ROCHUS WIEDEMER

WHY DERUMCTOURLINIGTINIWOOLNFE?N-NORD
URBAN REST

ROCHUS WIEDEMERN?
DEMOLITIOWHY RESTRUCTURING IN WOLFEN-NORD
URBAN

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

Urban Restructuring in
the 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 flats
have quite severe consequences for the housing industry
and urban development. That’s why they started the Urban
Restructuring in the New Federal States Programme. Since
2001 they have been trying to deal with the crisis within
the housing industry and problems with urban developmentin eastern German communities. Urban planners, however,answer the question of why flats are being torn down differently than people in the housing industry.

HOUSING
INDUSTRYFirst I met with the director of the
WBG (the Wolfen Housing Construction Company).

The Urban Restructuring
Programme’s goal is to reduce thesurplus of flats on the market by2010.
Why arebuildings being
demolished?

What’s the problem
with having a surplusof flats? If there areso many of them thenrents will go down.
Why does the government prevent thatfrom happening andreact with a demolition programme?

Maybe I can explain the situation
like this: these pre-fabricated concrete buildings are not worth
anything due to being vacant, but
are still a huge financial burden.
Lowering the rent doesn’t help to
pay off the debts, and that’s notjust the situation in Wolfen, but
in all of eastern Germany.

Wait a minute, I don’t understand. These buildings were put
up when Wolfen was still part of
East Germany. Where do the debts come from? And won’t the debts still be there even after thebuildings have been torn down?
Okay, in order to explainthat we’ll have to take acloser look at the historicalsituation.

THE WBG, A MUNICIPALLY OWNED HOUSING COMPANY

The 13,500 flats of the Wolfen-Nord Housing Estate belong to two
housing enterprises: The WBG (the Wolfen Housing Construction Company) and the WWG (the Wolfen Housing Construction Cooperative).
Both companies were created in 1990 from existing structures within
the 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 Wolfen
Workers’ Cooperative remained a cooperative and received a new legal
form as the WWG.

1960-1990 state-owned housing industry
Since 1990 the Wolfen Housing Construction Company (WBG)
1991-1990 the Wolfen Workers’ Cooperative
Since 1990 the Wolfen Housing Construction Cooperative (WWG).

Old Debts 1990

DEBTS

That partially explains thequestion about the debts,
as the old debts weretransferred to the WBG in
addition to the assets.

What are old debts?

Old debts 1990
14.6 billion Euros

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

At first the WBG and the GdW (Head Federation of Housing Companies) in East Germany refused to acknowledge the old debts. The housing industry debt dilemma
was similar to other reunion-related problems such as
the privatization of state-owned firms and the “return
before compensation” regulation.

But hang on,
what was theactual problem?

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

56 millions Euros

First of all, the transfer of old debts is still
being legally contested. The concrete
economic problem, however, was that rentin the GDR was state subsidized, whichmeans it was cheap. Because of these
existing 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 thus
reached in 1993 with the passing of the
Old Debt Assistance Law.

Old Debt Assistance Law 1993

11 billion Euros of old debts
are taken over by the federal
government.

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

14.2 billion Euros of old debts
remain with the housing
companies.

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

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

The Old Debt Assistance Law reduced the WBG’s old debts from56 million Euros to 26 million
Euros.

26 million EUR

In principle, yes. The Old Debt Assistance Law wasa housing policy tool for reducing the percentage
of communally and cooperatively owned flats andfor increasing the share of private ownership. The
problem, 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. Because
attempts at privatization proved to be difficult inother regions, the WBG was released from its
privatization commitment through an amendment
to the Old Debt Assistance Law in 1999.

Well, then the debt
problems were solved,
weren’t they?

No, because the WBG still
had a problem with new debts. Many of the flats were
badly in need of repair and on
top of that we had to react tothe development of new housing in the surrounding area.
We had to make our flats more attractive, which meant we
had to renovate.

