Cologne Social Housing- Tale of a Growing City

Overview

The population of Cologne is around 1.016 million. That makes the city around the 4th biggest in the entire country. Population estimates show that Cologne is expected to grow in the upcoming years. I believe the prognoses that are out there now will change dramatically and believing anything right now is dangerous. With the incredible number of refugees coming to Germany, it is not possible to say with any certainty that the prognoses below are even remotely close.

Prognoses
Date Population
31. Dezember 2020 1.026.850
31. Dezember 2025 1.028.520
31. Dezember 2030 1.022.910

The economic and demographic growth dynamics of the last few years is quite strong. The construction rate in Cologne has also been relatively high. Given the context of increasing suburban growth around the city, the rate of new build for single family housing units has increased around the area. In the early parts of 2000, the focus on single family units put affordable housing in the back seat. The city is working extremely closely to change this and created a goal of 1,000 new affordable housing units a year in 2009. The city also is working closely with the planning department to put an emphasis on a socially just land use policy. That means the city would give preferences to projects including social housing and encourage other developers to add social units in developments through taxes and levies.

Cologne as a city suffers from the same problem countless other cities do when it comes to social housing contracts ending. Throughout Germany, thousands of social housing contracts are ending each year pushing the number of affordable units throughout the country further down. The number of publicly funded social apartments in Cologne since the 90s went from over 100,000 down to 40 000.

As part of its municipal housing supply, Cologne has direct access to around 3,000 residences that are used when needed for urgent cases. The other social housing units are comparatively flexible as to who can stay in the social housing. The city is also working with private investors and the public to ensure a high level of interest in discussion and strategies for developing and maintaining social housing.   Because of this work, Cologne enjoys one of the highest rates in Germany for private investment in social housing.

Rent Prices and Affordability-

The average rent prices in Cologne have seen dramatic increases in recent years. A 2010 report by the Federal Department for Research of Cities and Building said average rent price laid around €8.52 per square meter. An article in the Cologne city newspaper put those figures at 10,96 Euro und 12,06 Euro by 2014 which was a 10% increase alone over the previous year of 2013. The city is obviously becoming one of the most expensive in the country. Families with lower incomes are finding it extremely difficult to find affordable housing. The income in low paying career fields in Cologne is only 10% over the national average for those careers while the average rent prices in Cologne are well over 40% of the national average. Those trends indicate that those in service sector and labor jobs will not be able to find or keep affordable housing within the city itself. The city must help many renters with housing subsidies. On average, it is more than €300 per household in Cologne which is more than most cities throughout the country.

Building Activity

  Last year more social housing units were built than in the previous year. According to the city of Cologne, over 530 new apartments were built in 2014. However, you must notice that is only half of the goal stated in 2009. In the year before, only 2010 were built so the city is happy with that progress. The city realizes that not enough social housing units are being built each year but blames the low interest rates in the private market. Because of the extremely low interest rates, private builders recognize they can build for the private market at the same low costs while realizing a greater profit. According to the city, the process of low approval by the main funding bank NRW Bank in Dusseldorf also scares off a lot of potential investors. The bank says that it is working on a streamlined and customer friendly process for the future. NRW Bank informed me that to increase the number of social housing units built in the region, they are now offering a deal where investors only need to pay back 80% of the loan taken for social housing units. That should help the total region as well as the city of Cologne in social housing completions in the future.

One only needs to examine the new build completions vs. units lost from 2000-2009 to see the direction social housing is headed in the city. It is clear that new building cannot keep up with the number of units being lost on a yearly basis.

Year Total Number of Units Number of Units Lost New Replacement Units Built (Approximate)
2000 67,565 980
2001 66,432 1,134 430
2002 61,618 4,814 800
2003 59,818 1,800 380
2004 56.808 3,010 500
2005 54,180 2,628 608
2006 50,319 3,816 800
2007 47,141 3,178 810
2008 45,086 2,055 410
2009 42,860 2,226 880

Current Terms for Building:

Below is more information about funding and lending conditions.

  • Loan conditions • 0.0% interest (for the first 10 years of the bond, after 0.5% for the duration of the bond) • After the binding: a market rate • 1.0% repayment (at the request of 2.0%) • 0.5% of ongoing administrative fee + 0.4% one-time administrative fee • 0.4% processing fee
  • Essential conditions At least 20% of funds for building must come from the builder/developer.
  • Must reserve a percentage of overall units for those with incomes within range stated in Social Law Books § 13 WFNG for the income group A and group B for income up 40% over the income limit;
  • Terms of loans are for 15 years, 20 years and up to 25 years.

    Occupancy rights Income group A and B: 15, 20 or 25 years a fundamental right occupation. At present there is an agreement with the housing industry Cologne, after which the investor or the investor chooses the legitimate tenants themselves.

  • Rent • Income group A: 6.25 euros per square meter per month • Income Group B: 7,15 euros per square meter per month • If the developer builds to a high energy standard (passive house) they can collect 30 cents more per square meter per unit. • Permitted rent increases: 1.5% per annum from the grant rent

Conclusions:

The city of Cologne is growing quickly and trying to catch up in both the provision and protection of affordable housing. There are other tools available to the city like Wohngeld or other housing subsidy programs. The city is supported by a very strong social housing politic in the German State of North Rhein Westphalia. Because of the commitment of both the city and the state, it seems like Cologne is well positioned in comparison to many other German cities to build enough social housing to meet its needs.

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