Lessons from Germany’s Shared Housing Models: Expanding Ownership Opportunities and Improving the Built Environment | How Housing Matters

Lessons from Germany’s Shared Housing Models: Expanding Ownership Opportunities and Improving the Built Environment

November 14, 2018  
 
 
 

by Kathryn Reynolds

In the United States, shared equity housing models, which expand homeownership access for low- and moderate-income households, have become increasingly popular, in part as a local response to home price and rent increases. These housing models typically take the form of community land trusts, cooperative housing, and other programs that help homebuyers bridge the affordability gap. Many localities, including Baltimore, Houston, and Washington, DC, have recently announced either community land trust or cooperative housing models to improve long-term affordability in target neighborhoods.

Germany has a robust market for cooperative housing, with 2,000 cooperative projects offering approximately 2.2 million units. While large companies offer the bulk of Germany’s cooperative housing, there have been many small cooperative projects motivated by grassroots efforts recently. The development of these small cooperative housing projects, and how German cities are providing incentives for them, can provide useful models for the United States.

Germany’s Project-Based Housing Cooperatives

Germany’s project-based housing cooperatives operate similarly to those in the United States. Typically, private firms, small organizations (similar to US nonprofit organizations), or self-formed groups of people establish a legally recognized organization and bylaws that govern the entity’s operation. The organization or group takes on low-interest financing to purchase, build, or renovate an existing building and, sometimes, contribute to the renovation directly. As in the United States, models can either place no limit on the equity that can be accrued by the residents or cap resident equity, thus preserving affordability when the unit is sold.

Though not all project-based cooperative projects are created with affordability as the main objective, they often provide societal benefits by offering multigenerational living (in which older residents age in place with younger residents), mixed-functional living quarters (in which people with disabilities can live independently and in an integrated setting), alternative to shelter for newly arrived immigrants, and an open-mindedness that attracts people from diverse backgrounds. German cities also recognize that small, cooperative housing projects provide indirect benefits, including

  • revitalization of empty or underused building stock;
  • provision of ownership of housing to groups often underserved by traditional financial markets; and
  • improvement in the stability and quality of affordable housing because residents own a share in the building and must be committed to the project to see it to fruition.

Innovative City-Led Programs and Policies

Germany’s long history with cooperative housing and its large number of projects have enabled cities to develop the following innovative policies that further illustrate potential benefits of cooperative housing.

Munich: Cooperative housing as an antidote to gentrification. Munich has experienced the greatest demand for housing and increase in housing prices in the country, in large part because of young professionals’ migration into the city and European Union citizens seeking jobs in this economic powerhouse. To protect its citizens from increasing housing costs, the city released a 2012–16 “Housing Offensive” and a 2017–21 Housing in Munich VI strategy. As part of both strategies, the city offered 20 to 40 percent of city-owned land at reduced prices to cooperative housing groups. The city stated that it viewed cooperative housing groups as important partners because of their interest in creating permanently affordable housing that fit into the fabric of existing neighborhoods. In addition to inexpensive land, cooperative housing projects that enumerated goals in line with the overall Munich housing and development strategy could receive additional benefits, such as reduced borrowing costs.

Leipzig: Cooperative housing as a tool for city revitalization. As part of former East Germany, much of Leipzig’s downtown housing stock was neglected between World War II and reunification in 1989. In the 1990s, most of the population was attracted to new housing stock being built on the city’s outskirts or to West Germany in search of new employment. The building stock left in the urban core was largely blighted and uninhabitable. Since the 1990s, Leipzig has slowly revitalized, beginning with the historic city center and moving outward into surrounding neighborhoods. This revitalization occurred mainly because of private investments, which received a tax reduction for this purpose. But about one-third of buildings remained difficult to refurbish for various reasons, including locations along main traffic roads and in neglected areas with low-quality public and green spaces.

A key part of the revitalization strategy for these difficult-to-finance properties has been the use of new, smaller, and project-oriented cooperative housing models. To make such projects easier to initiate and finance, several nonprofit organizations worked with the city to help interested residents obtain clear titles to properties or contact abandoned-building owners in the hopes of obtaining agreements for their reuse. Today, much of Leipzig has revitalized, and it is proportionally one of Germany’s fastest-growing cities. Because of high demand for housing and land, the city and all organizations involved in the reuse of blighted housing stock have formed one umbrella organization, Netzwerk Leipziger Freiheit, to bring investors to potential cooperative projects quickly and advise promising projects to obtain as much financing as possible.

Citywide incubators. Many large German cities offer city-run incubators for the creation of cooperative and shared housing models. In Leipzig, the Netzwerk Leipziger Freiheit provides free consultation, connection with similar projects, access to and information about available financial grants, and financial consulting for people interested in such a project. Incubators can also promote cooperative housing to a specific segment of the population, specifically one that is vulnerable or in need of more affordable housing options. For example, Berlin provides a consulting service for families and seniors interested in setting up multigenerational cohousing for aging in place called Netzwerkagentur Generationenwohnen, or Network for Multigenerational Living. The network is an intermediary between potential residents, owners, and city administration and provides access to peer learning from other such projects as well as facilitation in the projects’ founding. In 2010, the Faculty of Spatial Planning at Dortmund University found that 26 German municipalities supported cohousing projects, with support ranging from a website to more comprehensive approaches such as the provision of special funding or city-owned land.

Access to homeownership has been a rite of passage in the United States for many generations but is increasingly more difficult to achieve, particularly for middle- and low-income people. In particular, the traditional single-family home on a suburban plot is not meeting the current interests and needs of many people and is out of reach for others. In addition to affordability, midsized density can retain livability while creating the agglomeration benefits needed in the information age. Richard Florida in his new book, The New Urban Crisis, states that midsized housing in cities and suburbs is key to expanding high-density working and living spaces—an important driver of future economic development. New forms of cooperative housing, and city policies to provide incentives for them, should be another tool in the affordable housing toolbox to alleviate income inequality, increase diversity in neighborhoods, accommodate an aging population, and improve the built environment in cities and suburbs. Cooperative housing is one housing policy ripe for transatlantic exchange.

Photo by Wavebreak Media/Shutterstock

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