By William Wilkes and Patricia Kowsmann
FRANKFURT -- A bigger tax base, greater clout and a boost for
the local economy: The city that hosts the European Central Bank
has several reasons to welcome London bankers looking for a new
post-Brexit home.
Residents, however, aren't happy.
Many longtime Frankfurt locals see a potential wave of
deep-pocketed bankers driving up housing costs and even driving
them out of a city that is already struggling to meet its housing
needs.
The U.K.'s 2016 decision to leave the European Union sparked a
race among the bloc's capitals to lure banks and its employees who
want to keep the ability to sell their services across the EU if
Britain leaves the single market.
Frankfurt's charm offensive on the banks is working, and several
have said they would shift operations to the city.
But as Germany's financial hub steps up its campaign to attract
bankers from London, residents -- already faced with rising
property prices and many construction projects around the city --
are starting to say "nein."
"The city shouldn't be spending my taxes to get bankers from
London," said Almuth Mayer, a nurse who lives in central Frankfurt
and has joined one of several protest groups that have sprung up
demanding city officials act to curb spiraling housing costs.
Demonstrations are being planned outside luxury housing blocks
to coincide with the national election campaign in September in
which Angela Merkel's Christian Democratic Union seeks
reelection.
Ms. Mayer said her landlord, property company Rohleder and Paz
GbR, has refused to fix leaks and holes in the roof to encourage
middle-class tenants to leave and make way for bankers. She also
has criticized Frankfurt's mayor, Peter Feldmann, for personally
going to London to woo banks.
"It's close to criminal," Ms. Mayer said.
A spokesman for the mayor declined to comment.
Edwin Rohleder, partner at Rohleder and Paz GbR declined to
comment on the dispute with the company's tenants.
Development of middle-class housing is rising in Frankfurt, but
the pace isn't fast enough to meet booming demand.
The city's 730,000 population has increased 15% over the last
decade mostly thanks to immigrants attracted by Germany's strong
economy. A low unemployment rate and subzero interest rates,
meanwhile, have boosted demand for homes. But less than a third the
size of New York City, Frankfurt land is scarce, creating a supply
crunch that is driving up prices.
Rents have risen on average 45% over the last decade, according
to real-estate firm JLL. Apartment prices have more than doubled
over the same period to EUR4,550 per square meter.
While still much cheaper than European capitals like London and
Paris, the rise in real estate costs has eclipsed the average 25%
wage increase in the city.
"Too much available building land has gone to luxury housing
already, [while] nurses and other lower earners can't afford to
live here," said Jürgen Lutz, head of Frankfurt rental association
MHM, a group that helps Frankfurt residents with housing
issues.
Mr. Lutz called for the local government to tighten rental
controls and build more homes.
A Frankfurt city government spokesman said authorities are aware
of the residential shortage problem and are trying to address it by
making more land available for construction, transforming office
buildings into apartment complexes and helping lower-income
residents with subsidized housing.
"We are more concerned about getting apartments for those on low
incomes. We need to help those people," he said.
Estimates of how many bankers could move to Frankfurt with
Brexit vary. According to Deutsche Bank analysts, a 5,000-person
inflow could increase residential prices by an extra 4%. That
figure could surge if more people end up coming, given the city
already has an estimated shortage of 36,000 houses.
Frankfurt's housing problem hasn't spilled over nationally, but
the topic is sensitive for both the local and national authorities.
Berlin has largely held off in giving public support to Frankfurt's
campaign to attract bankers ahead of September's elections. But
behind closed doors, it is considering steps to make the country
attractive to banks, including making more flexible labor laws for
higher earners, according to people familiar with the government's
plans.
The shortage of housing mirrors a dearth of office space in the
city, where new building projects are snagged on Frankfurt's strict
zoning laws.
"The greater the Brexit effect, and the more successful
Frankfurt is in attracting British companies, employees and expats,
the less equipped [traditional] housing policy will be to master
these additional challenges," Deutsche Bank said in a report
published in November.
At a quaint street near Frankfurt's center, residents complain a
playground will soon give space to a new luxury development by
property giant Vonovia AG. The company also is redoing surrounding
buildings, which will result in higher rental prices for current
residents including Robert Stojanoski, a 37-year-old logistics
clerk.
"I was born in Frankfurt and would like to continue to live
here," Mr. Stojanoski said at a recent residents meeting to discuss
the higher rents. "But I can't afford to."
A spokesman for Vonovia said rent increases will be moderate.
The company plans to build a new playground in the development, he
said.
Write to Patricia Kowsmann at patricia.kowsmann@wsj.com and
William Wilkes at william.wilkes@wsj.com
(END) Dow Jones Newswires
August 16, 2017 05:44 ET (09:44 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.