background
Leasehold was intended to enable people with lower incomes to own their own homes. The idea was that a house would be built and the land underneath would be rented. But the math no longer works.
In the Heddernheim district in the northwest of Frankfurt, an entire street is almost entirely made up of leasehold houses. These are properties where the houses belong to private individuals who also live in them. The associated land, however, is owned by the city of Frankfurt – and is usually leased to the house owners for 99 years.
Pensioner Anette Fuchs is one of many who bought a house here on a leasehold plot decades ago: “The idea used to be to enable middle-income families to own property and afford something. And that no longer exists.”
Interest rate trap snaps shut when selling
When Anette Fuchs bought the property, the ground rent was still 80 euros per month. She still pays this interest today. The relatively small sum enabled her to finance the loan for the house and the rent for the property, i.e. the ground rent. Maintenance and modernization were also included.
She is now retired, the house is too big and too much work. Now she wants to sell. But the ground rent in the city of Frankfurt, which has now risen by 1,000 percent – in her case to 800 euros per month for new owners – is putting a damper on her plans. And the interested families too: “There are many young families who are interested in my house, but then find that they cannot pay the high ground rent and therefore cancel,” says Anette Fuchs.
Lucrative business for the city
The ground rent for new owners in Frankfurt am Main is currently 2.5 percent. This is a lucrative business for the city, as the municipality holds around 5,000 inheritance rights in the city area. The total income is calculated by multiplying the land value by the 2.5 percent ground rent.
Bernd Oettinghaus is also interested in Anette Fuchs’ property. The master gardener’s financial circumstances are good, but not conducive to unlimited adventures. Oettinghaus is annoyed by the high ground rent. “I don’t think it’s fair.” For Oettinghaus, the potential is not being exploited in Frankfurt’s already competitive housing market.
Oettinghaus actually wanted to buy a leasehold house. He and his family are threatened with eviction for personal use – this is also a daily occurrence on the housing market. But given the high leasehold interest, he is now thinking about buying a house on the open market: “If I were to buy a house with land now, I would end up getting it cheaper than if I signed a leasehold contract with the city.”
If Oettinghaus were to pay the 99 years for which a leasehold is calculated, he would pay off the property three times over – and it would still not be his. “The state should not be the one to profit,” says Oettinghaus.
“A misguided land policy”
Is the city of Frankfurt really more expensive than the free market? Birgit Kasper from the Frankfurt Network for Community Living eV sees previous failures as the reason for the interest rate increase and sees the city’s associated behavior as like a greedy broker chasing the greatest profit. “The point is that in recent years we have simply had a misguided land policy that relied on the free play of forces to regulate the market.” Her rule of thumb: If the city were to set low prices, low prices on the market would follow.
The association has now at least managed to ensure that the coalition agreement between the city parties includes the goal of reducing the ground rent again. According to information from the Hessian Broadcasting There is even an agreement to reduce the ground rent from 2.5 to 1.5 percent. The responsible building and real estate office has therefore made proposals to politicians on how to implement this. Now the ball is back in the city politicians’ court. However, the interest rate is still as high as ever.
No longer affordable for families?
If the ground rent were reduced by one percentage point to 1.5 percent, as proposed, this would make an enormous difference in practice. Based on the 800 euros per month in Ms. Fuchs’ example and a classic loan term of 32 years, a potential buyer would have to pay a total of 307,200 euros.
With a ground rent of just 1.5 percent, this sum is reduced by more than 100,000 euros. The city of Frankfurt currently grants a discount for families with children. There is a 20 percent reduction in the interest rate for each child, with a maximum of four children being taken into account.
Nevertheless, this does not seem to help, according to Anette Fuchs’ observation: “The city is making money at my expense. I have to lower the selling price so that, together with the high ground rent, it does not become a utopian sum.” That is why she is no longer looking for a family with children, but for people with higher salaries. It seems as if the city is not as socially and family-friendly as it could be.