Housing for Locusts

Selling out the common good for the short-term gain of private investors is a common practice in the United States. And that is exactly what has happened now in Dresden:

"Mr. Rossberg reached a deal in March to sell Dresden’s entire stock of 48,000 city-owned apartments to an American private equity firm, the Fortress Investment Group, for $1.2 billion. In a single stroke, Dresden wiped out its burdensome public debt."

"Foreign private equity investors, mostly American and British, have already spent $25 billion since 2003 on apartments owned by German cities and companies. With the owners hungry to raise even more money, analysts forecast that 750,000 additional units will be sold over the next five years."

The interests of the public in providing affordable housing cannot be reconciled with the profit motivations of hedge funds. In many US cities like New York and San Francisco there is an accute shortage of affordable housing, forcing renters to move far from the urban centers.  What happened here could also happen to the citizens of Dresden. The investors behind Fortress and the other hedge funds will need to show a return – which means they will have to raise rents and convert the appartmerts to condominiums. The economist Albrecht Müller warns about this disturbing sell-off in Die NachDenkSeiten:

  Wir stehen gerade am Anfang einer gigantischen Verramschung dieser gemein-nützigen Wohn-einheiten an dubiose Geldanlagekonsortien, vornehmlich aus den USA und Großbritannien. Die Städte sind klamm und verkaufen ihr Hab und Gut. Privatisierte Unternehmen wie die Deutsche Bahn AG wollen durch Verkauf ihrer Betriebswohnungen an liquide Mittel kommen. Internationale Fonds und Kapitalgesellschaften mit martialisch klingenden Namen wie Cerberus, Blackstone, Fortress (=Festung), Lone Star und Annington kaufen massenweise deutsche »Wohnungspakete«. Diese Firmen vertreten allein die Gewinninteressen ihrer diversen Geldanleger. Die sozial schwachen Mieter sind jetzt sogenannten REITs (Real Estate Investment Trusts) ausgeliefert. […)Der kurzfristige Liquiditätsgewinn der Kommunen durch Wohnungsverkäufe wird sie langfristig teuer zu stehen kommen: denn die durch Mieterhöhungen geschaffenen Wohnungslosen müssen irgendwo wieder untergebracht werden. Letztlich darf die Solidargemeinschaft der Steuerzahler dafür aufkommen

I agree with Albrecht Müller that the last thing Wall Street is interested in is The Common Good. On the other hand, I am puzzled by the economics of the deal.  The demographics in eastern Germany would seem to work against it.  The New York Times article mentions that much of the capital behind Fotress Investment Group – the hedge fund that purchased the Dresden properties – comes from state pension funds in the US.  So, in the end both the residents of Dresden and the pensioners in the US could be the losers in this deal.  The only winners are the hedge fund managers – a.k.a. the Locusts (Heuschrecken).

Heuschrecken