NEW DEBTS SINCE 1990

There was still a lack of flats in East Germany at the beginning of the 1990’s. Due to direct and indirect subsidies
totalling 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’ own
capital 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 receive
any subsidies. The subsidies resulted in the housing companies having even more debts.

Spending 64 million Euros, theWBG was able to renovate 3,700of their 5,000 flats. The WBG’s
new debts amounted to 25 million Euros. These debts consistedof loans from the KfW for modernization and the firm’s own capital resources from the subsidy
programme, which were alsoloans.

The assistance policies in the 1990’s are the causeof the current surplus of flats on the market. It took
a long time until these policies were changed, evenafter the first signs of a long-term surplus became
apparent 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.
.

26 million euros old debts

25 million new debts

And once again theloans couldn’t be
paid backUNOCCUPIED

These debts havebecome a problem
due to the low levelsof occupancy.

That’s right; the loans weren’t a problem when the flats were occupied.
Let’s take a closer look at a building.

The building with
48 flats is burdened with 220,000
Euros of old
debts…

…and 208,000 Euros of modernizationrelated debts.

CRISISIn 1998 the WBG had a vacancy quotient of
30%. It became more difficult to cover costs.
At the same time the company’s tangible assets
became worth less and less. The WBG was
threatened with insolvency.
Sinking tangible assets

Old debts 2001
11 billion Euros

Sinking tangible assets

52 million Eurosof old debts

50 million Eurosof new debts

New debts

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 assets
decreased dramatically. In 2000 the National Association of
Housing Companies stated that 30 companies were in dangerof becoming insolvent.

Interest and repayments of old
debts 32,000 Euros

Running costs 43,500
Euros per year

In mid-1998
26 flats werevacant.

That leaves 22 occupied flats. Witha rent (excluding heating) of 3.8 Euros per square metre, they bring in
an income of 60.000 Euros.
The building costs are still 75,500
Euros, which means that a loss of
15.000 Euros per annum occurs.
A lack of occupancy has an effect on
the value of the building: a buildingin which no one wishes to live isworthless. The building is stated as
being worth only 90.000 Euros in
the WBG balance sheets. The market
value is probably quite a bit less.

INSOLVENCY OR RECAPITALISATION
Okay, the low occupancy rates
threaten the housing companies.
Why not just let them all go
broke? We live in a market
economy, don’t we?

It’s not a problem for banks or the regional housing market if
a single homeowner goes broke, but the insolvency of a large
housing 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.
What would happen if the WBG
went broke?

WBG

New housing company

Insolvency administrator

WWG

WWG

The WBG’s flats would be taken over by an insolvency
administrator. He would first of all try to find a buyer
for the flats. He would dramatically cut down on running costs as the creditors’ interests are of the utmost
priority. As a result the living conditions for 7,500
tenants would deteriorate and the exodus would
increase.

Insolvency administrator

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

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 companies like the WWG the tenants themselves are liable, and would loose
their shares in the cooperative. The losses which are not covered by any
liability would then have to be covered by the banks themselves.
After such a sale is made there are stilllots of debts. Who takes care of them?

I see, and that’s why the municipalities and banks together with the housing companies have campaigned tosupport the housing industry
in eastern Germany and not
simply 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 owned
housing companies. The municipalities and banks fear firstly the collapse of the
housing industry and urban development, and secondly, that as a result they won’t
be able to control development at all.

STADTUMBAU OST AS A
MARKET ADJUSTMENTPROGRAMME
1990:

Occupied 6,5
million flats

Demolition

State
governments

Federalgoverment

Unoccupied
400.000 flats

1998

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

500 million
Euros

Unoccupied
500,000 Flats

Goal for 2010
Demolition
350,000 Flats
2002 - 2010
New Flats?

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

Occupied 6.85 million flats
150,000 of those renovated

Unoccupied
500,000 Flats

The demolition is intended to reduce the surplus ofdwelling units.

