Gentrification in East Germany:
the case of Prenzlauer Berg

Introduction

In spite of the truly comprehensive state of the research now, the identification of gentrification has remained a difficult topic in Germany. That has presented itself almost paradigmatically in sociological reports on the upgrading of East German inner cities. Although rapid gentrification was prophesied for practically all large East German cities in the early 90s (Häußermann 1991; Krätke 1991; Herlyn/Hunger 1994; Schubert 1993), the hypotheses already had to be relativized within a few years following empirical investigations (ex. Harth/Herlyn/Scheller 1996; Rink 1996; Weiske 1996). After the conviction began to take hold in the mid-90s that gentrification was not a topic for East German cities, new analyses are now appearing which produce contrary evidence (ex. Franz 2000; SAS 1999; Friedrich 2000). Such uncertainty is perplexing, but is also unfortunately typical for the state of German gentrification research.

The difficulty of analyzing gentrification processes in Germany (especially in East Germany under the conditions of system transformation) is less connected to the quantitative lack of data and research work than it is to the condition of the object of research, which appears to be closed to the patterns of explanation - patterns often adopted from the USA. Thus the lesser degree of income polarization, stronger social security systems, less ethnic segregation, a greater share of renters in the housing market, and much more in Germany have deformed (cf. Friedrichs 1996: 36ff.), the extent, tempo and forms of gentrification. In East Germany one must add to that the transformation of housing, the development of a base price structure which is only just now occurring, and the "loosening of the social structure" (Harth/Herlyn/Scheller 1998: 9). As a result the imported models often appear inadequate for encompassing the particularities which need to be assessed in the affected German quarters. Research is thus often limited to partial areas or arrives at contrary conclusions. In reverse conclusions this means that either Anglo-American gentrification theories are not applicable to German municipal districts, or that the German particulars, which lead to a change of process patterns, have not yet been sufficiently conceptualized.

Which of these two possibilities apply now? We wish to pursue this question using the example of the East Berlin district of Prenzlauer Berg.

Prenzlauer Berg is an inner-city quarter in East Berlin with old-style architecture adjacent to the city center and the government quarter, which - except for a few incomplete projects - was architecturally neglected over broad surfaces during the GDR period. As a result the structural materials became more and more dilapidated so that the greater part of the buildings were seriously in need of renovation at the beginning of the 90s. One sixth of the apartments were empty. After reunification, further sections of the district were declared in need of renovation. According to building type, location and the degree of lack of investment, Prenzlauer Berg seemed to be accordingly predestined for gentrification in 1990, and the prognoses of many urban researchers pointed in this direction.

For an appraisal for gentrification of an East German old-style architecture quarter, Prenzlauer Berg was favored for two reasons:

• First of all there is hardly a city district in Germany about which so much has been written in the last ten years as Prenzlauer Berg. Along with accompanying research within the framework of state renovation programs (argus 1997, argus 2000, AG SPAS 1992 and 1993, TOPOS 1999, PFE 1992 and 1993, Mieterberatung/TOPOS 1995 and 1998) pertinent articles have appeared at the Berlin universities (cf. Bernt 1998; Häußermann/Kapphahn 2000; Borst/Krätke 2000; Holm 1998 and 1999; Reimann 2000) which have thematized the rapid transformation of the district in the past few years.
• Secondly Prenzlauer Berg certainly belongs to the leading group of locations for which the description and judgement "socially changing" is completely unchallenged. The consensus today among Berlin urban researchers is still merely that Prenzlauer Berg has undergone a fundamental change since the Wall came down. Where this change is leading and what its causes and outcome are is debatable. While one researcher sees a "gentrification process" (Borst/Krätke 2000), others discard this view as too "one dimensional" (Häußermann/Kappahn 2000: 197) and identify rather a "locally mixed re- and devaluation" (ibid.: 177), which will sustain itself in the mid-term or, even instead of an expectation of gentrification (especially at Helmholzplatz) will show a devaluation tendency with the danger of a developing "social focus point".(1)

Two goals will be pursued in the present contribution. First of all it will attempt to dissipate the fog surrounding the transformation of Prenzlauer Berg. And secondly, with this analysis we would like to test what kind of definition value the results of the international gentrification research offers for a district of an East German city under the conditions of a system transformation. We hope with this to be able to define more clearly the gaps and deficits in the German gentrification research and to be able to identify the points of departure for the explanation of German (and East German) particularities.

