Privatization, Financialization and State Restructuring in Eastern Germany: The case of Am südpark

Abstract

Using a mix of survey data, results from a study on local planning politics and fieldwork, this article discusses the interplay of planning and welfare policies with global financial markets in the 'making' of social segregation in Halle-Neustadt, a borough in the German city of Halle (Saale). Here, different developments come together. First, Halle-Neustadt has experienced two waves of privatization, leading to a complete change of ownership structures, marked by the rise of financial investors. Second, welfare cuts have put increasing pressure on welfare recipients to live in the cheapest housing available. This has led to the emergence of a 'Hartz IV business model' based on low, but state-subsidized, rents. Third, new planning policies have led to a massive drop in house prices, thus facilitating the use of 'leverage' strategies for financial investors. We expand on an already developed debate, providing new insights about relations between planning, state restructuring and financialization in a German context. We demonstrate that a broad array of changes in national regulatory settings, policy change in different sectors and local particularities can all be crucial in enabling financialization. We conclude that research should place greater emphasis on the state in providing explanations and take differences in context more seriously.

The Financialisation of Rental Housing 2.0: Releasing Housing into the Privatised Mainstream of Capital Accumulation

“…Although it was not the goal of the German government to facilitate these investors, their entry into the German housing market is the contingent outcome of state restructuring, welfare reforms and housing privatisation that created new state–market relations (Bernt et al. ). The first international investors that entered the German housing market were US‐ and UK‐based private equity and hedge funds (Aalbers and Holm ; Kaiser ; Voigtländer ).…”

“…For instance, Bernt et al. () have shown how private equity funds can make money through receiving state‐subsidised rents to house unemployed welfare recipients. Providing that a housing shortage prevails and interest rates remain low, private equity funds can make money on this so‐called “Hartz IV‐model” as they offer low‐cost and often low‐maintained housing units to this target group (see also Müller ).…”

“…By describing the shift from financialisation 1.0 to 2.0, this paper adds to the literature on the financialisation of rental housing (Aalbers ; Bernt et al. ; Beswick et al. ; Fields and Uffer ; Soederberg ; Wijburg and Aalbers ) but also contributes real‐world examples to the literature that argues that real estate increasingly is managed as an object of investment (Coakley ; Lizieri and Pain ; Van Loon and Aalbers ) and more generally to the a strand of the financialisation literature that argues that profit‐making occurs increasingly through financial channels rather than through trade and commodity production (Krippner ).…”

“…Second, they seek to enhance the net value of the portfolio, for instance through focusing on core investment strategies, stimulating gentrification effects through modernisations and refurbishments, “gaming” rental regulations and teaming up with local authorities to coordinate neighbourhood development (Bernt et al. ; Beswick et al. ).…”

“…On the one hand, there are several urban case studies which have highlighted how former decommodified housing portfolios have been sold to financial investors (Bernt et al. ; Beswick et al. ; Fields and Uffer ; García‐Lamarca ; Teresa ) .…”