The transition from people's property to private property

Applied Gtwgrophy.Vol. 17, No. 4, pp. 301-314, 1997 8 1997 Elsener Science Ltd Pnnted m Great Bntain. All rights reserved 0143.6228/97 517.00 + 0.00

PII: 80143-6228(97)00023-4

The transition from people’s property to private property Consequences of the restitution principle for urban development and urban renewal in East Berlin’s inner-city residential areas Bettina

Reimann

Humboldt-Universitiit zu Berlin, Fakultiitsinstitut Linden 6, 10099 Berlin, Germany

Sozialwissenschaft.

Unter den

The constitutional decision to return to their original owners all real-estate property in East Germany that had either been expropriated or placed under state administration (the restitution principle) has had significant consequences for urban development and urban renewal. Experiences from East Berlin’s innercity residential areas illustrate the effects on the state of repair of housing, the character of residential neighbourhoods, the tenants living in the areas affected, and the future structure of real-estate ownership. The case studies reveal a picture of a contradictory development of residential neighbourhoods, including shifting power relations and new polarizations, especially between tenants and landlords. 0 1997 Elsevier Science Ltd. All rights reserved Keywords: Eastern Germany/East Berlin, Germany, housing, inner-city residential areas, property, restitution, tenants

Introduction The unification of Germany on 3 October 1990 and the East German transition from state socialism to private market capitalism went along with fundamental changes. The privatization of ownership and thus of housing and land were a key issue of that process. Immediately after the fall of the Berlin Wall on 9 November 1989, negotiations between the German governments began in preparation for a united Germany. The settlement of unresolved land and property disputes (die Regelung offener Vermijgensfragen) was a matter of conflict between the two negotiating parties, reflecting from the very beginning the different nature and ideology of property rights within capitalist and socialist cities. In order to clarify property relations the actions of the GDR between 1949 and 1989 had to be examined. Under the communist government huge amounts of land and property were confiscated by the state and either nationalized or reallocated to new owners. Large sections of housing stock had been taken into public ownership and housing was subject to state planning and control, its allocation subject to principles of social equality resulting in policies removing market influences, as land itself was removed from the market and could not be 301

Urban development and renewal in East Berlin: B. Reimann

sold (Smith, 1996: 4). As a result of this policy rents were extremely low and did not vary much according to location and quality of dwellings. Appropriation and exploitation of land and property was abolished. Housing, though, was nationalized less than elsewhere in Eastern Europe. Although the GDR did not generally allow the private ownership of property, different perceptions of ownership existed between 1949 and 1990. About 20 per cent of the housing stock belonged to cooperatives (Genossenschaften), 40 per cent was people’s or state property ( Volkseigentum) and about 40 per cent remained in private ownership (Faik and Schlomann, 1995). The latter was divided between ‘persona1 ownership’ (individual owner occupation excluding capitalist gains from ownership of property) and private rental. In many cases private ownership persisted in the GDR, especially in inner-city residential neighbourhoods with predominantly pre-1918 housing stock. But even if not expropriated almost all of the private rented housing stock was kept under state administration. In East Berlin in 1989 about 60 per cent of the housing stock was state property, about 17 per cent belonged to cooperatives and almost 24 per cent remained in private ownership. More than half of the private property was managed by the communal housing association. The rest was private housing stock, mostly single-family or owner-occupied housing (Geographisches Institut der Humboldt-Universitat zu Berlin, 1994: 20). Due to the fact that rents had been fixed at a very low level, they did not cover repairs and maintenance and managing a private rental property became a burden. Sometimes property was even given to the state by the owners. In cases where the owners lived outside the GDR, for example in capitalist countries including the FRG, their property was kept under state management if not expropriated. Consequently, the owners did not have their property at their disposal. It is important to note that the general issue of state-inspired expropriation of land and property is not confined to Germany. In former socialist countries in Eastern Europe and the former Soviet Union the sudden switch from state-run, centrally planned economies has made the future of private property a matter of intense public debate (Blacksell et al., 1996: 14). The major difference in the case of East Germany as opposed to these countries was the existence of a ‘ready-made system of legal regulation of private property rights’ (Harloe, 1996: 16). The conversion to private real-estate ownership in East Germany occurred through the almost complete adoption of the West German system of property law and rights. With the constitutional decision in 1990 (see Born, 1997), priority was given to private property With the Unification Treaty (Einigungsvertrag) a legal basis was given to previous owners to claim their confiscated property. All property in East Germany that had either been expropriated or placed under state administration between 1949 and 1989 was thus to be returned to the original owners. (There are exceptions from the restitution principle, some with major implications; see Born, 1997; Reimann, 1997.) The restitution principle was also especially extended to property that had been confiscated under the auspices of the Third Reich (1933-45). Property restitution had begun in what was to become the FRG (though not in the Soviet occupation zone that was to become the GDR) as early as 1945. After the fall of the Berlin Wall in 1989 it was taken for granted that the process would be extended to East Germany (Blacksell et al., 1996, 14; see also Reimann, 1996, 1997). At the heart of the Law on Property Restitution (Vermijgensgesetz) lies a legal requirement that return of property should take precedence over the payment of damages for loss (Riickgabe vor Entschtidigung). That regulation enables original owners to reclaim their expropriated properties. The consequences of this restitution principle (Restitutionsprinzip) are varied and grave. The following numbers illustrate the scope of disputed property claims in the new Ltinder. The effects in terms of urban development and urban change are discussed subsequently. By 1992 over 2 million claims for restitution of real-estate property in the new LHnder 302

