Viterra/Annington-Tenants defend themselves against

Context

Large parts of the region’s housing stock were originally produced by mining, steel, chemical, and other companies. Due to the beginnings of the employment crisis during the 1970’s the industries lost their traditional interest in production of new company flats, and reduced their investments in maintenance and repair. In the late 1980’s, the national government abolished the law for non-profit housing companies. This was the final step to initiate total business orientation in the entire rental housing sector in Germany. The industrial housing companies, which had been mainly orientated to housing provision for the masses, now changed their attitude and viewed the existing housing stock and real estate as a resource for profit. The main strategy to profit from existing old housing stock is to sell it. Instead of spending money on maintenance, sale of housing brings money.

All landlords of company flats - forced by their shareholders - became more or less active in this market. Customers are sometimes speculators or investment groups, but the final customer is always the consumer, who may be the tenant or another person who wants to live in the flat.

Around the year 2000, new economical players appeared in the regional housing sector. International financial investors, which had collected huge amounts of capital worldwide, became interested in building operative platforms within the big German housing market, since from their point of view it seems “undervalued”. The interest of the financial funds to buy met with the local industries’ interest to get rid of their housing companies. The industrial corporations intelligently used this situation to create hot competitive beddings for their huge housing stocks. Between 2004 and 2005 the majority of former steel’ and miner’s housing stocks – about 250.000 housing units - was sold to a few new investors, who generated huge returns on their investment. The new owners continue – partly even intensify - the conversion of rental housing into free ownership. At the same time the industrial corporations invest the high returns from the sales in global buy-outs of foreign corporations in their key business.

Viterra AG

The Viterra AG was the largest landlord company in Germany. Their traditional housing stock was totally based on company flats of mining, steel and chemical industries in the Ruhr district. The Viterra AG – who until June 2005 was owned by the leading German energy corporation Eon - was the result of several concentrations in the housing sector and in the industrial sector. Some years ago, Viterra – under it’s former name Veba - owned about 180,000 rental flats, including land, facility services, etc.

Since the late 1990s Veba/Viterra tried to improve its shareholder value through different strategies which have changed over the years. Since about 2002 Viterra AG tried to sell as many flats as possible in the Ruhr region. At the same time they bought shares of former public housing companies at hot markets like Munich, Berlin, and Frankfurt. There they even followed a strategy of sale, but with better profit rates.

In early 2004 Viterra sold a package of 32,000 flats to a bank-based real-estate and leasing company (Mira/KGAL). Viterra kept the administration of the flats while MIRA planned to divide and sell the whole stock in small pieces. As a result whole city districts - most significantly in the City of Gelsenkirchen - are in the process of sale. Since the beginning of 2004 new protests and political debates emerged from this problem.

Annington: The final exit for Eon

In 2004/2005 Eon AG started the process of sale of the whole Viterra company. Three private equity funds, mainly Anglo-Saxon, were highly interested to overtake the huge housing stock in order to build a German platform for further invasions of the German housing market. Backed by the competition of leading funds Eon in June 2005 succeeded to sell the whole Viterra Company for the very high prize of nearly 7 billion Euros to British private equity fund TerraFirma which runs a housing branch named Annington. After buying Viterra they control 250.000 flats in Germany and still want to buy more. Mid-term goal is the control of half a million units, in long term they want to grow up to one million.

An indispensable pillar of their strategy is the continuation and optimisation of the process of condo-conversion sales. Because returns after condo-conversions in the long run are higher than so called block-sales, Annington at the moment concentrates on direct marketing to the end user and stopped block sales.

Social dangers and risks

Legal evictions are a main risk for the tenants in the conversion process. According the German law a landlord can quit the rental contract if s/he has an interest to occupy the house by her/himself. In case of a condo conversion, national law regulates rights such that the tenant is protected against an eviction for a period of three years after the first sale of the transformed flat. This regulation however does not cover sales of smaller rental houses to families. Some of the intermediary speculators after block sales are totally orientating on sales of smaller houses. If the new owner has a need for a larger family he may be allowed evict two, three or even four families in small flats and there is no period of protection.

National law even allows the federated states to define longer protection periods for cities with special housing problems. Periods for the most affected towns in Ruhr district differ between six and eight years in case of condo-conversion. The regional government however plans to abolish this regulation. Many thousands of tenants are in danger to loose their homes.

Extra-legal pressure and “mobbing”

Because of comparably strict legal regulations “extra-legal” measures of producing pressure against the tenants are of high importance. Some of the intermediary investors are systematically using the fears of the tenants by giving wrong information on their rights, by producing rumours in the neighbourhoods or offering the apartments to persons which are not accepted in the neighbourhood. Other methods include noisy, dirty and lousy construction work, illegal demands for rent increase, criminal demolishing of tenants’ gardens and much more. Especially if some tenants get interested in buying the units which are occupied by neighbours a process of distrust starts which can totally destroy the balance of these areas. Tenant’s organizers call it « mobbing ». As a result many tenants feel more anxious than they had to be if they would consequently organize and defend their legal rights. In some of the cases more than the half of the original tenants left affected privatisation areas within a period of 2-3 years.