To this end the state of gentrification research will be discussed briefly. Out of the theorems of this research hypotheses are developed which would be expected due to the acceptance of gentrification in Prenzlauer Berg. In the next step the available material will be discussed and compared with the hypotheses. The emphasis will be placed on the areas of "cultural upgrading", "real estate investments", "development of housing available" and social development. In our evaluation we then draw conclusions regarding similarities and particulars which show the change in Prenzlauer Berg as seen in other countries due to gentrification processes.

Gentrification - a multidimensional Process

"Gentrification" became a central topic for urban research by the end of the 70s. In a general definition one can call "Gentrification" the upgrading of a residential district of workers and poor people, which occurs with the help of market mechanisms by resident turnover". "Displacement is the essence of gentrification, its goal, not an unwanted side-effect." (Marcuse 1992: 80)(2)

The causes of this process was for a long while discussed in polarities. The individual intellectual background of the researcher supported their explanations with economic, socio-structural or cultural factors. Such a one dimensional observation is considered antiquated today; one strives meanwhile to integrate the views of the "other school" into one's research. In this way, instead of a conceptual explanation, one comes to a diversity of explanatory positions so that there is a whole series of affecting determinants possible for gentrification which are available today. Gentrification is thereby understood as a "chaotic concept" (Beauregard 1986), which includes multiple processes.

A very early and exacting politico-economic conceptualization of gentrification was produced by Neil Smith (1979) with his rent-gap-theory. Smithassumes that the accumulation cycles of real estate capital in inner city districts could cause a rent-gap, that is to say, a gap between potentially realizable and actually obtainable ground-rent. When capital depreciation and rent-gap reach a scale which is great enough to guarantee investors a profit which would be able to compete with other investment options, this would set a new investment cycle in motion. The affected quarters will then be renovated and thus a new supply of gentrified housing is created. Gentrification in this view is "a structural product of the land and housing market. ...Capital flows where the rate of return is highest, and the movement of capital to the suburbs along with the continual depreciation of inner city capital, ...produces the rent gap. When this gap grows sufficiently large, rehabilitation (or for that matter, renewal) can begin to challenge the rates of return elsewhere, and capital flows back" (Smith 1979: 546). A further European development of this position is the value gap-theory (Hamnett/Randolph 1984). In contrast to rent gap-theory the housing- and not property value are decisive for the profitability gap. Correspondingly, the expectation of higher rent incomes or higher sales proceeds are the determining factors for the revaluation of inner city residential areas. On this basis housing is strategically purchased, modernized and finally profitably re-sold. The creation of rent- or value gaps are thereby smaller with a longer lasting disinvestment politic than with an inflationary rise in property value and rents.

Very soon after the formulation "supply side", explanatory positions were decidedly criticized, in particular for its ignorance in the face of individual actions (cf. Beauregard 1986; Rose 1984). This critique was accompanied by a series of arguments which concentrated consequentially on explaining the emergence of "gentrifiers". The causes and course of gentrification was thereby analyzed from a the viewpoint of a new demand for inner city neighborhoods. The development of "gentrifyiers", they argued, is the result of complex social and demographic changes which have led to an increasing number of "single" or Dink" (Double income, no kids") households with a new consumer structure. The "re-conquering" of the inner cities was primarily be analysed as a result of the housing needs of a "new middle class" (cf. Ley 1996; Beauregard 1986; for German research; Blasius 1993; Alisch 1993; Häußermann/Seibel 1987), whose simultaneous professional and career oriented as well as hedonistic lifestyle lead to a culture of conspicuous consumption. This finds its expression in gentrified spatial complexes in the "formation of culture miles, longer store hours, street musicians and acrobats, an increase in street cafés" (Helbrecht 1997: 4). The cause of the valuation of inner city old-style architectural housing lies here in the location decisions of new and financially strong consumers who prefer large, well-planned apartments, dependent on a diversity of contact possibilities (cinema, clubs, bars) outside their own apartment and generally exclusive, "individual" values, goods and services and giving preference to the standardized mass products.