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and East Berlin had been filed, amounting to about 15 per cent of the GDR housing stock (Scholz, 1993: 32). Up to 1996, about 60 per cent of the restitution claims had been decided by the Offices for the Settlement of Disputed Property Claims (Vermiigensiimter). About one-third of restitution claims settled have been returned to the original owners (see Born, 1997). In East Berlin one can study the many different types of privatized real-estate property and also the diverse interested parties who claim to be the legitimate owners of former state property. In East Berlin almost three-quarters of all properties are claimed for restitution. But there are twice as many claimants than properties that are targeted. Thus, the average is two requests for restitution for each piece of land. The Offices for the Settlement of Disputed Property Claims have to examine very carefully the legitimacy of every claimant-whether it be an individual person or the Federal Government or the Liinder. Of particular importance for East Berlin is the fact that almost 20 per cent of all requests for restitution are claimed as former Jewish property. Before the Nazi regime East Berlin was the centre of the German Jewish community. Jewish property-owners were an important section of the middle-class ownership structure in Berlin. As part of the Nazis’ ‘Aryanization’ policies, Jewish owners were robbed of their property. The extinction of the Jews was preceded by the ‘dejudification’ (Entjudung) of real-estate ownership (Zunzer, 1997). Thus, with the extension of the restitution principle to property confiscated under the auspices of the Third Reich, one of the darkest periods of German history is revisited through tracing back property relations before the Nazi’s seizure of power in January 1933. The basis for the so-called ‘Aryanization’ of Jewish property tightened between 1933 and 1945. Different laws with increasing ‘effectiveness’ were enacted during the course of the Nazi regime in order to exclude Jews from real-estate ownership (Zunzer, 1997). In the following sections, the restitution principle is viewed and analysed in the light of its practicality and efficiency with respect to future urban development, especially urban renewal. Even though restitution of former Jewish property is one of the most complicated and time-consuming tasks within the procedure of returning property to its original owners or their heirs, this aspect of restitution should be seen as an attempt on the part of Germany not only towards reconciliation and reunification with the former East but also to reconcile itself with its own Nazi past (HauBermann, 1996: 227). In practice, the privatization of housing and land stimulates different kinds of development, especially within urban areas, and has consequences with social, economic and geographical relevance. This paper explores some of the main current developments in East Berlin’s inner-city residential areas, with particular reference to the consequences of the restitution principle for urban renewal, the character of the residential neighbourhoods and the restructuring of private real-estate ownership. The existing difficulties within urban planning, urban development and urban renewal discussed in this paper are associated with the restitution principle but cannot be reduced to the effects of this principle alone. Various interdependent factors have a determining influence on these developments; restitution is one important factor among others.

