Municipal Housing Companies

Christoph Krönke, Ludwig Maximilian University of Munich

Relevance of the Practice

One of the crucial challenges of our time for local governments is the ensuring of adequate housing opportunities. In principle, both urban local governments (ULGs) and rural local governments (RLGs) bear core responsibilities in this field. As a result of the urban-rural divide, however, the socio-economic context and (subsequently) the political objectives of providing housing opportunities vary considerably in urban and rural areas respectively. This results in an increasing divergence of ULG and RLG responsibilities which can be perfectly illustrated by the example of the activities of municipal housing companies. The activities of these companies can serve as one of the top practices for the comparison of ULGs and RLGs with respect to all report sections.

Description of the Practice

Housing construction by municipal enterprises is one of the many (and most important) instruments of local governments to ensure adequate housing opportunities for their populations. In principle, the responsibility of local governments under Article 28(2) of the Basic Law (BL) to provide adequate housing, including the establishment and operation of municipal housing companies, is comprehensive and relates, de jure, to both ULGs and RLGs in a symmetrical manner.

Despite this uniform (symmetrical) legal starting point, however, the socio-economic contexts of ensuring adequate housing opportunities by ULGs and RLGs are quite different. In rural areas, housing activities must take account of the situation of the respective municipality against the backdrop of the urban-rural cleavage, and they need to address, in particular, the increased social and economic attractiveness of larger metropolitan regions and – as a result thereof – the possible population decline. For RLGs, future-oriented sustainable housing construction does therefore not mean building up all accessible spaces. For them, quality in individual buildings and in local planning (along with other quality services such as culture and infrastructure) seems to be of utmost importance in order to create an attractive living environment. Hence, each municipality must determine its specific needs, for example for young families, employees of local companies (and companies in cities nearby) or those in need of social assistance.

In contrast, ULGs typically face a significant quantitative shortage of affordable housing. According to recent studies, there is a total lack of almost 2 million apartments and houses in German urban municipalities. While the quality of urban housing, including the consideration of demographic aspects (such as age, gender and ethnic origin of the population), must not be neglected either, these figures illustrate that in mere quantitative terms the public providing of affordable housing is a much more urgent task in urban areas than in rural areas.

From this perspective, the activities of municipal housing companies seem very suitable for a comparison of the effects of the urban-rural divide on local responsibilities and public services (report section 2 on local responsibilities). Almost all of the relevant research parameters are addressed: With regard to organization, housing activities are not only carried out at the lowest level of local government, i.e. the municipal level, but also at the level of the German Länder and within forms of inter-municipal cooperation. Furthermore, they are an example of carrying out local responsibilities and providing public services by public enterprises, as an alternative to other instruments of local government (such as the conclusion of contracts with private actors). Moreover, local governments must pay particular attention to the demographic structures of their populations when providing housing services. And finally, the issue of housing is high on the agenda of municipal lobby organization with substantial influence on policy makers.

The activities of municipal housing companies are also highly relevant for the other WPs. They are among the most capital-intensive responsibilities and services provided by local governments, and they quickly raise questions about financing (report section 3 on local finances). Moreover, especially smaller local governments can quickly reach their financial and performative limits in carrying out housing responsibilities; this can require changes in the structure of local government, ranging from simple inter-municipal cooperation to the transfer of tasks to larger governments and amalgamations of local governments (report section 4 on local government structure). From this perspective, excessive housing activities of local governments and their municipal housing companies might quickly become a question of mandatory state supervision (report section 5 on intergovernmental relations). And finally, the issue of public housing is also highly relevant for forms of direct democracy, as illustrated, for example, by the referendum in Berlin on the naturalization of large private housing companies (report section 6 on people’s participation).

Assessment of the Practice

The objective of municipal housing companies is to contribute to adequate local housing opportunities. On a preliminary basis, municipal housing companies in both ULGs and RLGs have considerable difficulties in achieving this goal. Quite obviously and despite ULGs’ and RLGs’ qualitative and quantitative housing efforts, urban areas continue to detract people from rural areas while housing shortage is worsening dramatically in certain areas. While the City of Munich, for example, does not even get close to meeting its target of building 8,000 new living units per year (which could accommodate about 20,000 inhabitants), it still attracts around 30,000 persons per year. In view of these difficulties in carrying out their responsibilities through single undertakings, ULGs and RLGs should consider creating joint ULG-RLG housing companies. It appears, however, that ULGs and RLGs are rather reluctant when it comes to joining forces in this field. In general, relevant factors for successful housing activities include – above all – political willingness as well as sufficient financial resources and real estate available to the respective local governments.

References to Scientific and Non-Scientific Publications

— — ‘Praxisstudie Bezahlbare Qualität im Wohnungsbau’ (Bavarian State Ministry for Housing, Construction and Transport, 22 June 2018)   <>

— — ‘Gründung der DIWOG: Interkommunale Zusammenarbeit im Bereich des kommunalen Wohnungsbaus‘ (Stadt Neu-Ulm, 14 December 2018) <>

Bölting T, ‘Regionale Kooperationen von Wohnungsunternehmen, Analyse von Mechanismen der Zusammenarbeit und von Erfolgsfaktoren am Beispiel der Kooperation kommunaler Wohnungsunternehmen im Ruhrgebiet‘ (Dissertation, TU Dortmund University 2016)  <>

Holm A, Lebuhn H, Junker S and Neitzel S, ‘Wie viele und welche Wohnungen fehlen in deutschen Großstädten?’ (working paper no 63, Hans Böckler Stiftung 2018) <>

Hoppe W, Uechtritz M and Reck HJ, Handbuch Kommunale Unternehmen (3rd edn, Dr. Otto Schmidt 2012)

Mitschang S (ed), Erhaltung und Sicherung von Wohnraum – Fach- und Rechtsfragen der Planungs- und Genehmigungspraxis (Nomos 2017)

Traub H, Der Ausverkauf kommunalen Wohnungseigentums – ein Verstoß gegen staatliche Gewährleistungsverantwortung? (Dr. Kovač 2015)

Website of the municipal housing company GWG, <>

Website of the BayernHeim GmbH,  <>