WHY DEMOLITION?URBAN RESTRUCTURING IN WOLFEN-NORD

ROCHUS WIEDEMER

WHY DEMOLITION?URBAN RESTRUCTURING IN WOLFEN-NORD

ROCHUS WIEDEMER

Hello, my name is Uwe and I operate an excavator. I’m herein Saxonia-Anhalt in Wolfen-Nord and have the job of de-molishing these buildings you see behind me. To be honest,I don’t really understand why empty flats are simply beingtorn down.

Urban Restructuring inthe New Federal States

Housing industry

Urban development

I learned a little about what’s going on and found out thatit’s not an easy question to answer. All these vacant flatshave quite severe consequences for the housing industryand urban development. That’s why they started the UrbanRestructuring in the New Federal States Programme. Since2001 they have been trying to deal with the crisis withinthe housing industry and problems with urban developmentin eastern German communities. Urban planners, however,answer the question of why flats are being torn down dif-ferently than people in the housing industry.

HOUSINGINDUSTRY Why are

buildings beingdemolished?

The Urban RestructuringProgramme’s goal is to reduce thesurplus of flats on the market by2010.

First I met with the director of theWBG (the Wolfen Housing Construc-tion Company).

Okay, in order to explainthat we’ll have to take acloser look at the historicalsituation.

Wait a minute, I don’t under-stand. These buildings were putup when Wolfen was still part ofEast Germany. Where do the de-bts come from? And won’t the de-bts still be there even after thebuildings have been torn down?

What’s the problemwith having a surplusof flats? If there areso many of them thenrents will go down.Why does the govern-ment prevent thatfrom happening andreact with a demo-lition programme?

Maybe I can explain the situationlike this: these pre-fabricated con-crete buildings are not worthanything due to being vacant, butare still a huge financial burden.Lowering the rent doesn’t help topay off the debts, and that’s notjust the situation in Wolfen, butin all of eastern Germany.

Old debts 199014.6 billion Euros

DEBTS

Debts occurred because the construction of the flats inthe GDR was financed by the country’s state bank in theform of loans. At the time of the monetary union in 1990the construction loans were at a level of 72 billion marks.When West German banks took over the East GermanState Bank a 14.6 billion Euros market economy-baseddebt was created. These “old debts” were simply propor-tionately transferred to the 1200 newly founded housingcompanies.

That partially explains thequestion about the debts,as the old debts weretransferred to the WBG inaddition to the assets. What are old debts?

Old Debts 1990

The 13,500 flats of the Wolfen-Nord Housing Estate belong to twohousing enterprises: The WBG (the Wolfen Housing Construction Com-pany) and the WWG (the Wolfen Housing Construction Cooperative).Both companies were created in 1990 from existing structures withinthe GDR housing industry: the 5,000 state-owned flats were transferredto the municipality of Wolfen, which then founded the WBG as anindependent subsidiary. The 8,500 flats belonging to the WolfenWorkers’ Cooperative remained a cooperative and received a new legalform as the WWG.

.

THE WBG, A MUNICIPALLY OWNED HOUSING COMPANY

1960-1990 state-owned housing industrySince 1990 the Wolfen Housing Construction Company (WBG)

1991-1990 the Wolfen Workers’ CooperativeSince 1990 the Wolfen Housing Construction Cooperative (WWG)

In 1990 the WBG’s old debts at firstamounted to 56 million Euros. Thatwas its proportion of these all-Germandebts

First of all, the transfer of old debts is stillbeing legally contested. The concreteeconomic problem, however, was that rentin the GDR was state subsidized, whichmeans it was cheap. Because of theseexisting cheap rents in 1990 interest andthe repayment of the debts couldn’t befinanced. The debts didn’t shrink, theygrew, which quickly became obvious toeveryone involved. A compromise was thusreached in 1993 with the passing of theOld Debt Assistance Law.

At first the WBG and the GdW (Head Federation of Hou-sing Companies) in East Germany refused to acknow-ledge the old debts. The housing industry debt dilemmawas similar to other reunion-related problems such asthe privatization of state-owned firms and the “returnbefore compensation” regulation.

But hang on,what was theactual problem?

56 millions Euros

Because of interest and unsettled repayments the all-Germanold debts grew to 26 billion Euros by 1993. With the Old DebtAssistance Law the federal government agreed to cover olddebts up to a limit of 78 Euros per square meter. In return,the housing companies agreed to acknowledge the old debtsand to privatize 15% of their holdings within ten years. Thatmeant that flats had to be sold in order to make money availablefor old debt repayments.

