On August 31st, I joined a delegation of housing professionals from Canada, the USA and the Netherlands in Dusseldorf Germany. Dusseldorf lies in the German state of North Rheine Westphalia (NRW). In total, there are 16 different German states. NRW is the largest German state in population and the fourth biggest in sheer size. Four of the ten largest cities in Germany (Cologne, Essen, Dortmund, and Dusseldorf) lie within the borders of NRW. All together the German state, which was created in 1946, currently enjoys a population of around 17.5 million people. It is a conglomeration of older Ruhr cities mixed in with growth cities like Cologne and Dusseldorf that are doing well financially. The housing needs of each city within NRW vary but it is clear that cities like Dusseldorf and Cologne are in substantial need of affordable housing investments in the future. The study group including multiple NAHRO members was welcomed by the NRW Ministry of Construction, Housing, Urban Development and Transport (VdW RW) as well as the North Rheine Westphalia Bank. The major goal of the meetings in Dusseldorf was for the delegates to gain a stronger understanding of not only the German social housing sector but the political and economical climate in which it operates within.
The Basics
In the early afternoon we met with Alexander Rychter from the VdW RW and several staffers including Rita Tolle who gave us an introduction to the German social housing system. We learned that much like other European countries, Germany enjoys a comparatively lower rate of home ownership than the USA. Most people rent in Germany. The structure of social housing is tremendously different from the USA especially in how policy is developed and eventually created. In the USA, public housing policy is created at the federal level. In Germany, the central federal government passed the power to create social housing policy down to the individual 16 German states (Bundeslander). The change took place in 2006 and because of that, the policy, structure; funding and social housing politics take place at the state level. That means the policy and funding models differ from German state to German state. The federal government still gives money to every German state to help with social housing but that is scheduled to end in 2019. The majority of the funding for housing comes from the state level. In total, NRW makes 800 Million euro available for social housing each year. Below is a breakdown of the funding levels in North Rheine Westphalia.
Federal Funds in 2015: 97 Million Euro
State Funds in 2015: 703 Million Euro
If a developer or property owner wishes to build housing with money from NRW they must apply to one of 53 different distributing authorities in NRW. That can be a city, town, municipality or other entity.
Who Lives in Social Housing?:
In Germany, the income limit for entering into social housing is just over 18,000 euro for a single person. You simply add around 5,000 euro more for each additional family member. One key difference in Germany is once you are in social housing, you will not income out of it regardless of how much you might make. In addition, social housing in NRW is not income based. The rent is set by size of the unit. Renters will pay per square meter. To illustrate this I will use an example. A normal apartment in NRW might cost 10 euro per square meter. That means a 60 Square meter apartment which is around 620 square feet would cost around 600 euros per month. A social housing unit might have the rent restricted to 5.50 euro per square meter. That means the same sized social housing unit would cost 330 euro per month. The renter is expected to pay that amount to their landlord. If the tenant is extremely low income, there are housing allowances in Germany called Wohngeld or living money. These can help offset some costs but in my experience I have not seen a lot of people receive both social housing and Wohngeld at the same time. The populations in social housing are diverse with a mixture of single people, families, elderly and disabled. Social housing companies often own a diverse portfolio and have market rate units mixed into the same building as social units.
NRW Bank and its Role in Social Housing Development
The NRW Bank is the state’s major tool in developing, improving and creating social housing. The bank itself operates with a public mission and is fully guaranteed by the state. Staff from the NRW bank explained to us that any type of investor is eligible to apply for funds to develop social housing. That means not only social housing companies build social housing. Private developers can apply and develop social housing units as long as they agree to the contract terms on affordability and meet all of the criteria. The usual period of affordability is 15, 20 or 25 years and after this time the stock can revert to private market. The funding is through low interest loans and the people who receive the housing units are designated by the city in which the housing is built. Who builds the social housing? As we learned, private investors make up nearly 40% of the developers of social housing while municipality associated housing companies make up only around 17% A mixture of private housing companies, charitable organizations, corporate entities and other types of housing companies make up the rest of the investors. The NRW bank must work closely with the Ministry of Building as the ministry decides on regulation, funding programs and supervises the granting authorities. The money being allocated to housing is revolving fund so everything that is coming back is redirected into the building of more social housing.
The total portfolio within NRW for social housing is valued at around 20 billion euro with 16 billion in rental housing and 4 billion in owner occupied housing. The NRW bank gives fixed rate low interest rates of .5%-1% with long loan durations. Funding amounts are subject to category but are usually between 50,000 to 100,000 euro per unit. The borrower must fund at least 20% of the costs themselves but often take a private loan for that 20%. Another bonus of using NRW bank is in many situations, a borrower will only need to pay back 80% of the total loan. NRW bank worked with the government to create this extra incentive because the interest rates on the private market were low and the interest levels in their funding programs were not as high as they wanted. Below is a description of the yearly amount of money available with the categories of priorities:
New Creation of Rental Housing: 450 Million Euro
Renewal of Housing Stock: 150 Million Euro
New Built Owner Occupied Houses: 80 Million Euro
Neighborhood Development: 70 Million Euro
Student Homes: 50 Million Euro
Challenges:
The German State of NRW is suffering from a reduced number of social housing units like other states throughout the country. Right now the current portfolio in the entire state stands at 500,000 units of social housing. Much of the social housing stock was built in the 1950’s, 1960’s, and 1970’s. Most of these housing units were created with a contract length of 25, 30 or 35 years. Now that these contracts are expiring, thousands of affordable housing units a year are being lost to the free market. In Berlin alone, the city is losing 8,000 units of social housing per year and only building back or adding around 1,000. Another challenge is a lot of the housing stock is old and the quality is not good enough. That means the older dwellings throughout this German state and others need substantial rehab. Because of that, the government in NRW is offering substantial loans for the updating, rehab and retrofitting of apartments and homes in the state.
Site Visit:
After our German Social Housing 101 crash course, we took the opportunity for a site visit. We visited the Climate Protection Estate of Garath. The name of the social housing company that built the estate is Rheinwohnungsbau Dusseldorf. The site totaled 187 apartments built in 3 phases with affordable housing for families, seniors, singles and couples. In total there is over 14,000 square meters of living space with 90% of the units accessible by those in wheelchairs. The project was built with an extremely high energy standard approaching almost passive house standard. Solar panels were installed over most buildings and a heat recovery ventilation system helps conserve and produce energy. Our host gave us a personal tour of the property and we even viewed an empty apartment.
Conclusions:
The German Social Housing system is complicated but encompassing. We focused our short period of time in Dusseldorf Germany on social housing and co-ops. It should be noted that there are several programs that can provide money for housing including a Section 8 like program called Wohngeld and another program for those who are unemployed or unable to work called Harz IV or the laws contained in their legal books which protects and provides for those who are in tough situations. We thank all of our hosts, speakers and new friends who warmly welcomed us in Dusseldorf!
International Observatory on Social Housing 
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