An operationalization of this view for explanation can be found in stadium models which describe gentrification as a double invasion-succession-cycle (cf. Berry 1985; Caulfield 1994; Häußermann/Seibel 1987; Dangschat 1988 and 1991). At the first part of the cycle younger, better educated or those still in training displace the established residents. In the literature these early invaders are labeled "pioneers" since they first take over the quarter for the gentrification process. If a quarter has established the reputation of a good location for living, the established residents and pioneers will themselves be displaced by somewhat older, better paid working professionals.(3)

Closely related to the position of defining gentrification as a pattern of consumption are ultimately positions which also analyze the process as a cultural phenomenon (cf. Zukin 1982; Jager 1986; Featherstone 1991). Zukin (1990,1991) sees new forms of organization of consumption arising for example in spatial complexes such as gentrification and Disneyland which are based on a high density of spatially bound cultural capital. Cultural, symbolic capital thereby becomes the true reason for "real" investment. This new form of socio-spatial organization of consumption is the goal of the spatial dependence, the mediating of the relation between cultural producers and consumers as well as an overlapping of cultural and economic cycles to be analyzed. The focus here is on the spatially powerful discourses and their reflection in a new organization of consumption along with the appearance of spatially related, concentrated consumer complexes which are given an agreed upon "label". The social and economic upheaval of gentrification is then accompanied by a "symbolic gentrification" : "...before the advent of new renters and users...the district was made and is being made appealing to them: the architectonic upgrading and economic re-utilization is prepared and accompanied by a symbolic gentrification, that is, by medially prepared images, pictures, representation.". (Lang 1994: 498f.)

Hypotheses

The gentrification research has, as stated, produced a complete series of explanatory points of view in the past few decades which can help us to understand the process. Even without looking into the advantages and disadvantages of individual theorems here, one can still reap a number of hypotheses from the various points of view on how a gentrification process must be reflected in observable indicators.

Hypothesis 1: If one understands gentrification as a reinvestment process, there must first be a provable increase in investments in the substance of dilapidated buildings. These investments must be geographically concentrated and must effectively lead to an increase in the local property market or in rental prices (showing along with this that there are demonstrably, potentially realizable, basic rents which are above the actual rents collected without the investments, and would therefore open a rent-gap).

Hypothesis 2: Regarding the population changes which would be expected in a district, new household types would be expected to invade which have a higher social status (especially in income and educational levels) than the residents up to that time. Thereafter would come an upgrading of the social structure, and this upgrading would be the result of migrations. In connection with Hypothesis 1 these changes would have to be particularly clearly visible in renovated houses.

Hypothesis 3: Parallel to the changes in population mixing and the occurrence of investment, a general, cultural up-grading of the district as "chic" generally would have to be seen in the meantime. This revaluation would lead to a new infra-structure in the form of lifestyle-restaurants, boutiques and delicatessen.

With the help of these assumptions we will attempt to examine the transformation assumed too difficult to oversee in Prenzlauer Berg, and to order our examinations and the relevance of the gentrification hypotheses.

The Property Market and Investment Behavior

When one analyzes the investment occurrences of the last ten years, Prenzlauer Berg becomes conspicuous for a number of its characteristics.

A central and often assumed precondition for gentrification is the presence of developed real estate markets - they make a regional increase in price of housing possible in the first place. There was not yet such a market in East Berlin in 1990. It was created just then - above all in Prenzlauer Berg due to the "return" of property to their "previous owners", which included between 70% to 90% of all existing housing, as in other old-style housing areas, and in general led very quickly to sales of the real estate (cf. Dieser 1996; Reimann 2000). Since there could not yet be any generally accepted, well-founded price structure, the targeted sales prices were highly speculative. This resulted in an unparalleled real estate boom (cf. Borst/Krätke 2000: 145ff.) which virtually exploded the sales prices of the early 90s and they rose to a peak value of substantially more than 1,000 DM/sq.m. in inner city old-style quarters. In the meantime the real estate marked cooled down noticeably, the prices for unrenovated apartments near the center have dropped back to between 300 and 400 Euros/sq.m.

Along with the distorted price structure - additionally heated up by comprehensive tax subsidies for investments in East Germany - the boom expectations caused comprehensive building activity in Berlin as well as in outlying areas. Altogether more than 200,000 apartments were built new in the interwoven areas within Berlin-Brandenburg by 1999. However, the number of households in Berlin barely rose in the same time period (4), which led to a distinct housing glut, to empty housing, and a clear reversal in real estate prices and rents in the upper market segments.