Scale and consequences areas

of the restitution

principle in inner-city residential

The privatization of ownership--especially housing-and the restitution principle have different consequences and stimulate diverse developments according to the size of the city, the distribution of housing and land within the city (inner-city residential areas, outskirts, city centre) and the type of housing affected by restitution claims (single-family or owner-occupied housing, multiple dwellings) (Brouer et al., 1995; Dahn, 1994; Reimann, 1997). The extent of restitution to the original owners (Alteigentiimer) varies 303

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significantly according to these criteria. In older urban areas with predominantly pre-1918 and pre-1945 housing stock, the original property rights will be restored extensively, whereas in suburban areas with predominantly owner-occupied housing the Law on Property Restitution (Vhmiigensgesetz) determines exceptions from restitution. (The following examples are simplifications of a very complicated and extensive corpus of law. For a more detailed analysis, see Kimme, 1995; Reimann, 1997.) Only under the condition that new homeowners bought confiscated or state-administered property after 1949 in good faith and legally under the then-prevailing law (so-called redlicher Enverb) are they excluded from the obligation to give back their property to the original owners. Restoration of earlier property rights does not take place extensively in areas dominated by this kind of housing. In contrast to owners, tenants or other users of single-family homes are confronted with restitution claims and are afraid of having to leave the houses and dwellings that they considered for over 40 years to be their own. This aspect of the restitution principle is one of the most controversial and has led to considerable social tension between East and West German citizens and between residents, users, present owners and original owners (Dahn, 1994). In neighbourhoods and cities with predominantly new and prefabricated buildings in large-scale developments, requests for restitution of real-estate property are rare. After 1990, this new housing stock, which had been people’s property in the GDR, has become the property of the communal housing associations. By its nature it is excluded from restitution but is subject to another kind of privatization strategy: part of this local property is to be sold to private owners, preferably tenants (Borst, 1996). Thus, the re-establishment of the original property rights is concentrated in inner-city residential areas with tenements and in the historical city centres. Large cities with extensive stocks of pre-1918 housing, such as Berlin, Leipzig and Potsdam, are confronted with relatively more claims for restitution than smaller cities and towns (Figure 1). What can actually be observed is that in cities such as these, with their tenements and historical city centres, the constitutional decision to return to the original owners all property that had been expropriated or placed under state administration has significant consequences for

90

80

70

60

50

40

30

20

10

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Figure 1 304

Restitution claims on real-estate property since 1990 for selected cities

Urban developmenl and renewal in East Berlin: B. Reimann

urban development and urban renewal, not to mention social relations, especially between East and West Germans (Dahn, 1994; Reimann, 1997). These can only be outlined in this paper. Restitution claims were filed for more than three-quarters of all real-estate property in these cities. In certain neighbourhoods about 90 per cent of all properties are legally entangled due to restitution claims. Problematic is the fact that those areas that are predominantly affected by restitution claims are also those needing investment for renewal and modernization most urgently. The need for renewal is due to the neglect of pre-1945 housing stock in socialist cities. Old tenement houses were a reminder of capitalist living conditions. If they were not removed in the course of urban renewal under the GDR housing policy, they remained with substandard conditions (stove heating, exterior toilets, no bath) and increasing decay (Geographisches Institut der Humboldt-Universitat zu Berlin, 1994; Frick and Lahmann, 1996; Smith, 1996). The lengthy process of restoring ownership for these affected buildings has important consequences for the state of repair of the housing stock. The entire process of establishing private ownership for a lot or a building may sometimes take two or three years from the time when the Oflices for the Settlement of Disputed Property Claims start to deal with the case. The process is bureaucratic and the legal procedure complicated. Files are often incomplete and lawsuits are common. It will be at least ten years before all claims have been decided (Reimann, 1997). In older urban areas properties have multiple claimants because of successive expropriations. (Different changes of ownership were stimulated and enforced in the course of German history through laws and decrees enacted by the Nazi regime, the government of the Soviet Military Occupation during 1945-9 and the government of the GDR.) During the process of determining the legitimate owner the Law on Property Restitution imposes a moratorium (Verjiig~~gssperre) on the property until the property rights are restored to the legitimate owner. Any further exchange of the property is blocked, as is its restoration and modernization. Consequently, buildings that need renewal most urgently cannot be modernized and are in effect removed from the market for several years. In order to avoid the impediment to investments and to stimulate economic growth, a law has been enacted (Investitionsvorranggesetz) enabling investors to buy the property despite existing claims for restitution. If investors have convincing investment concepts, restitution is replaced by financial compensation to the original owner. For inner-city residential areas this law is rarely used, since investors concentrate on lucrative areas in the business districts of big cities (Reimann, 1997). During this transitional phase from people’s property to private ownership, the difficult task of managing buildings has fallen to the communal housing associations (kommunale Wohnungsbaugesellschaften), whose freedom of action is severely limited. Investment is only allowed with the approval of all claimants or the future owners. Since they are not usually all known, this regulation is of no practical relevance. Housing improvement is thus delayed and neglect increases (Dieser, 1996; Reimann, 1997). While progress is slow, with each day the number of buildings with re-established property rights increases. But with the increasing scale of restored property rights a new phenomenon occurs: almost all legitimate or original owners whose property has been returned to them intend to sell it. These intentions arise largely out of an increase in property values, through modernization, conversion into owner-occupied flats and profitable retail space. Thus, old buildings that have fallen badly into disrepair over the last few years, due to the housing policies of the GDR and the moratorium on property repair as soon as the privatization process started, now face a new situation. Through the clarification of ownership and the sale of the returned buildings, a change in value and sometimes in building use is stimulated. The expected consequences are increased 305