Old Debt Assistance Law 1993

14.2 billion Euros of old debtsremain with the housingcompanies.

800 million Euros are raisedthrough the sales of flatsaccording to the terms ofprivatization.

11 billion Euros of old debtsare taken over by the federalgovernment.

Well, then the debtproblems were solved,weren’t they?

No, because the WBG stillhad a problem with new de-bts. Many of the flats werebadly in need of repair and ontop of that we had to react tothe development of new hou-sing in the surrounding area.We had to make our flats mo-re attractive, which meant wehad to renovate.

26 million EUR

Good! You were already halfway there. But if I understandit correctly, the Old Debt Assi-stance Law was also supposedto help with the privatizationof state-owned property?

In principle, yes. The Old Debt Assistance Law wasa housing policy tool for reducing the percentageof communally and cooperatively owned flats andfor increasing the share of private ownership. Theproblem, however, was that in this region all theindustry was gone and in Wolfen, beginning in theearly 1990’s, no one wanted to buy a flat. Becauseattempts at privatization proved to be difficult inother regions, the WBG was released from itsprivatization commitment through an amendmentto the Old Debt Assistance Law in 1999.

The Old Debt Assistance Law re-duced the WBG’s old debts from56 million Euros to 26 millionEuros.

There was still a lack of flats in East Germany at the beginning of the 1990’s. Due to direct and indirect subsidiestotalling 17.4 billion Euros, the construction of new flats and the renovation of existing ones were supported.There were also federal and state subsidy programmes for the renovation of prefab-concrete tower blocks and theupgrading of large housing estates, and the Credit Institution for Reconstruction (KfW) gave low-interest loans.In a majority of the new federal states, however, the subsidies were linked to the use of housing companies’ owncapital resources. That means, in order to get money, the housing companies had to bring their own money withthem. The fact that they didn’t have any money meant they had to take out additional loans in order to receiveany subsidies. The subsidies resulted in the housing companies having even more debts.

NEW DEBTS SINCE 1990

The assistance policies in the 1990’s are the causeof the current surplus of flats on the market. It tooka long time until these policies were changed, evenafter the first signs of a long-term surplus becameapparent in many regions.Many of our flats had long been vacant while theconstruction of new ones was being encouraged.That only increased the number of vacancies astenants moved to new flats in the surrounding areas.

.

And once again theloans couldn’t bepaid back

Spending 64 million Euros, theWBG was able to renovate 3,700of their 5,000 flats. The WBG’snew debts amounted to 25 mil-lion Euros. These debts consistedof loans from the KfW for moder-nization and the firm’s own capi-tal resources from the subsidyprogramme, which were alsoloans.

26 million euros old debts

25 million new debts

In 1998 the WBG had a vacancy quotient of30%. It became more difficult to cover costs.At the same time the company’s tangible assetsbecame worth less and less. The WBG wasthreatened with insolvency.

The WBG is, however, not an isolated case. The vacancy levelin communally and cooperatively owned flats grew to an averageof 14% in 2000. The housing companies’ tangible assetsdecreased dramatically. In 2000 the National Association ofHousing Companies stated that 30 companies were in dangerof becoming insolvent.

CRISIS

Sinking tangible assets

52 million Eurosof old debts

50 million Eurosof new debts

Sinking tangible assets

Old debts 200111 billion Euros

New debts

These debts havebecome a problemdue to the low levelsof occupancy.That’s right; the loans weren’t a pro-

blem when the flats were occupied.Let’s take a closer look at a building.

The building with48 flats is burde-ned with 220,000Euros of olddebts…

…and 208,000 Eu-ros of modernization-related debts.

UNOCCUPIED

Interest and repayments of olddebts 32,000 Euros

Running costs 43,500Euros per year

That leaves 22 occupied flats. Witha rent (excluding heating) of 3.8 Eu-ros per square metre, they bring inan income of 60.000 Euros.

The building costs are still 75,500Euros, which means that a loss of15.000 Euros per annum occurs.

A lack of occupancy has an effect onthe value of the building: a buildingin which no one wishes to live isworthless. The building is stated asbeing worth only 90.000 Euros inthe WBG balance sheets. The marketvalue is probably quite a bit less.

In mid-199826 flats werevacant.

Okay, the low occupancy ratesthreaten the housing companies.Why not just let them all gobroke? We live in a marketeconomy, don’t we?