The speculative over-heating of the Berlin real estate price structure at the beginning of the 90s on the one hand, and the development of a housing surplus on the other hand consequently led - contrary to the assumptions of Hypothesis 1- to prices not rising but falling. The development of property prices spoke directly against the expectations formulated in Hypothesis 1. This situation is however a consequence of the special conditions of the German-German system transformation which led to a speculative bubble in the real estate market especially in Berlin. These major influences may lose their shaping power with the advancing establishment of the real estate price structure and the reduction of the market glut.

Further particulars result from state intervention. This applies first of all to the direct subvention of Berlin's local government for modernization and restoration, the acceptance of which on the part of apartment house owners is connected to rental and occupant obligations (varied according to different program types). Before the fall of the Wall, city renovation in West Berlin was financed almost exclusively with public funding. Because of the obviously greater need for renovation in the East Berlin old-style housing areas and the deep budget crisis in Berlin, this is no longer considered financially possible. For this reason in the course of the 90s successively fewer funds were made available and the financing of renewal was given over to private capital.

Above all at the beginning of the 90s renovation was essentially paid for with public funds; until 1996 the ratio between subsidized and freely financed renovation was around 2:1. Since then the public subsidies have been continually reduced. In 1999 the ratio had reversed itself: only one third of the (comprehensive) renovation provisions were supported by public funds, the rest were freely financed.(5) In 2001 the public funds for renewal provisions were finally completely abolished.

In spite of the increasing dominance of private forms of financing, altogether around one sixth of all apartments have been renovated with public subvention through the comprehensive subsidies. As a result there is a "state public relief" segment in the local housing market, at least for the duration of subsidy programs, neutralized primarily by the events on the market in rent development, occupancy and profitability for investment.

A further, probably even more important particular has arisen because of the tax laws. The special deduction possibilities from the "subsidized areas law (Fördergebietsgesetz)" enabled home owners in East Germany in the past decade to finance a substantial part of their renovation costs as "tax savings". These "deduction possibilities" amounted to up to 50% of the renovation costs which could be deducted from taxes until 1996, and then up to 40% until 1998/1999; these could be deducted in the first year after investment.(6) These high, indirect subventions made the renovation of old-style houses - especially with high costs and in spite of low rents - extremely lucrative for investors with high incomes to be taxed, since the investment could be transformed into emerging "costs" in tax savings for the participants.

A series of implications for the profitability from renewal investments resulted from the financing of these renewal investments through "tax deductions" which led to further particulars in the course of renovation:

• First, the tax subvention rose (assuming the tax burden of the investor allowed deductions for the relevant sums) along with building costs. A cost saving renovation was then illogical from the tax point of view. Renovation for this reason took place in general "comprehensively", at high speed, with great intensity and with high standards. Only in less than a third of the cases (7) were only single steps (ex. heating installation) accomplished. for affected renters this meant not only substantially increased burdens from an extensive building project, but also that they would live in an apartment after renovation which was planned and equipped for a higher income class and, due to available relevant surveys, would justify serious rent increases.
• Secondly, the apartment business profits from tax savings speculation arise for the greater part from the claim on tax advantages and only a lesser portion from rental proceeds. Since the result of an active investment is only balanced out by tax advantages, investors can partially afford to forego high rental income or even to build there where there is no financially strong demand present. Investments pursued on this ground are predominantly independent from the rents realistically expected after renovation and from the condition of the buildings.

Encouraged by the possibility of saving taxes and the uncertainty concerning good or poor locations and proceeds, renovation has taken place in practically all of Prenzlauer Berg. Even the area around Kollwitzplatz - generally valued as especially attractive - has attracted only slightly more investors than other areas (8). A "frontier of profitability", as they were seen in US American gentrification areas (cf. Smith 1996; Reid/Duncan/Smith 1989), has not developed so far in Prenzlauer Berg. Gentrification has no clear "frontier" in Prenzlauer Berg, but - keeping with military metaphors - rather the scattering radius of a cluster bomb in the hinterland.

