Legal fight brewing over Berlin's plan to seize housing from large landlords

A renewed push in Berlin to strip large property companies of thousands of apartments is colliding with a competing effort in the federal capital to block such moves through new legislation, reviving a years-long dispute over what Germany's constitution actually permits.

The debate has gained urgency as polls point to a growing likelihood that Berlin's next state government will be a coalition of the Social Democrats, the Greens and the Left party, all of which have shown sympathy for transferring housing stock from major corporations into public or collective ownership. In response, the federal government is working on an investment protection law intended to make such a transfer harder to carry out. Legal scholars say both the city's socialization plans and Berlin's countermeasure face serious constitutional questions.

At the center of the argument is Article 15 of Germany's Basic Law, which allows land and natural resources to be transferred into common ownership or other forms of collective economic management through legislation that also sets out compensation terms. The provision has never been applied since the constitution took effect, leaving courts with almost no precedent to draw on and legal experts divided over how it should be read.

Thorsten Schmidt, a professor of law at the University of Potsdam, said any law seeking to socialize housing would still have to satisfy the constitutional principle of proportionality. That means the measure would need to serve a legitimate aim and be suitable, necessary and appropriate for achieving it. In Schmidt's assessment, Berlin's proposed takeover of apartments from large landlords would not meet that bar, partly because less drastic options exist for expanding affordable housing. He noted, however, that it remains legally contested whether Article 15 is even subject to a proportionality test in the first place.

Schmidt also pointed to Berlin's own state constitution as a separate obstacle. Like the federal Basic Law, the city's constitution contains a clause protecting property rights, he said, but it includes no equivalent to Article 15 permitting socialization. As a result, he argued, property enjoys broader protection under Berlin's constitution than it does nationally.

That raises the question of which legal framework would prevail. Under the Basic Law's general rule, federal law overrides state law. There is an exception, though: provisions in a state constitution that guarantee fundamental rights remain valid even where they go further than the federal charter. Schmidt said this allows a state constitution to offer stronger rights protection than the Basic Law, adding, "It therefore seems very doubtful to me whether socialization can happen in Berlin at all."

A different conclusion was reached in 2023 by an expert commission appointed by the Berlin Senate to examine the issue. A majority of the panel's 13 members, including former federal justice minister Herta Däubler-Gmelin and law professor Ann-Katrin Kaufhold, who now serves as vice president of the Federal Constitutional Court, found that socializing large housing companies in Berlin would be fundamentally permissible.

Wolfgang Durner, a law professor at the University of Bonn who also sat on the commission, said any such step would only be lawful if affected companies received appropriate compensation. Expropriations are typically compensated at market value, he said, though lawmakers can in principle set compensation below that level. According to Durner, the more a property's increased value stems from a company's own investment and effort, the closer compensation must come to market value.

Applied to Berlin, that principle raises the question of whether housing companies themselves generated the rise in value of their property holdings or whether it resulted mainly from external factors such as the broader housing market. Durner warned that if the Federal Constitutional Court were ultimately to approve a completed socialization but find the compensation offered too low, ordering it to be brought closer to market value, the city of Berlin would likely face additional costs reaching tens of billions of euros.