It’s not a problem for banks or the regional housing market ifa single homeowner goes broke, but the insolvency of a largehousing company has much different consequences for theentire region. The communally and cooperatively owned flatsin eastern Germany account for 57% of the rental market; insome regions this rate is much higher.

INSOLVENCY OR RECAPITALISATION

What would happen if the WBGwent broke?

For communal housing companies such as the WBG the municipality ofWolfen is liable. Wolfen, like most eastern German communities, alreadyhas substantial debt problems. With cooperatively owned housing com-panies like the WWG the tenants themselves are liable, and would loosetheir shares in the cooperative. The losses which are not covered by anyliability would then have to be covered by the banks themselves.

The WBG’s flats would be taken over by an insolvencyadministrator. He would first of all try to find a buyerfor the flats. He would dramatically cut down on run-ning costs as the creditors’ interests are of the utmostpriority. As a result the living conditions for 7,500tenants would deteriorate and the exodus wouldincrease.

WWG

If the stock of flats is sold to an investor, he wouldnaturally purchase them without any debts, and atthe current market value, which, due to low occupan-cy levels, is incredibly low. Because of this he wouldhave much lower capital costs than the WBG andcould offer tenants lower rents.One housing company’s insolvency doesn’t mean thata supplier disappears from the housing market, be-cause a new supplier is created; one which has muchmore favourable conditions. This makes the situationon the regional housing market more difficult for allcompeting suppliers.

.

After such a sale is made there are stilllots of debts. Who takes care of them?

New housing company

WWG Insolvency administrator

WBG Insolvency administrator

STADTUMBAU OST AS AMARKET ADJUSTMENTPROGRAMME

The demolition is intended to reduce the surplus ofdwelling units.

Demolition350,000 Flats

Unoccupied500,000 Flats

Unoccupied400.000 flats

1998

Occupied 6,5million flats

Occupied 6,7 million flatsof those 800,000 new flats

Unoccupied500,000 Flats

Occupied 6.85 million flats150,000 of those renovatedNew Flats?

1990:

Goal for 2010

Demolition

500 millionEuros

Stategovernments

Federalgoverment

2002 - 2010

500 millionEuros

500 millionEuros

In August 2001 the federal government passedthe Urban Restructuring in the New FederalStates (Stadtumbau Ost) assistance programme.The so-called partial demolition (Rückbau) isbeing subsidized by the federal government (500million Euros) and by state governments (500million Euros).

I see, and that’s why the mu-nicipalities and banks toge-ther with the housing compa-nies have campaigned tosupport the housing industryin eastern Germany and notsimply leave it at the mercyof the free market.

The housing market crisis in eastern Germany is not simply due to a surplus offlats, but rather the threat of insolvency for communally and cooperatively ownedhousing companies. The municipalities and banks fear firstly the collapse of thehousing industry and urban development, and secondly, that as a result they won’tbe able to control development at all.

The debt crisis of the municipal and cooperative housing companiesrevived the debate about the old debts: The Old Debt AssistanceDecree of December 2000 waived the old debts for demolishedhousing if the housing companies had a higher than 15% vacancyrate. The federal government made 358 million Euros available.Applications for the waiving of debts, however, had to be submittedby the end of 2003. Housing companies still had to pay off anynew debts connected with a demolished building. These debtscould be transferred to another residential building upon the banks’approval.

STADTUMBAU OST AS A PROGRAMME

FOR WRITING OFF DEBTS

Old debt relief 2000358 Mio. Euros

Remaining old debts10,6 billion Euros

The WBG’s concept for redevelopmentcalls for the demolition of 2,000 flatsand a corresponding application for debtrelief. That means the waiving of 9 mil-lion Euros in old debts.

The partial demolitionin Saxonia-Anhalt issubsidized with alump sum of 65 Eurosper square metre; thisadds up to 190.000Euros for the buildingin our example.

Whether there is a loss of rentalincome depends on how many ten-ants accept a substitute apartmentowned by the WBG.

Right, this stabilizes the rentsand the value of flats on thehousing market. But whatdoes a demolition programmedo for an indebted housingcompany such as the WBG?The debts don’t disappear ifthe buildings are demolishedor sold.

43.500 Eurosrunning costs peryear are done away

32.000 Euroscapital cost per yearremain.

The value(90.000 Euros) ofthe building in thebalance sheets islost.

Tangible Assets

17 million Eurosold debts

25 million Eurosnew debts

Applications forold debt relief9 million Euros

That’s what I’m saying - the building isdefinitely gone, the debts are still thereand the bank doesn’t have any moresecurity if their loan isn’t paid back. Thedemolition doesn’t do anything for theWBG’s debt crisis. So what’s the pointin doing this?