Housing Market and Rent Development

Since only a diminishingly small part of the apartments in Prenzlauer Berg are inhabited by their owners up to the present, we direct our attention next to rent development. This is also strongly influenced by state price regulations, and specifically East German and district regulations.

It is generally true that rent development in Germany is strongly influenced by laws which allow rent increases only by gradation, within a specific framework of a "comparative rent system (Vergleichsmietensystem)". Additionally, until 1998 in the former GDR various transitional rules were in effect in the region which narrowly prescribed margins for rent increases. Beyond that, in 1995 in various East Berlin inner city districts, so-called rent ceilings were put into effect, which were supposed to put a cap on rents after modernization for a certain time period at a socially bearable level of about six to nine DM per square meter.

All of these regulations have one thing in common: that they substantially protect existing renters more than new renters. While the rent increases (without modernization) were limited for existing renters, for example, by 30 percent in three years, new renting could basically be freely negotiated between renter and landlord. Even the district rent ceilings, which should have been effective for all rental contracts, are often still insufficiently enforceable. A study of rent development in the houses renovated without public subvention (argus 1999) came to the conclusion that new renters paid about 25 to 30 percent higher rents than older renters; the average basic rent without utilities at 9.46 DM was considerably above the general rental price level in East Berlin ("Mietspiegel" the public rent comparison register).

Since rental increases can only be made by gradation and only enforceable to a certain level, the market development has been strongly characterized by the generation of rental prices through the writing of new contracts. Precisely here the obvious attractiveness of the inner city East Berlin old-style housing areas was demonstrated - documented by a "Marktmonitor - Immobilienmarkt 2000" (BBU 2000), in which renters were surveyed after the formation of rents in new rental contracts (9). The rent price level of the new rental contracts here was clearly above those of West Berlin, although the East Berlin incomes are still below those in West Berlin. While a maximum price of 9.48 DM/sq.m. is asked in West Berlin inner city districts such as Charlottenburg, Schöneberg and Wedding for renovated apartments, in the old-style housing districts in the East Berlin districts Friedrichshain, Mitte and Prenzlauer Berg peak prices of up to 14.- DM are attained. Only here is there a rising market development, while the rents are stagnating in the rest of Berlin. Additionally in renovated houses in the East there is an extreme spread of new contract rental prices (ex. in Prenzlauer Berg 5.14 to 11.- DM) which is traceable to the effect of rental ceiling levels in renovated and protected historical areas, and these in turn are forced to rent, in part, far below the market level, even in new rentals. While the lower edge of the spread is determined by state rental price controls, the upper edge of the rental increase potential is made clear by the expiration of these regulations. In this way the district Mitte already finds itself now at a very high level, which the upwardly climbing market situation is approaching in the East Berlin districts Prenzlauer Berg, Pankow and Freidrichshain. In all other districts the market is stagnating.

In comparing the districts a clear differentiation in the housing market appears in which the highest rents are attained in the East Berlin renovation districts Prenzlauer Berg, Mitte and Freidrichshain. These are still on the increase while rents are stagnating or even sinking in almost all other locations in Berlin. (10)

Population Changes in the Area

Household Sizes and Age Structure

The household sizes in Prenzlauer Berg have changed fundamentally in the 90s. The portion of single dwelling units has risen from 1991 to 1999 by around 20 percent, and now comprises about 57 percent of all households - on the Berlin average it is about 47 percent. The average number of persons per household has sunk therefore from 2.1 to 1.6. The Berlin relative value in 1999 was at 1.9 persons per household (Mikrozensus 1999). Prenzlauer Berg has developed into a clearly singles-dominated living quarter.

In the old-style housing areas of the district there has also been a clear decline in the number of children and younger youth (up to 18 years). The portion of 25- to under 45-year-olds in contrast has risen from a third to over half. In a further division of these age groups it can be determined that in the first half of the 90s the age group of 25- to 30-year-olds has clearly increased. Since 1997 this age group has been slightly in decline. The older groups - especially 30- to 40-year-olds could show a slight above average increase.

Educational and Employment Structure

At the beginning of the 90s Prenzlauer Berg showed one of the highest unemployment rates in all of Berlin and the highest in East Berlin - it was surpassed in only four districts in the west of the city. In spite of a slightly rising rate (from 14.66 percent in 1991 to 16.7 percent in 1999) the district could improve its position and is now the single founding district below the Berlin average (17.47 percent). The average portion of working persons in the area is 68.9 percent in Prenzlauer Berg as against 65.83 in all of East Berlin (Mikrozensus 1999, B3), with a clearly above average number of persons in employable age referring to the high percentage of students who are entered into the statistics as unemployed (cf. TOPOS 1996:22).

