Evaluation of the Effects of Designated Areas for Milieu Protection on Local Berlin Residential Property Markets

Social preservation areas, so-called 'milieu protection areas', are currently a popular instrument in urban policy of major German cities such as Berlin, Hamburg, or Munich, which promises to protect residents from displacement. Ownership rights are restricted here, e.g., through modernisation regulations and controls on conversions from rented to owner-occupied flats. In the popular Berlin district of Friedrichshain-Kreuzberg, for example, 40 % of the area has now been designated as a milieu protection area, with corresponding effects on the property markets. The federal government is currently planning an amendment to the Building Act with similar regulations. Therefore, we take a closer look at the effects of these restrictions on the property market for Berlin and address the central question How have purchase prices for condominium in Berlin's milieu protection areas developed and how does milieu protection affect them? We look at housing transactions from 2015 to 2019 provided by the Expert Committees for Property Values, relate these to further neighbourhood data and regress the transaction price using hedonic modelling in the various spatial submarkets inside and outside the milieu protection areas. We conclude that milieu protection areas are placed in areas where higher prices are paid beforehand and milieu protection itself does not reduce the attractiveness on the markets. In addition, modernisations are made more difficult, which in turn is associated with larger price increases for features (e.g., balconies) in the areas. The much-criticised converted flats cannot be associated with luxury refurbishment in the study. Our paper contributes to the discussion on urban development laws that focus on property restriction activities.