26.1. Short description

Osthuesheide is a neighbourhood consisting of several apartment blocks with about 800 inhabitants. They were built in 1963 by a private company and have since been used by the British army. Gradually, the apartments have been sold to private investors or individual owner-occupiers since the late 1970s. Throughout the 1990s and 2000s, a “circular and cumulative process of degradation”³⁶ was observed: the low standard attracted mainly tenants and owners with few resources and necessary investments were omitted. As a consequence, several apartments became uninhabitable and as a result, poverty and a high fluctuation of residents have become symptomatic of this area.

In a report concerning the preparation of a renovation programme following the declaration as an area with special need for renovation (Sanierungsgebiet) by the city council in 2005, the fragmented ownership structure and lacking financial capacities of many owners were identified as the main obstacles for private investment. Legally, only owners’ associations (Eigentümergemeinschaften, WEG³⁷) were able to make decisions on major investments. Two of these decided in favour of investments, while a positive decision in the third and biggest (128 units) lacked a majority.

Therefore, a public company was formed in 2006, Wohnungsgesellschaft Große Lodden (WGL). The company was commissioned to buy flats until those willing to invest had a majority in the respective owners’ association. In 2010, the third owners’ association opted – with WGL representing almost 50 per cent of the units – for substantial investments.

26.2. Conceptions and ways of addressing users

In a first approach, the municipality tried to counteract the negative housing situation and reputation of Osthuesheide by means of social work and social services. This, however, only resulted in very limited success: it did not further the identification of inhabitants with the neighbourhood and failed to promote significant improvements.

Consequently – based on the problem analysis – the owners were identified as the main addressees of public efforts: (a) financial investors should be either forced to invest by majority decision or driven to sell their flats; whereas (b) individual owner-occupiers should be convinced of joining the pro-renovation fraction and be enabled to carry the financial burden.

In WEG I and II, with a high share of owner-occupiers, the municipality initiated a moderated process. The general aim was to foster decisions for renovation without further financial engagement of the municipality. The owners were assisted – following an empowerment approach – in developing realistic investment and modernisation plans. Regarding WEG III, some owners considered the net costs³⁸ of the renovation a financial problem. Therefore, for the first 4 years a subsidy of 100 euros per month was offered by WGL. As an alternative option, owners could sell their flat to WGL at 4,000 euros above market value³⁹. The third option – reducing the monthly payment by work contribution during the renovation process – was not chosen by any tenant.

The aim of the renovation was not only to improve the living situation for existing tenants but also to attract new and well-to-do inhabitants to the area⁴⁰. The common catchphrase for this is “to create a (healthy) social mix”⁴¹. The underlying assumption is that those in a worse socio-economic situation will indirectly benefit from this mixing process. It can be argued, however, that this concept does not strike at the core problem of poverty/ inequality but merely changes the settings in which it exists.

26.3. Internal organisation and modes of working

The direct intervention of the municipality was limited to a few measures improving the quality of the surroundings as well as changing the name of the neighbourhood, in order to improve its reputation⁴². Involvement of the city in purchasing units – as initially intended – was soon considered inappropriate. The influence obtained through the acquisition of a low number of flats was remote and there were concerns that the municipality would be in danger of being legally liable in the event that the owners’ associations were unable to repay their debts.

In order to avoid this, the separate company (WGL) was founded as a subsidiary of the communally owned Wohn+Stadtbau. This company was supposed to gain a majority share in WEG III, where both the need for investment and the number of flats owned by corporations were highest. The close connection between the established public housing company and the new WGL allowed for the obtainment of a substantial loan for the renovations, since Wohn+Stadtbau offered other houses as guarantees. In the short term, the WGL needed to invest a high amount of money in order to buy and renovate the flats⁴³. In the long run, however, these investments are expected to be profitable in terms of a sustainable income (rents) or through a resale.

According to the complex statutes of the owners’ associations and housing ownership laws (Wohneigentumsrecht), one single decision for the whole area of WEG III (128 flats) had to be taken. As a public support programme for renovations was due to be discontinued, a decision was taken quickly by simple majority. Court cases – arguing that a qualified majority would have been necessary – are still ongoing, but have been rejected in the first instance⁴⁴.

26.4. Interaction with the local welfare system

Both the moderated process in WEG I and II and the renovation in WEG III represent a governance innovation in Münster and probably even in Germany⁴⁵. Interventions in the ownership structure of neglected neighbourhoods have not been executed before, especially not to such a high degree in terms of financial volume. However, both the representatives of the WGL and of the Municipal Office for Housing do not observe a paradigmatic change in housing policy. According to the representative of the Municipal Office for Housing, a long-term re-communalisation of housing stock is not necessary. It would suffice to take up an intermediary role, for example by buying neglected blocks and reselling them to private owners based on a contract including obligations regarding the future development of the neighbourhoods⁴⁶. This underlines the predominance of market mechanisms in combination with a certain level of municipal control.

This reliance on market mechanisms was only broken up in the case of Osthuesheide⁴⁷ due to the state and reputation of the neighbourhood threatening the overarching image of Münster as an attractive location for private investments. This perception activated a broad number of stakeholders and led to the acceptance of public intervention.

Additionally, consciousness has been growing for the interaction between public transfer payments and the lack of private investment. The representative of the municipal office for housing issues calls this process “capitalisation of social rent”⁴⁸. He explains that if the rents for recipients of transfer payments are paid regardless of the state of the flats, this can pose a disincentive to investment. Some financial investors owning neglected flats are even actively seeking such tenants. Especially if the payments are made directly to the owners, reducing payments in case of seriously neglected apartments could be used to press for investments and renovations, which would offer another form of indirect influence on the housing market.

Most stakeholders consider the Osthuesheide renovation programme highly successful and a sustainable solution to the underlying problems. According to the municipal representative, a number of other communities facing similar problems⁴⁹ are greatly interested, especially in the moderated process in WEG I and II. An organised transfer of knowledge might be a starting point for diffusion processes. The process in these units was ruled by only a small number of preconditions: the owners were able to shoulder the lion’s share of the costs themselves, a majority for the renovations was easily obtained, and the involvement of the community remained low.

The process in WEG III was a lot more demanding, however, and as such will be more difficult to reproduce. The possibility to obtain credits at low interest rates depended both on the declaration as Sanierungsgebiet and on the ability of the Wohn+Stadtbau to offer its existing stock as guarantee. The willingness of existing owners to either renovate or sell their flats was another prerequisite. Finally, the point in time was crucial: at that time, a renovation was still possible, while other seriously neglected housing might already be in a condition that only allows for its destruction.