Right, this stabilizes the rents
and the value of flats on the
housing market. But what
does a demolition programme
do for an indebted housing
company such as the WBG?
The debts don’t disappear if
the buildings are demolishedor sold.

The partial demolitionin Saxonia-Anhalt is
subsidized with alump sum of 65 Euros
per square metre; thisadds up to 190.000
Euros for the building
in our example.

Whether there is a loss of rental
income depends on how many tenants accept a substitute apartment
owned by the WBG.

43.500 Euros
running costs per
year are done away
32.000 Euros
capital cost per year
remain.
The value(90.000 Euros) of
the building in thebalance sheets islost.

E
STA DTU MB AU OST AS A PRO GRA MM
FOR WR ITIN G OFF DEB TS
The WBG’s concept for redevelopment
calls for the demolition of 2,000 flats
and a corresponding application for debt
relief. That means the waiving of 9 million Euros in old debts.

Remaining old debts
10,6 billion Euros

Old debt relief 2000
358 Mio. Euros

The debt crisis of the municipal and cooperative housing companies
revived the debate about the old debts: The Old Debt Assistance
Decree of December 2000 waived the old debts for demolishedhousing if the housing companies had a higher than 15% vacancy
rate. The federal government made 358 million Euros available.
Applications for the waiving of debts, however, had to be submitted
by the end of 2003. Housing companies still had to pay off any
new debts connected with a demolished building. These debts
could be transferred to another residential building upon the banks’approval.

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

The debt burden of
428.000 Euros
remains the same.

So, the WBG demolishes its
buildings in order to get rid ofdebts and not to somehow profit from an adjustment of themarket.

Tangible Assets

17 million Euros
old debts

25 million Euros
new debts

Applications forold debt relief
9 million Euros

The important thing isthat the partial demolition
assistance programme islinked to a modification in
the Old Debt Assistance
Law: Whoever demolishes
buildings has their debts
dropped.

URBANDEVELOPMENT

In order to find out what effect the demolition has had on urban development in Wolfen I got together with an architect who
works in the City Planning Department in
Wolfen.

Why are flats
being torn down?

Assistance for demolition wasdeveloped as a planning tool, sothat eastern German communities could control urban development despite migration andlow occupancy levels. Unfortunately, it looks completely different in practice.

Of course!
Urban planning
can’t solve theproblems of
migration andlow occupancy
levels, can it?

To a certain extent that’s right,
but through migration and low occupancy rates certain socialspatial processes occur which
migration further reinforces. In
planning language that’s called
the “low-occupancy spiral”. Urban planning can exert a certain
influence on these processes.

I see. Low occupancy leads
to even lessoccupancyand buildings
have to be demolished or
Wolfen willturn into theBronx?

No, it’s not about some kindof threatening scenario or
increased security, but whether, and how, we planners areable to react to these developments.

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 oldest
sections was approximately 50 and in the newest sections barely more than 20.

THE LOW-OCCUPANCY SPIRAL

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

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

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

The social-spatial development is clearly discernible on a map showing the levels of occupancy at the end of
2001.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 unemployment
and a lack of jobs. Single-family housing developments and residential areas were built in the vicinity. Little
by 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 large
enough 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 those
who earn more do what they can to get away. You could say the development within the region has more to
do 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 sprawl
continues 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 municipality
has no money for infrastructure reorganization because, due to a decline in the number of residents andweakened economic activity, the municipal income is dwindling.

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 department
in Wolfen-Nord, in concert with the housing companies, tried to deal with the problem of empty flats in the mid
1990’s. We weren’t able to achieve much though, despite renovations and open-space improvements.

So these problems are now supposed
to be solved through financial support
for demolition?

No, urban development problems can’t be solved
by demolition alone. The answer to these problems
doesn’t just have to do with solving occupancy
problems. A perspective for the housing estates
must be developed: which parts of the development
will 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.

