100 years ago, the so-called house interest tax was introduced in the Weimar Republic. This could stimulate new construction again today.
Money was only given if standards were met: Schillerpark settlement in Wedding Photo: Markus Schreiber
BERLIN taz | War refugees, inflation, housing shortages and hardly any construction activity: poor conditions that make it difficult to provide housing in Berlin already existed in the 1920s. So it is not surprising that today there is once again discussion about an instrument that was used to finance new housing construction 100 years ago.
Going back to the idea ofSchöneberg City Councillor for Construction Martin Wagner In 1924, the house interest tax was introduced in the Free State of Prussia. With the exception of Württemberg, all states of the Weimar Republic later introduced such a tax, which had to be paid on rental income. The tax was then partly invested in promoting public housing.
On the one hand, skimming off profits, on the other hand, providing money for urgently needed new construction: Given the lack of housing construction and the high profits that are often made from rent today, such a tax seems to some to be an attractive all-purpose weapon.
Even in the Weimar Republic, the House interest tax a reaction to the dramatic housing shortage. Tens of thousands of people squatted in basement apartments. Individual rooms in already overcrowded apartments were sublet to entire families. The “sleeper-walkers” who emerged during industrialization and rented a room for just a few hours were also part of everyday life in Berlin in the 1920s. It was not just those returning from the war who had to be accommodated, the numerous refugees and the large number of immigrants to Berlin also posed challenges to the housing supply.
The house interest tax was also a reaction to hyperinflation. While this affected ordinary workers in particular and food prices exploded overnight, property owners profited from the inflation. Mortgages were easy to pay off during hyperinflation and houses were paid off in a very short time.
Housing associations are created
The house interest tax was intended to compensate for this debt relief. What was saved in interest on the one hand was now to be paid to the state in the form of a tax. Over time, the revenue flowed more and more into the general budget, but part of it was made available as a low-interest mortgage for non-profit housing construction.
From 1924 onwards, numerous housing associations were founded. Among them was the Loved (which today belongs to Deutsche Wohnen), which was Horseshoe settlementthe Waldsiedlung Zehlendorf and the Papageiensiedlung were built with the help of funds from the house interest tax, the iconic settlements of the “New Building” style.
In the years before the global economic crisis, an average of over 25,000 apartments were built in Berlin each year with the help of state subsidies. Even then, these new building numbers did not meet demand, but are far from what we are seeing today.
Wouldn’t it be fair and reasonable to use this model to skim off rental income to build urgently needed housing? Stefan Bach and Claus Michelsen from German Institute for Economic Research Berlin (DIW) had already made such a proposal in 2021.
They had calculated that rent tax would be up to 30 percent for rents that were above the local comparative rent. They calculated that this could mean an additional 200 million euros in tax revenue per year for Berlin. They received approval from the tenants’ association, individual voices from the SPD, and the Greens and the Left.
Dirk Löhr, a tax expert at the University of Trier, is skeptical. “The idea of promoting new construction and taxing real estate more heavily is not a bad idea in principle. But the devil is in the details,” he told taz. There are several legal obstacles to such a property interest tax.
Löhr also doubts the general effect. A subsidy offensive could indeed reduce the financing costs for new construction. “But then there is a risk that land prices will continue to rise as a reaction,” he says. In the end, the question remains as to who will really pay the tax. “If such a tax were to burden existing housing, then it is likely that the costs would be passed on to the tenants, as was the case with the historic house interest tax.”
In the Weimar Republic, too, the tenants of old buildings ultimately bore the burden of the tax through their rent. The rent tax was thus more like a solidarity contribution that the tenants of cheap old buildings made for new public housing.
Nevertheless, the historic house interest tax of 1924 represents a time when the state first recognized housing construction as a public task. The fact that such an instrument sometimes seems attractive again 100 years later may also be due to the fact that some people have the feeling that the state is no longer adequately fulfilling this public task.
