Rent Controls, One of the Key Elements of the Weimar Welfare State, Hindered New Apartment Construction

The most common way of describing the housing situation in Germany in the inter-war period was one of ‘housing shortage’. Rival interest groups competed to define this deficit, with estimates varying between 1 and 2 million apartments depending on the author of the estimate. The concept of shortage, however, is a problematic one. In a ‘free’, self-equilibrating market there are no shortages. An excess of demand over supply would tend to drive up the price, resulting in a reduction in effective demand and an increase in supply, eliminating the deficit. The symptoms of shortage in the housing market of inter-war Germany were, therefore, first and foremost a reflection of the ‘distortions’ introduced by the imposition of rent controls after the end of World War I. . . .

The Depression fatally undercut Weimar’s system of publicly subsidized construction. As tax revenue plunged and expenditure on welfare increased, the flow of public funds towards new construction collapsed. From a peak of 1.34 billion in 1928 the public subsidy to housing fell to as little as 150 million Reichsmarks in 1932 with devastating consequences for the building trades. In Berlin, a city of more than 4 million people, construction was begun in the last six months of 1931 on only 2,606 new apartments. In this extreme situation, the Reich took the extraordinary step of announcing a subsidy for the self-built settlements of the unemployed and their families on the margins of Germany’s cities. Each settlement was to be provided with enough land for the families to secure a high degree of self-sufficiency in their food supply. The Reich would provide a subsidized loan of 2,500 Reichsmarks towards construction, the rest would come from the self-help of the settlers themselves.

—Adam Tooze, The Wages of Destruction: The Making and Breaking of the Nazi Economy (London: Penguin Books, 2007), 157-159.