The important thing isthat the partial demolitionassistance programme islinked to a modification inthe Old Debt AssistanceLaw: Whoever demolishesbuildings has their debtsdropped.

The debt burden of428.000 Eurosremains the same.

So, the WBG demolishes itsbuildings in order to get rid ofdebts and not to somehow pro-fit from an adjustment of themarket.

URBAN DEVELOPMENT

In order to find out what effect the demo-lition has had on urban development in Wol-fen I got together with an architect whoworks in the City Planning Department inWolfen.

Why are flatsbeing torn down?

Assistance for demolition wasdeveloped as a planning tool, sothat eastern German communi-ties could control urban de-velopment despite migration andlow occupancy levels. Unfortu-nately, it looks completely diffe-rent in practice.

I see. Low oc-cupancy leadsto even lessoccupancyand buildingshave to be de-molished orWolfen willturn into theBronx?

Of course!Urban planningcan’t solve theproblems ofmigration andlow occupancylevels, can it?

To a certain extent that’s right,but through migration and low oc-cupancy rates certain social-spatial processes occur whichmigration further reinforces. Inplanning language that’s calledthe “low-occupancy spiral”. Ur-ban planning can exert a certaininfluence on these processes.

No, it’s not about some kindof threatening scenario orincreased security, but whe-ther, and how, we planners areable to react to these develop-ments.

Wolfen-Nord was built as a series of housing complexes between 1960 and 1990. The development had a variedsocial mixture; chemical plant workers lived next to engineers.

The development was organized according to the age of its tenants. In 1990 the average age in the oldestsections was approximately 50 and in the newest sections barely more than 20.

THE LOW-OCCUPANCY SPIRAL

Housing complexes 1 and 2Construction period 1961-70Level of occupancy 94%

Housing complex 4Construction period 1980-90Level of Occupancy 63%

Housing complex 3Construction period 1971-79Level of occupancy 76%

The social-spatial development is clearly discernible on a map showing the levels of occupancy at the end of2001.The level of occupancy in Wolfen-Nord isn’t evenly distributed. It is worst in the newest housing complexes,which have the youngest tenants.

The so-called mobile segment of tenants, young families and singles, were the first to leave due to unemploymentand a lack of jobs. Single-family housing developments and residential areas were built in the vicinity. Littleby little, families with good incomes began to move into their own homes. New tenants, mostly emigrants andfamilies on welfare, moved in due to the availability of empty flats in the newer complexes which were largeenough for families.

The social mixture disintegrated and the housing estate’s image became worse. The migration to thesurrounding areas increased. The migration of tenants to the surrounding areas is now much greater thanthe migration of jobs. Socially and economically disadvantaged tenants remain in Wolfen-Nord while thosewho earn more do what they can to get away. You could say the development within the region has more todo with segregation, that is, the separation of social groups from one another, and polarization, thestrengthening of social differences.

In comparison to its neighbouring municipalities Wolfen-Nord has the highest percentage of welfare recipientsand unemployed persons in the region. On top of that is the fact that social tasks and burdens are not equallydivided among the communities. It’s a paradox that despite low occupancy levels in Wolfen urban sprawlcontinues to grow.

ECONOMIC DILEMMA

An economic dilemma has been created for the municipality of Wolfen by all the empty flats and themigration. The technical and social infrastructure, that is day-care centres, schools, public transport,parks, etc. is no longer working to capacity, but the running costs are nevertheless rising. The municipalityhas no money for infrastructure reorganization because, due to a decline in the number of residents andweakened economic activity, the municipal income is dwindling.

So these problems are now supposedto be solved through financial supportfor demolition?

No, urban development problems can’t be solvedby demolition alone. The answer to these problemsdoesn’t just have to do with solving occupancyproblems. A perspective for the housing estatesmust be developed: which parts of the developmentwill be done away with, and when? Which sectionsof the development have potential for stabilization,and how can this potential be strengthened? Maybethen it will be possible to stop the downward spiral.

URBAN PLANNING NO LONGER FUNCTIONS

Wolfen could barely control these processes. Because the present planning tools are for dealing with growthand improvement, eastern German communities have an enormous challenge to deal with. The planning departmentin Wolfen-Nord, in concert with the housing companies, tried to deal with the problem of empty flats in the mid1990’s. We weren’t able to achieve much though, despite renovations and open-space improvements.

The allocation of funds is tied to the creation of an urban development concept. This concept has to react tooccupancy level investigations and the long-range prognosis, and must be developed in concert with housingcompanies.

