massively expand supply - but in reality, central areas remain off-limits.
His assessment of fast-track construction and building turbo laws:
You go to the right direction, because procedures are accelerated.
But they will overestimated, because the central transmission belt - the price mechanism - is damaged by rent regulation.
In addition, new paragraphs (e.g. Section 246e) create scope for municipal arbitrariness and „deals“ with project developers, which do not always lead to good results in terms of urban planning.
58:43 - Conclusion: misappropriation, obsolete planning law, conclusion & outlook
In the final block, Ramón Sotelo focuses his criticism on three points:
Right of misappropriation
Property developers who complete flats but do not rent or sell them immediately due to market uncertainty quickly come into conflict with the law on misappropriation.
From his point of view, this is absurd: those who produce new buildings are „penalised“ if distribution does not run at the politically desired speed.
Outdated planning law
Many old development plans (e.g. from 1958) are effectively obsolete, but are used to block owners (e.g. for loft conversions).
Instead of systematically streamlining these plans, traditional regulations are being adhered to.
Political logic instead of securing housing
His suspicion: housing shortages are sometimes „needed“ politically in order to bind voter groups and play on conflict issues.
A truly consistent supply, tax and subsidy policy would defuse many of these conflicts - and thus also take the political pressure off the issue.
Conclusion by Ramón Sotelo:
In the Stock we clearly need More market and less price regulation.
With Promotion and social issues we need smarter state, which makes a clear distinction between object promotion, subject promotion and occupancy rights.
In the Urban development we have to be honest: Anyone who permanently withdraws certain areas from development is making a conscious decision in favour of scarcity - and against falling rents.
What does this mean for owners, landlords and prospective buyers?
Some practical conclusions can be drawn from the conversation:
The current shortage is not natural, but the result of decisions - especially in tenancy law, tax law and construction planning.
Anyone investing in residential property today is operating in a highly regulated political environment that may change significantly in the medium term - both in the direction of further intervention and liberalisation.
Owners and landlords should Rent index, misappropriation law and subsidy instruments very precisely so as not to lose money where opportunities actually lie.
You can watch the full interview with Prof Dr Ramón Sotelo below or on our YouTube channel. This summary can only touch on the depth of the arguments - so it's worth watching the original 60 minutes.
