Berlin’s Renters Want to Show Landlords the Door

Berlin’s tenants are trying to evict large landlords. On Sept. 26, voters in Germany’s capital will decide whether to expropriate any landlord that owns more than 3,000 properties in the city, the Wall Street Journal reported. A clause in the German constitution allows for the move, but it hasn’t been tested before. It would affect real-estate investment trusts including Deutsche Wohnen DWNI 0.04% —which owns 116,000 properties in Berlin and is currently the target of an €18 billion takeover bid, equivalent to roughly $21 billion at current exchange rates—and its suitor Vonovia. Berliners are angry about rising rents so there is a chance the vote will pass. The likelihood of the properties actually being confiscated is slim. The referendum isn’t binding and landlords would need to be compensated to the tune of €36 billion for the 240,000 units likely to be affected, Berlin authorities estimate, which would push the city deep into debt. But the tensions may force politicians to tighten rules in Germany’s already highly regulated rental sector, hitting returns in one of investors’ favorite residential property markets. Steady rent growth and increasing home prices have made German housing stocks a good bet in recent years. Deutsche Wohnen, Vonovia and LEG Immobilien have delivered annual shareholder returns of 17% to 20% over the past decade. The stock prices have been weak ahead of the vote, though, and imply an 8% fall in asset values, according to UBS real-estate analyst Charles Boissier. Read more. (Subscription required.)