The Urban Restructuring in the New Federal States Programme (Stadtumbau Ost) tries to solve urban developmentproblems by offering improvements in addition to demolition. Particular areas where demolition is occurringare also to be stabilized. More money is allotted for improvements than for demolition. A third of the capitalfor improvements has to be raised by the municipalities themselves.

Municipalities

500 million EurosState

governments

Federalgovernment

2002 - 2010 2002 - 2010

Demolition

Improvements

500 millionEuros

Allocation of demolition and improvement funds

Urban development concept

Housing companies Municipalities

Stategovernments

Federalgovernment

500 million Euros

500 millionEuros

500 million Euros

STADTUMBAU OST AS AN OPPURTUNITY

FOR URBAN DEVELOPMENT

That means demolition is onlyallowed providing that the buil-dings which remain will be mo-re liveable and given some sortof perspective for the time after2010.

That’s exactly right. But let’s takea look at how the urban develop-ment concept in Wolfen-Nord wascreated by both housing compa-nies together with the planningdepartment.

URBAN DEVELOPMENT CONCEPT

The situation for the housing companies in Wolfenis so precarious that their highest priority is for eco-nomic redevelopment through partial demolition anddebt relief. The redevelopment plans of both housingcompanies call for the demolition of between 5,000and 12,000 flats by 2010. The firms intend to carryout these plans as inexpensively as possible.

Housing Complex 4.3 isan exception, as it was re-novated and greatly impro-ved in the 1990s.

The newer housing comple-xes which have the lowestlevels of occupancy will betorn down.

Post-use conceptswill not be developedfor the newly createdopen space.

The areas which should beimproved have not beenclearly defined.

The planning department wanted to use the conceptto define which sections of the development wouldbe demolished and which sections would be preservedand improved over a prolonged period of time. Theplanning department’s position was, however, veryweak and not formulated in concrete terms becauseit was extremely important for the municipal budgetthat the WBG remained solvent.

Housing companies Municipality

That means cityrestructuring inWolfen amountsto no more thandemolition.

Even though consent for the financial assistancefor demolition is sometimes late in coming,1,200 flats have been torn down up to now. Themoney for improvements has failed to arrive asWolfen isn’t able to come up with its own shareof the necessary funds.

IMPLEMENTATIONThat means we couldn’t developthe best possible plan in terms ofurban development. Instead wehad to develop a plan which allo-wed the WBG to economically sur-vive. The plan merely definedwhere buildings would be demo-lished and indicated no develop-ment within the housing estate.

Municipality

Yes and the process of demolition is dictated by theinterests of the housing companies: little by littlethe buildings with the lowest levels of occupancyare vacated and then demolished.

The demolition of an entire area would be morefavourable for the municipality. If only the buildingswith low occupancy levels are torn down the streetsstill have to be maintained and the restructuring ofthe social infrastructure is made more difficult. Anexample: which day-care centre should be renovatedand which one closed?

Housing companies

The flats which have a view ofthe surrounding landscape areeasier to rent. The housingblocks towards the centre ofthe housing estate are occu-pied by Russian-German immi-grants.

A curved building, which becauseof its large flats has a higherlevel of occupancy and is rentedby Russian-German immigrants.

First of all there are the more recent residential com-plexes which have to be partially demolished. The socialand economic situation is disastrous. The demolitionresults in large, unused open areas which increase thesegregation within the housing estate.

Housing Complex 4, the end of 2003Unemployed tenants: 32%Welfare recipients: 12.9%Level of occupancy: 46%Average age of tenants: 39

Under these circumstances thespiral of low occupancy levelscannot be stopped. Because im-provements aren’t made and per-spectives for the development ofthe housing estate aren’t discerni-ble, the demolition is viewed asgiving up on the housing estate.There are now three separate zo-nes, which are defined by socialstructure, average age and levelsof occupancy.

END OF THE SPIRAL?

Thirdly, there are the oldest housing complexes. Theyhold their own on the regional housing market as aplace of residence for old-age pensioners. The socialdata indicate a more stable situation, which couldchange around 2015 due to a high percentage of elderlytenants, which could then trigger a new wave of lowoccupancy.Second of all, there is a housing complex for tenants

who previously lived in demolished buildings. The un-employment rate is meanwhile quite high, the percen-tage of welfare recipients is lower and the level of oc-cupancy is currently better than in Housing Complex4. Improvements and discernible growth perspectiveswould be especially important here.