Urban development

and renewal in East Berlin:

B. Reimann

rent levels due to these improvements and thus a change in the social structure of the future tenants and inhabitants to those able to pay these higher rents. The fact that about half the restitution claims on real estate have now been completed and thus ownership restored in these cases has led to a mixture of legal status in the affected buildings and consequently to a mixture in the standard of housing improvements. In attractive inner-city residential areas in East Berlin and other East German cities there now appears a mixture of very underutilized and run-down buildings (where ownership has not yet been settled) and modernized buildings (some luxurious, others moderate). The future position for the residents as tenants becomes hard to judge. The following experiences from East Berlin illustrate these developments.

Experiences from two residential areas of East Berlin: Prenzlauer Berg and Spandauer Vorstadt Spandauer Vorstadt, an historical inner-city area in Berlin-Mitte, and Prenzlauer Berg, a quarter with pre-1918 tenement houses, have found themselves in a difficult situation since reunification. A particular tension results from their location at the centre of reunited Berlin, which imposes an enormous pressure for upgrading. Their central position in the new Berlin has made them attractive to investors. After privatization and with the subsequent renovation and modernization of these properties they are being turned into profitable and attractive residences. There is no question that urban renewal in these old neighbourhoods is necessary. Almost every building needs repairs and modernization. In Prenzlauer Berg, for example, about 70 per cent of the housing stock is pre-1918 and almost none of the apartments had modern heating before 1990 (Topos Stadtforschung, 1992; Mieterstadt, 1993; Geographisches Institut der Humboldt-Universitlt zu Berlin, 1994). Apart from the need for improvement and renovation, what is becoming problematic today is that the need for renewal and the high expectations of profit by the landlords coincide with the shortage of finance in the public sector and the limited means of the residents. In older neighbourhoods and districts in Berlin with predominantly pre-1918 housing, such as Berlin-Mitte, Prenzlauer Berg, Friedrichshain and Pankow, much property is legally entangled due to restitution claims. In Spandauer Vorstadt 96.7 per cent of all property is subject to restitution claims (Dieser, 1993). In Prenzlauer Berg the situation is little different. For the whole of East Berlin, 75 per cent of all property has been affected by restitution claims since 1990 (Figure 1). Thus, the extent of restitution claims in inner-city residential areas is much higher than in the whole of Berlin. In these areas the claims are more concentrated than anywhere else in the city. In contrast, in new districts with industrialized housing, such as Marzahn, Hohenschonhausen and Hellersdorf, very few claims were filed (Figure 2). Therefore, the reorganization of property relations since 1990 has led to different developments within East Berlin. Various laws have been enacted mirroring different kinds of privatization strategies according to the housing stock affected. As East Berlin’s housing stock is roughly evenly divided between pre-1945 and new housing stock, with each kind concentrated in different districts within the city, one can study certain processes only within the affected areas. New and prefabricated housing is concentrated in Marzahn, Lichtenberg, Hohenschonhausen and Hellersdorf, while pre-1945 housing is found predominantly in Prenzlauer Berg, Friedrichshain, Mitte and Pankow (Geographisches Institut der Humboldt-Universitat zu Berlin, 1994). Once all claims have been processed, about 85-90 per cent of the property in Spandauer Vorstadt and Prenzlauer Berg will be returned to the original owners or their heirs. Many of the buildings were once Jewish property and the clarification of the property 306

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Figure 2 Unresolved claims on pre-1949 former people’s property in relation to total district housing stocks, 1995. Source: Communal housing associations; Dieser (1995: 68-69); Statistical Yearbook Berlin 1995

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90.000

TOTAL

Urban development

and renewal in East Berlin:

