Leipzig or Hypezig?- Housing and Recovery

The city of Leipzig is an interesting case study in rapid population decline, slow steady growth and change/maturation of the housing market.   Leipzig as a city is becoming a sexy trend in many magazines and newspapers that claim it is now the place where people should be moving.  Many citizens believe the press is nothing more than hype leading to the catchphrase “Hypezig”.  The overall attractiveness and future of the city can be debated but what is certain is the city plan.   The city laid out in several plans the focus of the housing market for the future for Leipzig.  Included was:

• The creation of a wide array of housing styles to meet the demand of multiple consumers.
• The improvement of existing housing through renovation and modernization with a special focus on energy efficiency.
• The guarantee of a sufficient number of affordable housing units.
• An active building politic with a focus on the construction of new buildings inside the city center.
• Looking at all fields of housing improvement by taking into account infrastructure, historic preservation, city planning and the resident’s point of view.

One most examine the population movement before looking at the housing situation.  Leipzig’s population is a fascinating 25 year study in itself.  Shortly after the fall of the Berlin Wall, the population substantially decreased.  The reasons are complicated but a massive loss of industry and the freedom to go west were main factors.  Leipzig lost 40,000 industrial jobs within a few years of the wall coming down and that was nothing compared to the next couple decades.  In total Leipzig went from a city with over 100,000 industrial jobs down to one that is around 15,000 currently.

Before the wall came down, Leipzig stood at around 530,000 people.  By 1998 the city slipped to around 440,000 citizens.  Despite the negative job loss and population loss, Leipzig is at present time a city of growth.  In fact, Leipzig is seeing some of the strongest growth in all of Germany.  In 2014, the city grew by in between 9,000 to 12,500 people.  That is more than double the amount of growth that occurred in the year 2010.  It is clear that the city is a place where people want to live and that the immigration away from the area may be over.   In total, the city is around 551,871 persons by city count and 543,244 by census count.  What is remarkably positive for the city is where the growth is occurring.  The age group of 18-35 is a major portion of the population growing in the city.  The number of refugees is small compared to other groups coming to the city.  Below is a detailed chart showing the growth of the population over the last decade.

Year	Population
2004	496,491
2005	502.651
2006	506.578
2007	510.512
2008	515.469
2009	518.862
2010	522.883
2011	510.043
2012	520.838
2013	531.562
2014	543.244
2015	NA

Development of Vacancies:

Like many cities of the former German Democratic Republic (GDR), the housing stock situation is complicated by years of neglect and sub standard new building.   First off, the number of vacancies increased dramatically once the wall opened and population decline begin.  In 1995 the number of empty housing units stood just under 40,000 and by 2000 increased to 62,500 which represented a 20% vacancy rate in the city.  Keep in mind a 3-4% rate is considered healthy.  The population increase and a smart demolition program helped to reduce that number to a manageable 10% in 2011.  It is believed the number stands around 8% now.  The percentages of vacancies in a building increase dramatically depending on the age of the building.  For example, buildings built after 2001 saw a vacancy rate of 3.2% while buildings built before 1918 saw a 17% vacancy rate.

Characteristics of Housing Stock:

In 2011, the city’s housing stock stood at around 294,169 housing units in multi-family properties and another 34,720 in single family or town houses.  Of that around 11% of people lived in housing units they owned.  The city embarked on multiple programs to attack the issues surrounding the housing stock.  The housing stock needed a lot of attention because of the neglect in the GDR days.  As many as 110,000 housing units were built before 1919.  About 1 out of 5 housing units were built in between war years in the 1919-1949 time period, 30% were built after the Second World War in between 1949-1990 and the remaining since 1991.  Around 11.5% of the total housing stock belongs to the municipal housing company of Leipzig, 16.4% were occupied in Co-ops, 10% were owned and rented by private rental companies with the rest filled out by owner/occupiers or am owner of the unit with a cooperative ownership in the building.  In many ways the city’s luck laid within the rich history of the pre-World War I housing stock that still stood.  It needed rehab and upgrades but the housing still stood.

Renovation and Modernization:

The plan in the city to improve the health of the housing stock laid on the ability to renovate existing housing units.  In 2005, the city of Leipzig created a Basic Security program intended to help refurbish buildings throughout the city.  The program especially focused on city buildings and cultural or historical buildings.  First a list of 20 buildings that were deemed significant was created.  More lists followed in 2006, 2008, and 2010.  In total, 139 different buildings made the way on the list.  In between 2006-2013 more than 5.6 million euro were spent on the renovation of the buildings on this list.  Other buildings were also renovated but these fell outside of the bounds of the Leipzig official plan.  Normally private owners took on those renovation activities often with the support of the city and banks.   87% of the older buildings received remodeling ranging from light to major within the city.  Leipzig also funded the demolition of another 13,000 highly distressed buildings.