For the investors these processes can have a double benefit: Because of the fears tenants buy their housing units at sometimes extraordinary high prizes. For payment even elderly people and poor mobilize their savings, call for assistance from their families and sign expensive mortgage contracts. The other benefit for the investors: It is much easier and more profitable to sell a small vacant house than an occupied if the new owner wants to live in it by himself. However, this strategy has its limits: Vacant houses reduce the permanent cash flow from rents and can lead to loss of value. If too many houses get offered at the market at the same time the competition even leads to falling prizes. For that reason Annington at the moment tries to avoid threatening sales and accepts negotiations with tenant’s organisation on improved rental security.

Tenants’ movements and resistance

Already in the late 70’s and 80’s Veba, the fore-runner of Viterra, tried to demolish some old miners’ neighbourhoods and to replace the old houses by new ones. In some of these neighbourhoods tenants organized and resisted with good success. Veba also started sales of some miner’s neighbourhoods. Tenants organized and built regional networks to fight against it. Some neighborhoods became new co-operatives funded by state subsidies. Organized workers-tenants built a CBO called “Working Group of Workers Real Estate Initiatives in the Ruhr and Aachen Region”. It still exists and has been active in the recent struggles. It is based on the worker-tenants themselves and follows a strict grass-root orientation against any sale of houses to private owners.

In the 1980’s new board generations were elected within the traditional tenants association in Bochum, Witten and Dortmund. The new board members were based in the new social movements and changed the attitude of the organizations. They developed active political advocacy, permanent media work and co-operated with the grass root groups. The associations are very active supporters/actors in the Viterra struggles and today build a lobby group for negotiations with authorities and the Annington management.

Building a new movement

In 1999 VEBA (fore-runner of Viterra) – was publicly accused that they have betrayed their tenants by mis-calculations of rents and facility/energy costs. Angry tenants organized meetings, protests, legal petitions etc. at many places. VEBA was forced to install an independent jury to proof the accusations. In a couple of important cases (especially the so called heating contracting) the jury decided that the costs VEBA had to pay back some million Euros and changed its name to Viterra.

These processes were accompanied by the building of a new regional network called “Action Coalition of Veba Tenants” which did not only care about the rents and costs but also about the robbing of gardens and the beginning of a new wave of “privatisations”. The coalition organized marches and negotiations with the bosses of Viterra, the federal government, they produced newspapers etc. The coalition was supported by the above organizations and neighbourhood groups in Dortmund, Essen, Gelsenkirchen, Oberhausen, Recklinghausen and Marl. After the mass sale in 2004 all these groups and new ones gathered again and renewed their alliance which between 2004 and 2006 worked very well and with much political impact.

Struggle for more security with support from municipality: Dortmund

During the past years Dortmund was one of the cities most affected by Viterra sales in the region. In many neighbourhoods Viterra opened its plans for mass sale. On the other hand, the municipality as well as the tenant’s associations are present in all cases, trying to achieve some compromises.

In this atmosphere it became possible to achieve serious negotiations with Viterra. But even the municipality does not have the aim to stop the privatization totally. They only want to find more moderate modes to organize it. Their permanent method is to come to agreements with the Viterra/Annington regarding the number of privatised flats in one neighbourhood, some security regulations for elder or vulnerable tenants and about some design standards. They always try to fix the agreements in a “city development contract” and to get the signatures of the tenant’s organizations for these agreements.

The Dortmund tenants association in each case tries to inform and mobilize the tenants, organize a meeting and call for the election of a committee which represents the tenants. They have signed a couple of “compromise agreements” not only with Viterra itself but also with the main speculator Viterra used as an intermediary dealer.

Witten examples

In Witten Viterra in 2002 sold a complex of about 300 steel workers’ flats from the 50ies (with beautiful gardens) to one of the main speculators in this field (Häusser-Bau). The speculator divided the whole complex into smaller claims with one house and a garden on it. Thus he separated the public green space by fences. The tenants did not protest against these changes but they got very angry when the landlord announced that they should leave the private gardens and even started the bulldozing.

Heaving learned from the experiences the tenants association became aware that it is indispensable to develop a community organization line timely before the speculators divide the claims. Thus, after a mass sale of 850 flats to Mira in January 2004 the tenants association started a couple of meetings and insisted that the tenants build committees. Although most of the tenants still did not believe in the necessity to organize it was possible to stabilize a small tenants’ committee. During the campaigns for local elections this group was able to lobby social democrat leaders who considered that they have to do something if they want to get the votes of their traditional basis. Meanwhile even the metal workers union agreed in an alliance to protect the rights of their members.