B. Reimann

rights of such property is one of the most laborious tasks in this process. But the likelihood that it will be given back to the former Jewish owners or their heirs is high. According to the law, those owners who were expropriated first are to be given back their property. Claims of previous Jewish owners are preferred to owners who bought the property from the Jewish landlords and were expropriated under the auspices of the GDR. (For a more detailed explanation see Reimann, 1996, 1997). For East Berlin in total, official estimates state that one-third of the requests for restitution of real-estate property will be given back to the original owners (Reimann, 1997: 56). Thus, the scale of restitution to the original owners is also highly concentrated in inner-city residential areas. As the amount of new housing is relatively low in these areas, little housing stock will remain in city or communal housing association ownership. The declining number of properties controlled or owned by local authorities or the city corresponds to the housing politics of the Federal Government for East Germany. The main goal is privatization of housing and land (Expertenkommission Wohnungspolitik, 1995; Borst, 1996). However, Berlin’s communal housing associations still have to manage nearly 105,000 apartments that were people’s property. The transition from people’s property to private property is a path of trial and tribulation. The pace is slow; six years after reunification 70 per cent of the dwellings that were former people’s property are still being managed by communal housing associations. Only when the question of ‘who is the legitimate owner’ is settled by the Office for the Settlement of Disputed Property Claims is the new legally recognized landlord allowed and obliged to take over the rights and duties of the propertyowner. As already outlined, after 1945, many of the old tenement houses were still privately owned. According to the Law on Property Restitution, state administration had been repealed by 31 December 1992. From that day on the owners had their rights and obligations as landlords restored. The communal housing association then in charge of managing these properties was supposed to return them within six months. This regulation has proved unrealistic. Today in East Berlin there are still over 16,000 apartments in the hands of communal housing associations, even though these buildings have a legitimate owneraccording to the land register (Tubfe I). There are various problems delaying the return and takeover of the property from the communal housing associations to the owners (Marcuse, 1996: 159). Most of the original owners are dead; their heirs have to be found and their entitlement has to be proved. But

Table 1 Number of flats in private ownership (previously state-managed flats) among communal housing associations in East Berlin (Emergency Management) Communal

housing association

Mitte Prenzlauer Berg Friedrichshain Treptow KLipenick Lichtenberg Weil3ensee Paokow Total Source: Communal

Flats under emergency management, as of l/3/95 708 7,921 3,851 906 1,023 807 289 1,058 16,563

housing associations;

Dieser (1995: 68-9)

Urban development and renewal in East Berlin: B. Reimann

what is more important is that in many cases the owners refuse to take over their property because they are afraid of being only ‘short-time landlords’. If a second claim is brought forward by a former owner who is Jewish, and whose property was confiscated under the Nazi regime, the owner’s right of disposal over the property is limited until the property rights are settled. As the property is likely to be given back to the original owner or the heirs in the near future (see Reimann, 1996, 1997), the actual owner has no interest in taking care of the building. Thus, the owners deny their status and their obligations as landlords. In cases where owners refuse to take over their property the communal housing association manages the building. In terms of urban renewal and housing politics this situation is most problematic because the right of disposal of the communal housing association is limited to emergency maintenance (Dieser, 1995; Reimann, 1997). The communal housing association is not allowed to issue leases or to order any housing improvements that lead to a change in value, such as modernization. Vacancies are common in these buildings. The main problem is that local authorities are responsible for property as yet unreturned, but since the original owners are not legally required to pay for work carried out after unification without their consent, the communal housing association and most local authorities cannot afford to spend their limited resources on reclaimed housing. At the same time, prospective new owners cannot invest until their claims are legally established (Smith, 1996: 6). Insufficient restoration of the property is the consequence. As Table 1 illustrates, the communal housing association of Prenzlauer Berg is profoundly affected by this state of affairs. The percentage of private property was much higher than in other districts of Berlin. Thus, the problems and conflicts with reference to emergency maintenance are higher than elsewhere in the city. Table 2 shows the scale of unsettled property rights within inner-city residential areas in East Berlin today. For more than a third of the housing stock the question of who the legitimate owner is has not yet been answered six years after reunification; thus ‘normal’ housing management is impossible. In the course of the restitution process and the transitional phase from people’s property to private property, many buildings are bound in a contradictory and even absurd situation-at one and the same time there are too many owners as well as no real owner at all. New types of landlords are created: short-time or transitional landlords, refusers, claimants, potential owners, emergency owners or caretakers are only a selection of a new variety, all with different legal status-but the most important character in this process is the buyer, whose actions have implications for the future development of neighbourhoods and for urban development in general.

