(de-news.net) – A disagreement over ambitions in Berlin to transfer significant residential buildings into public ownership would intensify with the planned, Investment Protection Act at the federal level tightening the standards for socializing huge private housing portfolios. While the Federal Government pursues separate reforms to lower construction costs, SPD MPs in the German capital object to the Investment Protection Act on constitutional grounds. In a parallel development, although they support the suggested Building Type E plan to foster more homebuilding, the Greens contend that more extensive steps are required to increase home affordability.

German Interior Minister Alexander Dobrindt (CSU) has proposed an Investment Protection Act that would significantly raise the legal barriers to socializing large private housing portfolios. Developed following an agreement between the CDU/CSU and the SPD at national scale, the initiative seeks to restrict state-level expropriation measures by establishing stricter requirements for demonstrating necessity and determining compensation.

Under the proposal, socialization would be permitted only if compelling necessity could be demonstrated and all reasonable alternatives, including new housing construction and subsidies, had been exhausted without achieving the intended results. Compensation would have to be paid directly in cash and reflect the property’s full market value, established through an independent appraisal. Dobrindt maintains that the legislation would prevent arbitrary measures that conflict with Germany’s Basic Law, placing additional legal conditions on efforts to transfer private property into public ownership.

Federal response due to Berlin housing plans

The proposal comes amid coalition negotiations in Berlin, where the SPD, Greens and Left Party are considering the socialization of large private housing portfolios following a public referendum supporting the initiative. Their plans target private companies with more than 10,000 apartments in the capital. Eligible companies would retain their first 10,000 apartments, while cooperatives, public-interest housing providers and properties built or scheduled for construction after Jan. 1, 2021, would be exempt.

The proposed measures could transfer approximately 160,000 apartments into public ownership, with compensation costs capped at an estimated 16 billion euros, potentially below the properties’ combined market value. Article 15 of Germany’s Basic Law provides the constitutional foundation for the initiative, permitting land and other productive assets to be transferred into public ownership under legislation specifying the nature and extent of compensation. Whether the proposal can be implemented in practice, however, remains disputed.

Luigi Pantisano, a co-chair of the Left Party, argues that the Federal Government is prioritizing shareholders of major property companies, particularly Vonovia, over Berlin’s tenants. He maintains that voters have repeatedly supported socialization and contends that Dobrindt’s proposed legislation would not withstand constitutional review. Pantisano has called on the federal SPD to clarify whether it stands with large investors or tenants.

Pantisano also argues that rental income should support property maintenance and, particularly in cooperatives, the construction of additional housing rather than primarily generate profits for investors. Citing reports of tenants living in mold-affected apartments while Vonovia distributes dividends, Pantisano has criticized the company’s approach to housing. Beyond residential property, he has advocated extending socialization to essential services, including water, energy and transportation.

Housing affordability remains central to Berlin talks

Elif Eralp, the Left Party’s parliamentary leader in Berlin, has identified housing affordability as a leading priority in coalition negotiations. The party supports an ambitious construction program, a rent cap for publicly owned apartments and progress toward socializing large private housing portfolios. The broader objective is to combine affordable housing with social and environmental priorities.

The proposed federal legislation has also prompted constitutional concerns within the SPD. Hakan Demir, the party’s housing-law rapporteur and a member of the Bundestag’s legal and interior affairs committees, argues that Dobrindt should pursue a constitutional amendment if he intends to prevent socialization measures at the state level. Such an amendment would require a two-thirds parliamentary majority, which Demir considers unattainable under the current political circumstances.

Demir questions the constitutional basis for requiring compensation exclusively at full market value and restricting socialization to situations in which all alternatives have failed. He notes that Article 15 does not explicitly prescribe either condition. In his assessment, the proposed restrictions could therefore exceed the authority available to the Federal Government under existing constitutional provisions. Demir warns that using federal concurrent legislative powers to exclude state lawmakers from regulating socialization could conflict with Federal Constitutional Court precedent. He believes affected states would have grounds to challenge the legislation, particularly if its principal purpose were to prevent state-level lawmaking rather than establish a valid federal regulatory framework.

Constitutional law scholar Ulrich Battis has raised similar concerns about the proposed limitation of compensation to market value. He argues that imposing such a restriction could unduly narrow the discretion permitted under constitutional law. Although Battis considers requirements for direct cash payments and proof of necessity more defensible, he emphasizes that the fundamental question of whether socialization is permissible under the circumstances remains unresolved.

Building Type E: CDU raises concerns over legal risks

Alongside the debate over property socialization, the Federal Government is pursuing separate reforms intended to make housing construction less expensive. A draft bill from the SPD-led Justice Ministry would introduce the voluntary Building Type E model, allowing parties to agree to lower standards for certain nonessential features, including sound insulation and electronic equipment. Pilot projects suggest that the approach could reduce construction costs by 10 percent to 15 percent while helping projects proceed more quickly.

The proposed changes to construction contract law would preserve mandatory requirements concerning fire safety, structural stability and natural lighting. Simplified standards would apply only when the parties expressly agreed to them; otherwise, existing requirements would remain in force. The reform seeks to address legal uncertainty that has discouraged builders from departing from established technical standards because of concerns about potential litigation.

Jan-Marco Luczak, the CDU’s construction-policy spokesman, has questioned whether the draft adequately addresses the legal implications of agreeing to lower construction standards. His concerns include disclosure obligations, documentation requirements and potential liability risks. He has called for these issues to receive detailed scrutiny during the parliamentary legislative process. The draft is being circulated to Germany’s federal states and relevant associations, which may submit comments through 13 November. Their responses will form part of the review of the proposed changes before the legislative process advances.

The Greens have welcomed the Building Type E proposal but argue that regulatory simplification alone will not resolve Germany’s construction-cost crisis. Kassem Taher Saleh, the party’s housing and construction-policy spokesman, supports greater flexibility in building standards while advocating broader measures to address structural cost drivers, particularly speculative land prices.

Saleh also cautions that the reform’s practical effects will take time to emerge. Its success will depend on whether departures from recognized technical standards can be implemented with sufficient legal certainty and whether the simplified requirements can also facilitate renovations of existing buildings. The debate thus highlights two related challenges for German housing policy: making construction more affordable and determining the constitutional limits of transferring private residential property into public ownership.