Later hundreds of tenants visited the meetings, built a tenants council and tried to organize the affected neighbourhoods. As a main tool an application form for life-long housing-rights was distributed largely. Some hundred tenants received guarantees for life long housing rights. The directors of the factories got in contact to the tenants association to discuss the strategy for negotiating with the landlords. Thus in some parts of the neighbourhoods the united social forces were able to get back the initiative and gave an example how speculation can be regulated even in the case of a private market.

This effort however could only stop some of the worst case scenarios and mainly protected elderly and well skilled. Though many tenants received some security guarantees the developer of one of the areas succeeded to sell many single house and to force tenants to change the flats. Permanent pressure by not legitimated demand for rent increase and demolishing of gardens continues. Other intermediate speculators orientated on condo-conversion. One landlord managed to get rid of specific occupation rights of the steel industries. Finally the steel corporation signed a contract with Annington giving up the rights against not satisfying guarantees only for elderly.

Struggle for alternatives: The Hassel Experience

One of the largest complexes Viterra/Anington is trying to sell is a neighbourhood of some thousand old and beautiful company flats of miners in the neighborhood of Hassel in the north of Gelsenkirchen-Buer. A group of tenants was able to build a strong initiative and to mobilize many people in the neighborhood. They worked out alternative plans for acceptable new constructions, built a strong advocacy line towards the local authorities etc. They were already well prepared when Viterra opened its new plans for mass privatization.

After a period of protests the group started to think about long term alternatives based on a new housing co-operative. The co-operative should include all the flats on sale and their tenants, with no respect to their income, age or nationality.

The regional government felt obliged to set up a little program for the support of new housing forms and co-operatives. In difference to former programs this one did not include any direct subsidies for the buying of the houses but only some financial support for professional advertising. The project received the money and a NGO who got the job started to work out a plan for the financing etc. in close relation with the tenants group. Meanwhile Viterra agreed to stop the sales of a part of the neighbourhood stock within a limited period of time.

However, the supporting NGO soon had to face many problems: The state subsidies available for a new co-operative were much worse than for private ownership. Viterra even demanded a high market-orientated prize for the flats. Thus the needed capital for the new co-operative was much higher than the tenants expected. Many tenants did not understand why they should buy their homes after 2 or 3 generations had worked hard in the mines, paid rents and even looked for the maintenance.

After Annington took over it seemed that the new management did not want to continue the moratorium any longer. After protests the parties returned to negotiations on the prize. Meanwhile the co-op was officially founded.

Political struggles

After the mobilisation of affected tenants in the region the regional political level started to react. The NRW parliament in Duesseldorf in 2004 decided on a guideline for « social sales. » This catalogue was based on a discussion with the housing business, the cities, NGOs and tenants organizations including the Mieterforum. The resulting « guideline » however is only an appeal and is not mandatory.

The only success was that Viterra agreed in a self-binding list of rental guarantees. After Annington took over the new management confirmed that they will keep that commitment. It includes promises for legal protection of elderly and a temporary period of ten years of protection against evictions after condo-conversion. Tenant’s associations through negotiations with the management try to improve the guarantees, so far with very limited success.

After the regional elections in June 2005 the new conservative-liberal government orientate on liberalization of housing markets. They plan to sell the countries housing stock LEG and to weaken regulations on legal security of tenants in cases of sale. Against these plans the tenants’ coalition started campaigning in the same summer. Within a short period of time 5000 signatures of protest were collected and handed over to the housing ministers. In September 2005 tenants organized protests an action. In 2006 the concerns were included in a country wide plebiscite.

In the first half of 2005 the tenant’s coalition even tried to increase pressure on Eon regarding the conditions for sale of the whole Viterra Company. There had been some negotiations and the already given guarantees were accepted by Annington. With Annington the negotiations are getting into a more regular mode.

Proposal for a global strategy

To face the challenges tenants/inhabitants must build their own organizations, independently from state and parties. Local tenants need legal and organizational support from professional tenants associations to defend their legal rights. At the same time the professional tenants associations need neighbourhood-based self-organization of tenants in order to mobilize political pressure and to reach all affected inhabitants. The coalitions must be able to negotiate with landlords and governments and at the same time they must be able to organize effective protests. It is even important to build larger coalitions with trade unions, social movements and supporting politicians.

Not only the rapidly growing role of private equity funds which build giant landlord corporations makes it necessary to shift from a local and regional to a national and even international stage of action. Annington is active in whole Germany but the movements concentrate in a part of the Ruhr District. However, it is very difficult to associate tenants’ mobilisation at national level. Even the professional tenants associations are not prepared to organize themselves against such huge landlords.

Annington is also acting as a privatising landlord in England. In Britain and in Germany TerraFirma is controlling a couple of other companies like restaurants and pubs. Up to now there are only ideas that this situation could be used to build international counter-networks.

The globalisation of struggles is an urgent task if tenants want to keep and develop alternative powers. There would be a couple of chances to achieve better rights by corporate watch and campaigns.