Table 2 Extent of housing stock with unclear ownership East Berlin, 1995 Municipal district

Mine Prenzlauer Berg Friedrichshain Pankow

in inner-city residential areas of

Total area housing stock, end of 1989 (Number of apartments)

% Housing stock with unresolved ownership in 1995 (former people’s property or state administered)

40,000 90,ooo 65,000 55,000

34 35 31 25

Source: author’s calculations 309

Urban development and renewal in East Berlin: B. Reimann

Structural changes of ownership As described above, most of the original owners will sell their returned property. Thus, after the restoration of private ownership according to the restitution principle and the Law on Property Restitution, a complete restructuring of property rights is taking place. Studies have shown that in Spandauer Vorstadt only about 5-8 per cent of the original owners keep their property in the long term and decide to invest in their old houses (Dieser, 1993, 1994). In Prenzlauer Berg, studies by the author have shown similar results. Various reasons lead to the decision to sell by the original owners or their heirs. Even though most would have originally liked to keep the property, other factors leading to the sale predominate: differences between the heirs, insubstantial financial resources, no experiences as landlords and places of residence far away from Berlin (Dieser, 1993, 1994; Reimann, 1997). This trend towards selling by individual real-estate owners is typical of current developments in the real-estate market in East Berlin and other East German cities. What these cities now have to face is the fact that privatization and the restructuring of real-estate ownership coincide with a general budgetary crisis in the public sector. This has resulted in the introduction of incentives for private capital; professional investors are given preference over individual long-term owners and cooperative ownership or owner-occupation. In inner-city residential neighbourhoods, especially in urban development areas, for individual long-term owners the economics of housing renovation remain problematic. In the next few years inner-city residential areas are expected to face a complete change in the ownership structure. The motives of the new owners to buy real-estate property not only in the commercial and office district of the city but also in inner-city residential areas such as Prenzlauer Berg and Spandauer Vorstadt, are dominated by economic reasons. High tax incentives attract profit-seeking land developers, real-estate firms and large-scale commercial developers whose main interests are tax benefits. Anonymous real-estate funds and speculators of all types are profiting from the current tax policy, while small-scale property-owners and developers who have historically played a key role in West German cities are displaced (Haul3ermann, 1996). The buyers and new owners of housing are mainly West Germans (Eichstadt-Bohlig, 1992, 1994; Pfeiffer, 1994; Faik and Schlomann, 1995) who do not know the neighbourhood, its character or its inhabitants. Ownership becomes anonymous, and therefore long-term vested interests in the locality cannot be established (HauBermann, 1996: 228). Thus it becomes understandable why, after property rights have been restored in many areas, the standard of housing is upgraded to a point where it is impossible for the current tenants to keep up with the rent increases. The consequences of this change are mixed. Given the poor condition of pre-1945 housing stock, urban renewal and modernization are necessary. On the other hand, this renewal implies an upgrading of the neighbourhood with the negative impact of increasing rents and thus the danger of displacing low-income inhabitants whose number, especially in Prenzlauer Berg, is high (Topos Stadtforschung, 1992).

The shifting status of tenants after privatization With the privatization of the rental housing stock completely new economic and legal relationships have been institutionalized. In the GDR tenants enjoyed rights comparable to ownership, such as lifetime security of tenure and the right to pass this on to family members. They undertook considerable modernization and restoration of their apartments themselves. The introduction of private ownership, and perhaps more importantly 310