The State of Sachsen and the credit institute for renovations both offered different funding programs to interested owners in the area.  A lot of the funding was directly geared towards energy efficiency upgrades, modernization and multi-generation living complexes.  IN 2013 KfW, a bank focused on energy efficiency granted over 1,944 funding awards for improvements in energy efficiency for various apartments throughout the city.  In 2012, 21 funding awards were given out for multi-generational living complexes alone which was more than 2008-2011 together.  This was a program created to redevelop several existing sites into units that could be used by people with handicaps by removing barriers and adapting them for more flexible use.   In total, thousands of buildings and units were renovated, made more energy efficient and preserved in a way that allowed the city to keep its historical housing stock intact.

New Construction Activity:

The rate of building in Leipzig is also increasing.  The number of new housing units built stands at around 1,000 pro year since 2012.  In 2012 the number of new housing units built laid at 1,066 and in 2013 the number actually increased to 1,441 but lowered slightly in 2014 to 1,059.  In 2012, of the total of 1,066 housing units built, only 320 were in single family homes with the remainder in multi-family dwellings.  The building activity showed variation leading up until 2012 with some years having more apartment buildings developed while in other years homes were the leader in completed developments.   Below shows the percentage of new housing units and permits geared towards multi-family properties over the last several years.  That is also in line with the city planning goal of increasing density throughout the city which is vital for the long term vitality and sustainability of neighborhoods.

	2008	2009	2010	2011	2012
Number of housing units completed	1069	1290	661	914	1066
Number of completed Family houses	369	329	305	361	320
Number of completed Multi-family houses	700	961	356	553	746
Percentage of Family Houses	35%	26%	46%	39%	30%

Selling of Land:

Because of high vacancy rates and neglected properties, there are a lot of opportunities in Leipzig to purchase existing apartment complexes.  The number of vacant properties purchased over the last several years increased slowly in comparison to the number of purchases of property with existing buildings on them.  The chart below gives a comparison of these two numbers.   The prices for buying vacant land in 2005 were around 135 euro per square meter and increased to around 225-230 euro per square meter by 2012.  The price for space with un-renovated buildings on it swung wildly in the last few years with a high of almost 340 euro per square meter in 2006 to a much lower level in 2012 of around 210 euro per square meter.

	2006	2007	2008	2009	2010	2011	2012
Number of vacant lots purchased	43	56	54	71	79	80	78
Number of lots with existing apartment building on space purchased	766	595	453	406	429	460	539

Rents and Social Housing

Rent offers in the city are low compared with other medium to large cities in Germany with an average rent price offering of 5.80 euro per square meter.   Compare that to Munich at an average of 13 euro or Frankfurt at 12.91 and it is easy to see the prices in Leipzig are extremely reasonable.   Because of the current state of the housing market, there is no social housing funding program.  Other cities and states throughout Germany usually offer some type of funding program for those willing to develop and ensure affordability in a new complex for a certain amount of time.  With the number of vacancies and the overall affordability, no such program exists in Leipzig.  City planners believe a need could exist in the future as growth continues to take place.  There is a small fear that if no social or affordable housing is included in highly desirable areas, a negative social mix may begin to take hold.  The city will keep its eyes on future developments and push the state to consider a funding program if necessary in the future.   Looking at other housing market figures reveals further the situation in Leipzig.

• Average Rent in (cold) 5,12 €/m²
• Average Rent (warm) 7,12 €/m²
• Land for building 100 €/m²
• Land for building multi-family housing 200 €/m²
• Detached House  210.000 €
• Condo First Sale 2.150 €/m²

Conclusions:

Leipzig is a wonderful city and because of decades of GDR many of the beautiful pre World War I buildings are still standing.  The socialist era took its toll on the health of the building stock but an aggressive remodeling and renovation program is slowly improving the health of the housing in Leipzig.  The population is growing, the economy is slowly gaining traction and the housing stock is starting to even out.  As the future comes into focus, the city will need to work with the State of Sachsen to decide if a new funding program for affordable housing will be needed.  The days of ultra cheap rents and low cost buildings could be coming to an end.  Soon the future will be clear and Leipzig will discover if the catchphrase Hypezig is true or not.