TY
STADTUMBAU OST AS AN OPPURTUNIFOR URBAN DEVELOPMENT
Improvements

Demolition
Municipalities

State
governments

Federalgovernment

500 million
Euros

500 million
Euros

State
governments

Federalgovernment

2002 - 2010

500 million
Euros

500 million
Euros

500 millionEuros

2002 - 2010

The Urban Restructuring in the New Federal States Programme (Stadtumbau Ost) tries to solve urban development
problems by offering improvements in addition to demolition. Particular areas where demolition is occurring
are 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.

Allocation of demolition and improvement funds

Urban development concept

Housing companies

Municipalities

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 housing
companies.

URBAN DEVELOPMENT CONCEPT
That means demolition is only
allowed providing that the buildings which remain will be more liveable and given some sortof perspective for the time after
2010.

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

The newer housing complexes which have the lowest
levels of occupancy will betorn down.

The areas which should be
improved have not beenclearly defined.

Housing Complex 4.3 isan exception, as it was renovated and greatly improved in the 1990s.

Post-use concepts
will not be developed
for the newly createdopen space.

Housing companies

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

Municipality

The planning department wanted to use the concept
to define which sections of the development would
be demolished and which sections would be preserved
and improved over a prolonged period of time. The
planning department’s position was, however, very
weak and not formulated in concrete terms because
it was extremely important for the municipal budgetthat the WBG remained solvent.

That means we couldn’t develop
the best possible plan in terms ofurban development. Instead we
had to develop a plan which allowed the WBG to economically survive. The plan merely definedwhere buildings would be demolished and indicated no development within the housing estate.

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

Housing companies

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

That means city
restructuring in
Wolfen amounts
to no more thandemolition.

Municipality

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

END OF THE SPIRAL?

Under these circumstances the
spiral of low occupancy levels
cannot be stopped. Because improvements aren’t made and perspectives for the development of
the housing estate aren’t discernible, the demolition is viewed as
giving up on the housing estate.
There are now three separate zones, which are defined by social
structure, average age and levelsof occupancy.

The flats which have a view ofthe surrounding landscape areeasier to rent. The housing
blocks towards the centre of
the housing estate are occupied by Russian-German immigrants.

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

A curved building, which becauseof its large flats has a higher
level of occupancy and is rented
by Russian-German immigrants.

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

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

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

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

Second of all, there is a housing complex for tenants
who previously lived in demolished buildings. The unemployment rate is meanwhile quite high, the percentage of welfare recipients is lower and the level of occupancy is currently better than in Housing Complex
4. Improvements and discernible growth perspectives
would be especially important here.

Thirdly, there are the oldest housing complexes. They
hold their own on the regional housing market as aplace of residence for old-age pensioners. The social
data indicate a more stable situation, which couldchange around 2015 due to a high percentage of elderly
tenants, which could then trigger a new wave of low
occupancy.

Wolfen-Nord 2001

4,100 flats vacant.
9,400 flats occupied

Goal Wolfen-Nord 2010

5,000 flats demolished

8,500 flats occupied

Wolfen-Nord 2003

1,400 flats demolished4,500 flats vacant
7,600 flats occupied.

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 31,000
to 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 allows
for migration to the surrounding areas.

2010This means that after
2010 there will still be
too many flats and that
the WBG and WWG
will be faced with insolvency once again.

Those involved in Wolfen-Nord appear
to think that the programme for demolition will continue even after 2010. A
new wave of empty flats threatens andthere are no recognizable perspectives
for any kind of development. The only
thing we can do at the urban planningdepartment is to organize the windingup of the housing estates.

