Differences in patterns of home ownership in the New and the Old Federal States

Contents

List of Abbreviations

1 Approach

2 The situation after the Second World War
2.1 The hour zero
2.2 The division of Germany

3 Different developments
3.1 Housing politics in the GDR
3.2 Housing politics in the FRG

4 Changes after the reunification
4.1 Steps to the reunification
4.2 Problems during the transition to market economy
4.3 Privatisation of residential property in the New Federal States

5 Patterns in home ownership in 2002

6 Conclusion

References

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List of Abbreviations

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1 Approach

This paper shows an overview of the differences in patterns of home – ownership between the New and the Old Federal States in Germany. To find reasons for these differences we have to consider the situation after the Second World War in 1945 and the development of the GDR and the FRG under occupation. The economical situation of these two states was strongly influenced by the political attitudes of the Soviet Union and the USA. For that reason it had to develop in different directions inevitably. The reunification of Germany in 1990 caused a lot of changes especially in home ownership in the former GDR, which will also be presented in the following paper. Finally statistical data concerning the owner occupied housing will characterize the current situation.

2 The situation after the Second World War

2.1 The hour zero

Immediately after World War II all people had to cope with equal living conditions. Nearly everybody was placed under disability; nearly everybody was hungry, poor and worried about its future. The end of the war meant a crash in all parts of live. Money had lost its importance and economy corresponded to the stage of Stone Age.^[1] Nearly every city was destroyed. About 7,000,000 Germans died during the Second World War. Millions of Germans were still in other countries and millions of refugees and people from the Soviet occupation zone hiked towards the west. This period was characterized by serious housing shortage, so the survivors had to live in cellars as well as in damaged buildings.^[2] To control this situation the immigration was made more difficult. People were relocated to the country by threat of withdrawal of food stamps and the right of residence.^[3]

2.2 The division of Germany

After the winners of the Second World War – Soviet Union, USA, France and Great Britain – occupied the defeated Germany, they divided it into four zones of occupation to weaken it. Nevertheless it was intended that Germany should remain an economical and political unity. However, the Soviet Union wanted to transform their occupied zone into a communist state. They dismantled large fabrics to satisfy their reparation claims and changed the economical patterns to create a central controlled economy. In contrast, the USA, France and Great Britain supported West Germany to build a democratic state. In 1947 the American as well as the British occupation zone created a uniform economic area, in which the French occupation zone joined in 1949. The USA offered to Germany and other anticommunism countries economical aid. The Soviet Union, however, rejected the offer, but permitted every country, which were controlled by them, to accept. In 1948 the western zones implemented a currency reform to improve the economical situation. The currency reform in the Soviet occupation zone missed this aim. On 23rd May 1949 the constitution of the FRG was passed. As a reaction to this the GDR was founded on 7th October 1949 thus the division of Germany was conducted.^[4]

3 Different developments

3.1 Housing politics in the GDR

The GDR consisted of the today’s Federal States Saxony, Thuringia, Saxony – Anhalt, Mecklenburg – Western Pomerania, Brandenburg and Berlin – East. During the first years after the Second World War it was governed by the SMAD that enforced an economical -, an administrative – and a political reorganization as well as a cultural change according to the Soviet system. Already in 1945 the SMAD arranged for the agrarian reform, which meant about 7,000 owners of land bigger than 100 ha were dispossessed without compensation. Dispossessions in industry, retail as well as in trade followed. The land was distributed to 500,000 people and the communities. Due to the fact that farmers got less than 20 ha of a plot of land, they were not capable to farm profitably. For this reason several farmers amalgamate to the first LPG in 1972.^[5]

During the period of socialism there existed two types of home ownership. The first one is the socialist property, which could be divided into the following three subtypes: the national property, the cooperative property and the social organisations’ ownership. The second type is called individual property, that consists of personal ownership for own needs and private ownership for renting. The latter one was government controlled in order to prevent exorbitant rents and real estate speculations.