Urban development and renewal in East Berlin: B. Reimann

of absentee ownership (the owners rarely live in Berlin) and the new possibility of exploiting property by capitalist means result in a kind of alienation. What the tenants considered over 40 years as ‘their’ places, ‘their’ flats are no longer theirs. In the course of the restitution process the tenants have to deal with two difficulties. First, they have to cope with legal uncertainties due to the unsettled property rights for many houses. Leases become uncertain and the signing of new leases is hindered. Many flats remain vacant during the transition from people’s property or state administration to private property. Restoration is delayed for many houses. Given this ‘ownerless’ phase, tenants must constantly struggle for every necessary housing improvement. Modernization by the tenants themselves-a common and effective means of housing improvement in the GDR-is no longer supported or tolerated, even becoming irrational as tenants do not know whether they will be able to stay in their flats after the house has been returned. As a consequence, the neglect of housing increases. Secondly, after the property rights have been settled and the property is subsequently sold the tenants are threatened by large-scale or profitable modernization and increasing rents. Whether the traditional residents of areas that undergo these developments are able to stay in their houses or apartments or even in their neighbourhoods in the long term cannot yet be answered. Preliminary studies point towards the displacement of tenants from privately modernized buildings (Topos Stadtforschung, 1995). What is expected by the district authorities and feared by tenants is that modernization and renewal will lead to the expulsion of inhabitants with low incomes and their replacement by households with higher incomes. In urban renewal areas in particular, this would severely disrupt the social structure. In contrast to West German urban renewal areas, the social structure here is mixed in terms of class and income, and urban renewal strategies are directed towards keeping the existing structure (Winters, 1995). In areas of urban renewal legal regulations and urban renewal experts who mediate and intervene are set against these negative developments. The process of redevelopment is highly organized by rules, instruments, different protagonists of responsibility and negotiation and mediation, such as tenants organizations. But although so many rules are enacted, there appear just as many ways to evade them. Neighbourhood newspapers have reported a connection between an increasing amount of restored ownership in inner-city residential areas and increasing conflicts and confrontations between tenants and landlords.’ The inhabitants of neighbourhoods, especially in attractive areas such as Prenzlauer Berg and Spandauer Vorstadt, complain about a form of modernization that is directed towards driving out the tenants---if not by increasing rents then by subtle as well as illegal means. On the other hand, landlords complain about the lack of cooperation from the tenants. In urban renewal areas, for example, landlords need the approval of the majority of the tenants of a building to modernize the property. From the owner’s point of view the tenants prevent necessary improvement of their buildings and urban renewal in general by refusing their approval. In inner-city residential areas in East Berlin the restoration and modernization of an increasing number of buildings is therefore delayed or even prevented because of conflicts of interest between landlords and tenants that result in an increasing lack of cooperation on both sides. Thus, in the coming years until and even after the question of ownership in these areas is settled and housing is privatized, future development, including the state of repair and redevelopment of the buildings as well as the residential social structure, will probably depend not only on the development of the housing market and the economic situation of the inhabitants of the neighbourhood. Neither will it solely depend on the rules that the city is able to enact and implement on behalf of the tenants. All future development will depend partly on the various ways the tenants and landlords are able to extend their power and influence in order to realize their respective interests. Whether tenants and landlords 311

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will find ways of cooperating and compromising way to realize urban renewal and neighbourhood

remains to be seen. It may be the only development successfully.

Conclusion The scale and the consequences of the restitution principle differ according to the kind of property that has to be restored, the size of city to which the property belongs and the distribution of property within the city. This paper has outlined the effects of the restitution principle in inner-city residential areas in East Berlin. For nearly every building or lot situated in the tenements and historical inner cities requests for restitution were filed. In no other area of East Berlin is the concentration of claims higher. Until the property rights are restored, housing management becomes almost impossible and the neglect of pre-1945 property increases. After years of struggling between multiple claimants and prospective owners, nearly every property will be returned to the original owners or their heirs--of whom a considerable number were originally Jewish. Only a small number of old buildings remain in the city’s possession. After restitution most of the original owners will sell the property. As buyers are usually professional investors, an extensive restructuring of private real-estate ownership is taking place in these neighbourhoods. The extensive process of claiming, returning and selling of real-estate property coincides with a considerable need for housing improvement and modernization of the restored property. This need for renewal also coincides with the current public sector budgetary crisis that has led to the introduction of incentives for private capital. Buying and investing in old houses becomes financially attractive for those who can benefit from the tax incentives. Thus, entire inner-city residential neighbourhoods will change within the next few years, mainly under the stimulus of real-estate capital. Conversion into owner-occupied housing is lucrative and thus becomes attractive. Even though housing improvement and modernization is necessary today, the question of how the interests and needs of long-term tenants can be combined with short-term vested interests of professional ownership remains open. Nevertheless, an answer has to be found to benefit the preservation and the value of lively inner-city neighbourhoods.

Notes (1) Various 1995 and 1996 editions of two neighbourhood newspapers from Mitte/ Spandauer Vorstadt and Prenzlauer Berg: scheinschfag (Verein zur Begleitung Gffentlicher Diskussion in den Innenstadtbezirken) and VorOrt (Mieterberatung Prenzlauer Berg, Gesellschaft fur Sozialplanung mbH).

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