A curved building, which because ofits large flats has a higher level ofoccupancy and is rented by familieswhich are welfare recipients.

Housing Complex 1 and 2, the end of 2003Unemployed tenants: 27%Welfare recipients: 2.3%Level of occupancy: 82.5%Average age of tenants: 52

Housing Complex 3, the end of 2003Unemployed tenants: 28%Welfare recipients: 6%Level of occupancy: 67.9%Average age of tenants: 45

The loss of tenants is still so high that present plans for demolition will not eliminate the problem of low levelsof occupancy in Wolfen-Nord. The number of residents within the housing estates has dropped from 31,000to 15,000 since 1993. The rate of loss in the last two years has slowed down from 9.6% to 6.4%. This hasless to do with the results of demolition than with the residents’ economic situation, which no longer allowsfor migration to the surrounding areas.

Wolfen-Nord 2001

4,100 flats vacant.

9,400 flats occupied

8,500 flats occupied

5,000 flats demolished

7,600 flats occupied.

1,400 flats demolished

4,500 flats vacant

Goal Wolfen-Nord 2010

Wolfen-Nord 2003

This means that perhaps little by littlethe entire development will be demo-lished just in order to prevent both hou-sing companies from going broke. Demo-lition assistance sure did develop a lifeof its own. I hope the Urban Restructu-ring in the New Federal States Program-me functions better in other communities

2010

This means that after2010 there will still betoo many flats and thatthe WBG and WWGwill be faced with in-solvency once again.

Those involved in Wolfen-Nord appearto think that the programme for demo-lition will continue even after 2010. Anew wave of empty flats threatens andthere are no recognizable perspectivesfor any kind of development. The onlything we can do at the urban planningdepartment is to organize the winding-up of the housing estates.

Luckily there are more encouraging developments than thosein Wolfen. For example in Leinefelde, where housing com-panies and communities successfully cooperate and urbanrestructuring actually takes place, and not just demolition.Through demolition in Leinefelde new open-space areas andconnections with the wider landscape have been created;improvement funds are used for the experimental reconstruc-tion of prefab-concrete buildings. Because of this, sectionsof the housing estate now have a long-term perspective asplaces to live.

A few weeks later I took a day off and wentto a conference called “Two Years of UrbanRestructuring in the New Federal States”,which was sponsored by the Federal Ministryof Transport, Building and Housing. I talkedto an urban sociologist there, as I wantedto know how the programme worked in othercommunities. Are the results as equallydisillusioning as they were in Wolfen? Isurban restructuring really only determinedaccording to the stipulations and interestsof the housing industry?

TWO YEARSOF URBANRESTRUCTURINGIN THE NEWFEDERAL STATES

What prevents plannersfrom doing a better jobthan in Wolfen?

In order to explainthat I have to go backa little bit.

Places like Leinefelde, in which the urbandevelopment goals have been reached, areunfortunately the exception. If we look at theprogress and results in all of eastern Germa-ny we see that the Urban Restructuring Pro-gramme primarily functions as a redevelop-ment programme, not only in Wolfen, for thecommunally and cooperatively owned hou-sing companies

What's more predominant then,places like Leinefelde or placeslike Wolfen?

CONSEQUENCES OF ASSISTANCEPROGRAMMES SHORTCOMINGS

In the mean time there are even low levels of occupation in some of the housing estates built during the 1990’s.

Empty flats are not just limited to the housing estates with prefab-concrete buildings, in older buildingsit’s even more of a problem. In old sections of the city many buildings are no longer habitable and arefalling apart. The restored buildings are often empty.

…and debt-free old buildings can be torn down.

The assistance programme for Demolition is so organized, however, that with its help only the GDR housingstock belonging to companies which are entitled to old debt relief…

Remaining old debts10 billion Euros

The linking of relief from old debts and partial demolitionwill continue to determine the implementation of theUrban Restructuring Programme in the future. By thetime the deadline arrived in December 2003 the housingcompanies had applied for relief for 250,000 flats.Authorization for 150,000 flats has already been given.The assistance programme for old debts has alreadybeen increased twice and now amounts to 928 millionEuros, which adds up to relief for 215,000 flats.

Housing company, createdduring the process ofprivatization which began in1993, which has large debtproblems, but no old debts.

Munal housing company with anoccupancy level of 86% is notentitled to old debt relief

Private owner of renovated oldbuildings.