This means that perhaps little by little
the entire development will be demolished just in order to prevent both housing companies from going broke. Demolition assistance sure did develop a lifeof its own. I hope the Urban Restructuring in the New Federal States Programme functions better in other communities

TWO YEAR
OF URBAN S
RESTRUCTURIN THE NE ING
FEDERAL S W
TATES
A few weeks later I took a day off and went
to a conference called “Two Years of Urban
Restructuring in the New Federal States”,
which was sponsored by the Federal Ministryof Transport, Building and Housing. I talked
to an urban sociologist there, as I wanted
to know how the programme worked in othercommunities. Are the results as equallydisillusioning as they were in Wolfen? Is
urban restructuring really only determinedaccording to the stipulations and interestsof the housing industry?

Luckily there are more encouraging developments than thosein Wolfen. For example in Leinefelde, where housing companies and communities successfully cooperate and urban
restructuring 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 reconstruction of prefab-concrete buildings. Because of this, sectionsof the housing estate now have a long-term perspective asplaces to live.

Places like Leinefelde, in which the urban
development goals have been reached, areunfortunately the exception. If we look at the
progress and results in all of eastern Germany we see that the Urban Restructuring Programme primarily functions as a redevelopment programme, not only in Wolfen, for thecommunally and cooperatively owned housing companies
What's more predominant then,places like Leinefelde or places
like Wolfen?

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

What prevents planners
from doing a better job
than in Wolfen?

CONSEQUENCES OF ASSISTANCEPROGRAMMES SHORTCOMINGS

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

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

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

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

Yes, the majority of buildings being
torn down are in large housing estates
which belong to large housing companies. Because in these areas the entire stock of flats is often burdened with old debts and the firms demolishbuildings to get relief from the debts.

Remaining old debts
10 billion Euros

I see, that’s why I actually
only tear down prefabconcrete buildings.

Old Debt Relief
270 million Euros, April 2004
300 million Euros, Dec. 2002
358 million Euros, Dec. 2000

The linking of relief from old debts and partial demolition
will continue to determine the implementation of the
Urban Restructuring Programme in the future. By thetime the deadline arrived in December 2003 the housing
companies 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 million
Euros, which adds up to relief for 215,000 flats.

Housing company, createdduring the process ofprivatization which began in
1993, which has large debt
problems, but no old debts.

Municipality /Private owner of renovated old
buildings.
Housing construction cooperativewith an occupancy level of 83% isentitled to old debt relief.

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

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

Okay, then the Urban Restructuring Programme is
only useful for the restructuring of large housing estates.
It’s better than nothing if
these residential areas arestabilized because of it!

The Urban Restructuring Programme doesn’t seem to feel responsible for more complex urban structures. Are there other programmes
for these areas?
No, that’s a problem that has
yet to be solved.

DEMOLITION VS. IMPROVEMENTS

Demolition
Improvements
Federaland state
governments

336 millionEuros

2002, 2003

Federaland state
governments

264 millionEuros

2002, 2003

Many communities can’t raise their own share of money for improvements and, as in Wolfen, partial demolition
is 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 the
Urban Development Programme become less and less important as time goes by.

MARKET ADJUSTMENT?
Okay, so what's going on withthe problem of low occupancy
levels across the entire easternpart of Germany; is the housing
market surplus being reducedby this programme?

Goal for 2010:
500,000
flats vacant
New Flats

6.85 million flats occupied,
150,000 of those renovatedDemolition of
350,000 flats

GdW (Head Federation of Housing Companies) Figures 2003:
70,000 flats
demolished
1.3 million
flats vacantFederal Ministry of Transport, Building and Housing Figures 2003:
70,000 flats
demolished
1 million
flats vacantInvestigations have been conducted concerning low occupancy levels.
The results vary, depending on who did the research. The increased
financial assistance of partial demolition in Saxonia and Saxonia-Anhalt
tend to confirm the GdW’s figures. And that means, that a surplus of flats
will continue to exist in many regions after 2010 and that the housing
companies will once again face insolvency.

ALTERNATIVES?
The Urban Restructuring Programmein the New Federal States Programme
therefore doesn’t function as a market
adjustment programme any more. The
financing of demolition provided forin the programme just prolongs thecrises the communally and cooperatively owned housing companies arefacing and prevents their insolvency
for the time being.