The required amount of housing was also regulated by government; consequently it was not dependent on demand. The rent was fixed by the government to guarantee payable living space for all classes of people. The distribution of living space and the building activity were also government controlled. However, the socialist principles did not apply to private home owners, who were confronted with a disadvantage due to the utilization of indirect instruments; building materials for example were hardly available. Therefore the private homebuilding decreased from 61 % in 1950 to 5 % in 1968. Only in 1971 private homebuilding was encouraged for workers and families with three or more children by interest – free loans and the renunciation of land taxes. In 1973 all people were allowed to utilize the advantage of these offers. However, private homebuilding was limited to 10 – 15 % a year of all construction volume, thus the wait for a building permission was very long. Loans with simple payments were also available for the modernization, the upkeep and the purchase of homes, which required a license. With these measures the state homebuilding should be unloaded, because about 80 % of the fabric of a building were damaged and an increasing number of homes were uninhabitable. Financial reasons such as capital investment were shut out. Not surprisingly, private homeownership decreased from 62 % in 1971 to 41 % in 1989. This concerned multi – family housing mainly, because private homeowners were not supported by the government in upkeep and management. Additionally, it was impossible to recover the cost by the rents, because they were kept low artificially by government. Therefore many private homeowners gave their houses to the state, due to the fact that they could not afford to maintain it under these circumstances.

Three important facts influenced the supply of living space: the destroyed and damaged buildings after the Second World War, the obsolescence of the buildings and the increasing of one – person – households in the 1970s an the 1980s. The decrease in population unloaded this difficult situation.^[6]

3.2 Housing politics in the FRG

In the western occupied zones the allied had all governmental power, which did not include the housing politics from begin on. The American placed their occupied zones in charge of the legislation in housing already in 1945. Furthermore there was initiated an agrarian reform. With this reform residential area for the refuges and local population should be created. Large landownership should be split up. Furthermore the landed property of the NSDAP should be handed over to non – profit corporations. Actually these plans failed because the American run the reform not serious enough, the administration delayed the carrying out and the landowner used all appeals that were possible. The British did not transfer much responsibility to the people of the area later known as North Rhine – Westphalia, Hamburg, Schleswig – Holstein and Lower Saxony. In 1947 there were passed the agrarian reform, but the carrying out went very slowly and the results were not satisfying. In the French occupied zone the people got more responsibilities in 1948. The landownership was dispossessed only slightly. The German population accepted these measures reluctant and refusing.

The influence of the political parties on housing politics improved in importance little by little. The allied insisted on their authority in housing, they intended to prevent that the German administration spread over the zones. However, after the foundation of the FRG the parties were able to develop their work in housing politics. The plans of all parties had a lot in common. They required mass housing construction with help of public subsidies to create numerous and cheap residences, but no temporary accommoda – tions. Therefore the interests should be kept low. Besides, the parties claimed for industrialization of building, for standardization and for batch production. Of course there were also differences between the parties. The SPD wanted to enforce the rental apartment building, low rents and fair distribution. The investment should not serve for profit maximization but for cost recovery. The CDU / CSU however considered the home building as solution for the lack of housing, in their opinion rental apartments were an accommodation for the mass of demand. The FDP suggested to relax the management and to grant tax relief to boost the private initiative. As a result the rich people would be favoured and this would have lead to social differences. Surely this would have caused resistances among the population.^[7]

[...]

^[1] See Jaenecke, Heinrich, Stunde Null, 2002

^[2] See von Sternburg, Wilhelm, Geschichte, 2005, p. 254 – 255

^[3] See Schulz, Günther, Wiederaufbau, 1994, p. 45 – 111

^[4] See Gros, Jürgen; Glaab, Manuela, Deutschland, 1999, p. 7 – 34

^[5] See Weber, Hermann, DDR, 2000, p. 3 – 14

^[6] See Berendt, Ulrike, Wohnung, 1995, p. 15 – 173

^[7] See Schulz, Günther, Wiederaufbau, 1994, p. 45 – 111