In communities with a complex housing market and a more complex urban structurethe problem is that most property owners are given no incentive to demolish their emptyflats and buildings. They therefore don’t get involved in the development and imple-mentation of urban development concepts. The result is that in these communitiespartial demolition only takes place where the assistance programmes allow for it andnot where it would also be useful in an urban planning sense.

Municipality /

Housing construction cooperativewith an occupancy level of 83% isentitled to old debt relief.

I see, that’s why I actuallyonly tear down prefab-concrete buildings.

Yes, the majority of buildings beingtorn down are in large housing estateswhich belong to large housing compa-nies. Because in these areas the enti-re stock of flats is often burdened wi-th old debts and the firms demolishbuildings to get relief from the debts.

Old Debt Relief270 million Euros, April 2004300 million Euros, Dec. 2002358 million Euros, Dec. 2000

Many communities can’t raise their own share of money for improvements and, as in Wolfen, partial demolitionis not enough to prevent the downward spiral within the large housing estates. Saxonia and Saxonia-Anhalt havereacted to the latest developments concerning occupancy problems by increasing the financial assistance forpartial demolition - more and more improvement funds are being used for partial demolition. The goals of theUrban Development Programme become less and less important as time goes by.

DemolitionImprovements

336 millionEurosFederal

and stategovernments

264 millionEuros

2002, 20032002, 2003

DEMOLITION VS. IMPROVEMENTS

The Urban Restructuring Program-me doesn’t seem to feel responsi-ble for more complex urban struc-tures. Are there other programmesfor these areas?

No, that’s a problem that hasyet to be solved.

Okay, then the Urban Re-structuring Programme isonly useful for the restructu-ring of large housing estates.It’s better than nothing ifthese residential areas arestabilized because of it!

Federaland stategovernments

MARKET ADJUSTMENT?

Investigations have been conducted concerning low occupancy levels.The results vary, depending on who did the research. The increasedfinancial assistance of partial demolition in Saxonia and Saxonia-Anhalttend to confirm the GdW’s figures. And that means, that a surplus of flatswill continue to exist in many regions after 2010 and that the housingcompanies will once again face insolvency.

Federal Ministry of Transport, Building and Housing Figures 2003:

GdW (Head Federation of Housing Companies) Figures 2003:

Demolition of350,000 flats

6.85 million flats occupied,150,000 of those renovated

Goal for 2010:

500,000flats vacant

70,000 flatsdemolished

70,000 flatsdemolished

1.3 millionflats vacant

1 millionflats vacant

New Flats

Okay, so what's going on withthe problem of low occupancylevels across the entire easternpart of Germany; is the housingmarket surplus being reducedby this programme?

The Urban Restructuring Programmein the New Federal States Programmetherefore doesn’t function as a marketadjustment programme any more. Thefinancing of demolition provided forin the programme just prolongs thecrises the communally and coopera-tively owned housing companies arefacing and prevents their insolvencyfor the time being.

Let’s be honest, if demolition does nothingfor the housing industry or urban develop-ment in most places and debt relief is soimportant for the housing companies, whydon’t we just do away with demolition andsimply waive the old debts connected toall the empty flats?

That’s an interestingquestion, but unfor-tunately anotherlecture is beginning.

ALTERNATIVES?

After going to this conference, I’d really liketo know whether the preservation of thesecompanies is essential or not. Maybe it’s alsopossible to politically organize their insolven-cy! But that wasn’t what the conference wasabout at all, because that would have placedthe idea of the Urban Restructuring Program-me in question. What I did hear at the confe-rence amounts to the ministry trying to pre-sent problems with the Urban RestructuringProgramme as nothing more than initial diffi-culties common to any long-term programme.And the GdW reacts to the problem by de-manding a faster and better financing of par-tial demolition.

Well, then I should be getting back to work…

Sources of Numerical Data

The housing industry in eastern GermanyBundesministerium der Finanzen: Monatsbericht 07.2002, Altschulden der Wohnungswirtschaft in den neuenLändern: Enstehung und Lösung des Altschuldenproblems; pp. 57-69; see: www.bundesfinanzministerium.de/Finanz-und-Wirtschaftspolitik/Wirtschaftspolitik-.414.13335/Monatsbericht/Altschulden-der-Wohnungswirtsc...htmGdW, Bundesverband deutscher Wohnungsunternehmen e.V.: Wohnungswirtschaftliche Trends und Fakten 2003/2004;2003; pp. 120-122;Ullrich Pfeiffer, Harald Simons and Lukas Porsch: Wohnnungswirtschaftlicher Struktur Wandel in den neuenBundesländern; 2000; pp. 10-12, pp. 30-38; see: www.bmvbw.de/Anlage1723/Bericht-der-Kommission.pdfS.