Let’s be honest, if demolition does nothing
for the housing industry or urban development in most places and debt relief is so
important for the housing companies, why
don’t we just do away with demolition andsimply waive the old debts connected to
all the empty flats?

That’s an interestingquestion, but unfortunately anotherlecture is beginning.

After going to this conference, I’d really liketo know whether the preservation of thesecompanies is essential or not. Maybe it’s also
possible to politically organize their insolvency! But that wasn’t what the conference wasabout at all, because that would have placed
the idea of the Urban Restructuring Programme in question. What I did hear at the conference amounts to the ministry trying to present problems with the Urban Restructuring
Programme as nothing more than initial difficulties common to any long-term programme.
And the GdW reacts to the problem by demanding a faster and better financing of partial demolition.
Well, then I should be getting back to work…

Sources of Numerical Data
The housing industry in eastern Germany
Bundesministerium der Finanzen: Monatsbericht 07.2002, Altschulden der Wohnungswirtschaft in den neuen
Ländern: Enstehung und Lösung des Altschuldenproblems; pp. 57-69; see: www.bundesfinanzministerium.de/Finanzund-Wirtschaftspolitik/Wirtschaftspolitik-.414.13335/Monatsbericht/Altschulden-der-Wohnungswirtsc...htm
GdW, 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 neuen
Bundesländern; 2000; pp. 10-12, pp. 30-38; see: www.bmvbw.de/Anlage1723/Bericht-der-Kommission.pdfS.
The WBG’s economic situation
Erneuerungsgesellschaft Wolfen-Nord: Wohnen und Leben in Wolfen Nord; 1999; pp. 10,11
Matthias Bernt: Risiken und Nebenwirkungen des Stadtumbaus; 2003; p. 15; see: www.ufz.de/index.php?de=1647
Uwe 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.pdf
Interview with Uwe Reinholz, Director of the WBG Wolfen, 13 January 2004
The development of North Wolfen
Stadt Wolfen und Erneuerungsgesellschaft Wolfen-Nord mbH: Stadtentwicklungskonzept Wolfen; 2001
Stadt Wolfen: Soziale und demographische Indikatoren der Stadtentwickkung Wolfen; Statistische Informationen,
no.04; 2002
Stadt Wolfen: Soziale und demographische Indikatoren der Stadtentwickkung Wolfen; Statistische Informationen,
no.05; 2003
Urban restructuring in eastern Germany
BmVBW: Programm Stadtumbau Ost, Merkblatt über Finanzhilfen des Bundes; 2002;
see: www.bmvbw.de/Anlage9819/ Merkblatt-ueber-die-Finanzhilfen-des-Bundes.pdf
GdW, Bundesverband deutscher Wohnungsunternehmen e.V.: Wohnungswirtschaftliche Trends und Fakten 2003/2004;
2003; pp. 102-107
Iris Gleicke: Stadtumbau Ost – Wo stehen wir, wo wollen wir hin? in: BmVBW: Dokumentation zum Kongress „Zwei
Jahre 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 actual
persons, 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 Berlin
from 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.com
Berlin 2004
Acknowledgements
For 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 constructive
criticism and support during the production to Gudrun Wiedemer and Fabian Schwade, Uli Götz, Simone Goldate,Andrea Büttner and everyone at the Ideenshop.
Translation: David Skogley
Contact: rochus@ideenshop.net

In eastern Germany 350,000 vacant flats will be demolished by the year 2010 as part of the Stadtumbau Ost (Urban
Restructuring 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 housing
construction company and an architect from the planning authority, and participates in a conference at the Federal
Ministry 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 eastern
Germany from becoming insolvent. In addition, the housing estates which are subject to partial demolition should
be made more attractive with so-called improvements programmes. After two years and the demolition of 70,000
flats 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 companies
are 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.