Earlier quoted context omitted.
That’sa possible alternative but the experience here in Germany shows that landlords will use every loophole available to get back to profit maximizing = just rent to upper middle class. Or alternatively they’ll just let low cost units rot away without the required maintenance. The effort to enforce this system is arguably better spend on simply running it yourself.
I definitely agree there’s a point where it’s easier to run the system directly than to regulate it. In America, this just isn’t done. I’m trying to think why. I guess part of the issue is that building/maintaining structures is high risk, while owning land is low risk. So even if an American city owned lots of land, they would just do a long term lease to a property developer who would take on the risk of developing…
Unfortunately, the city also needed a lot of money so they sold these units to a private investor around 2005. Both this former public housing, as well as most of the other housing stock has been heavily upgraded in the intervening years and the city has experienced an immense influx of people since it became Germany's capital (again) in 2006.
Given Germany's laws regarding rent increase, there are now basically two rental markets in Berlin: You got tenants who have lived in the same apartment for 20+ years. They pay basically nothing (i.e. 300€/month for a two bedroom apartment), because rent increases are heavily regulated and can easily be challenged in court. Of course investment in these properties has also been quite low, although the German government has required certain upgrades by law.
On the other hand, if you want to move to Berlin now or want to change apartments, the same two bedroom apartment can cost you easily a multiple of what long-term tenants pay and you'll have trouble finding one. Berlin is now the second most expensive city to rent in (for new tenants), after Munich.
> What happens in Germany if real estate falls through?
Inner-city residential real estate does not "fall through." You could have bought a plot of bombed out housing after the war in 1945 in any major German city, built an apartment building on it and its valuation would have been stable or increased for every single year up until today. That Trump managed to do badly with real estate basically just proves how dump he and some of his fellow investors are: they try to make a quick big buck by investing in dept-leveraged office real estate, which is extremely dependent on the economy's boom-buts cycles.
Germany also never experienced (with the exception of some cities in the eastern part, which have since recovered) the desolation of inner cities that some U.S. cities had to deal with. Neither do we have much of the "suburbia" that is common in the U.S. and which is - financially speaking - a ticking time bomb. Our cities are quite dense and as long as we don't experience a strong decline in the total population multi-apartment properties within city limits are quite a safe investment.
We did have a huge wave of people (especially young women) moving out of the rural parts of former Eastern Germany into western cities, which desolated many smaller towns and villages in that part of the country. But public ownership of real estate in rural municipalities has never been much of thing, nor is it necessary as there is always enough space available to expand, if needed. So decreasing property values in these parts fell on private owners (often the same people who moved away).