The WBG’s economic situationErneuerungsgesellschaft Wolfen-Nord: Wohnen und Leben in Wolfen Nord; 1999; pp. 10,11Matthias Bernt: Risiken und Nebenwirkungen des Stadtumbaus; 2003; p. 15; see: www.ufz.de/index.php?de=1647Uwe Reinholz: Statement auf dem 3. Leerstandskongreß des GdW am 18.03.2003 in Halle; see: www.gdw.de/termine/stadtumbau_ost_2003/ download/statements_reinholz.pdfInterview with Uwe Reinholz, Director of the WBG Wolfen, 13 January 2004

The development of North WolfenStadt Wolfen und Erneuerungsgesellschaft Wolfen-Nord mbH: Stadtentwicklungskonzept Wolfen; 2001Stadt Wolfen: Soziale und demographische Indikatoren der Stadtentwickkung Wolfen; Statistische Informationen,no.04; 2002Stadt Wolfen: Soziale und demographische Indikatoren der Stadtentwickkung Wolfen; Statistische Informationen,no.05; 2003

Urban restructuring in eastern GermanyBmVBW: Programm Stadtumbau Ost, Merkblatt über Finanzhilfen des Bundes; 2002;see: www.bmvbw.de/Anlage9819/ Merkblatt-ueber-die-Finanzhilfen-des-Bundes.pdfGdW, Bundesverband deutscher Wohnungsunternehmen e.V.: Wohnungswirtschaftliche Trends und Fakten 2003/2004;2003; pp. 102-107Iris Gleicke: Stadtumbau Ost – Wo stehen wir, wo wollen wir hin? in: BmVBW: Dokumentation zum Kongress „ZweiJahre Stadtumbau Ost“; 2004

Based on my own calculations, the average size of a flat is 60 square metres.

The names and characters in this story are the products of the author’s imagination and any resemblance to actualpersons, living or dead, is entirely coincidental.

Why demolition? was created as part of Shrinking Cities as a contribution to the exhibition Schrumpfende Städte.Internationale Untersuchung. The exhibit will first be shown at the KW - Institute for Contemporary Art in Berlinfrom September 4 to November 7, 2004.Shrinking cities is a project (2002-2005) of the Federal Cultural Foundation in cooperation with the Leipzig Galleryof Contemporary Art, the Bauhaus Dessau Foundation and the magazine archplus.www.shrinkingcities.comBerlin 2004

AcknowledgementsFor their support during my research I thank Uwe Reinholz, director of the WBG Wolfen; Uwe Lummitsch,Quartiersmanager Entwicklungsgesellschaft Wolfen-Nord; Hellmuth Stieff, former head of the planning authorityof the city of Wolfen; Bernd Hunger, Director of Residential and Urban Development at the GdW; Anke Hagemannof Schrumpfende Städte; Laura Horelli and Kathrin Wildner.Thanks to Matthias Bernt at the UFZ Leipzig and Karla Schmidt for giving me lots of suggestions; for constructivecriticism and support during the production to Gudrun Wiedemer and Fabian Schwade, Uli Götz, Simone Goldate,Andrea Büttner and everyone at the Ideenshop.Translation: David SkogleyContact: rochus@ideenshop.net

In eastern Germany 350,000 vacant flats will be demolished by the year 2010 as part of the Stadtumbau Ost (UrbanRestructuring in Eastern Germany) programme.

The excavator operator Uwe wonders every time he tears down a building: Wouldn’t it be much better to keep thebuildings and lower the rents? Uwe wants to know what’s going on. In North Wolfen he meets the head of a housingconstruction company and an architect from the planning authority, and participates in a conference at the FederalMinistry of Building and Housing. Along the way he asks many questions in order to get to the bottom of thedemolition programme, with all its contradictions and problems.

He finds out that flats are being torn down in order to prevent the big housing construction companies in easternGermany from becoming insolvent. In addition, the housing estates which are subject to partial demolition shouldbe made more attractive with so-called improvements programmes. After two years and the demolition of 70,000flats it becomes clear that the goals of the Stadtumbau Ost programme are not being met. Instead, the affectedhousing estates are becoming less and less attractive and the bankruptcies of the housing construction companiesare only being postponed in a very expensive and extravagant manner.

Shrinking cities is a project of the Federal Cultural Foundationin cooperation with the Leipzig Gallery of Contemporary Art,the Bauhaus Dessau Foundation and the magazine archplus.