There is a growing tendency toward higher educational levels ascertainable in the district. In spite of a decreasing population, the number of inhabitants with a High School diploma (Abitur) has grown. While all other school degrees have slipped below the value of 1991, the number of persons with the Abitur has almost doubled. The district Prenzlauer Berg takes a special place in Berlin with this development. Both the eastern as well as the western parts of the city increased in the average of persons with Abitur by only about one third.

Along with effects of a remedial education expansion (11) only population movement seems likely as the basic cause of this trend. These apparently occurred selectively: households with lower levels of education (of those the East German households have become stronger since 1995) have left the area, households with college education - frequently still studying - have moved into the area. In the meantime almost 45 percent of the residents have an Abitur - the overall German average this is not quite one third (30 percent).

A similar tendency is seen in regard to the number of persons with college education . While all other vocational training degrees are stagnating or declining in number, the number of persons with college education has more than doubled in the area since 1991. The number of college graduates has risen from 15,500 in 1991 to almost 30,000 by 1999 - every fourth adult in the district has completed their studies. Prenzlauer Berg differs from the development in all other districts in Berlin in the distinct increase of the portion of persons with college education. Prenzlauer Berg is then quite attractive for highly educated new arrivals. Beyond this those still studying no longer see the district as an in-between station between their living quarters and career, but set up household for the duration.

This evaluation in the area of education has not yet clearly precipitated down into relative income. Just a few years ago Prenzlauer Berg was considered one of the poorest districts in the city (cf. Hermann/Meinlschmidt 1995; Hermann/Imme/Meinlschmidt 1998). Even now there are still households with an income clearly below the East Berlin average. With a look at the household sizes (Prenzlauer Berg 1.6 persons/East Berlin 1.9 persons), it becomes clear that Prenzlauer Berg has reached an average standard of living in the interim. In comparison to the other inner city districts, this district shows the highest equivalent income and is now taking a middle position within Berlin. In contrast to almost all West Berlin inner city districts the equivalent income (12) here has clearly risen in the past few years (cf. Topos 2001: 18 ff.).

Hidden behind this "normalization" of income in the district is a distinct difference: the spread of lower and higher incomes is clearer than in other districts and on the average. While almost every third household (31.51 percent) in Prenzlauer Berg must get by on less than 1400 DM monthly (on East Berlin average it is 26.97 percent), 13.08 percent of the households have an income of over 3000 DM (East Berlin Average 12.9 percent) (Mikrozensus 1999: E4). Households living next to one another earn well or poorly.

The changes in the social structure in the district follow congruently in expected changes for the gentrification process (cf. Hypothesis 2). The income distribution especially substantiates an evident differentiation between the area's inhabitants, which speaks for a pioneer phase of gentrification and for a compact co-existence of displacing and displaced households.

Moreover these changes do not explain by endogenous development, but they are a result of an enormous fluctuation. With a lightly varying population of between 130,000 and 140,000 more than 225,000 persons have left the district from 1991 to 1999 or have moved into the district (data of the Statistisches Landesamt). The mobility has thereby continually risen: in the second half of the 90s around 30,000 persons have moved to or away from the area annually.(13) In general those moving away have an average and below average income and comprise larger households (cf. argus 2000). While the better earning households are moving to the outskirts of Berlin or to the nearby countryside in Brandenburg, the lower income households "rotate", the "typically" displaced into a gentrification process, into the unrenovated buildings of the district (14), they move into the "platte" buildings or into other unrenovated old-style houses in East Berlin.

Population Changes and Renovation

The population dynamic is greatest there where renovations have been carried out. Primarily it is the privately financed modernization which leads to high departure quotas. A study of population structure in private modernized housing (cf. Mieterberatung/TOPOS 1998) was able to establish that 50 percent of the renters had moved in only after the modernization.(15) In a study from the Humboldt University in Berlin a new renter portion of two thirds was calculated after renovation (cf. Häußermann/Holm/Zunzer 2002). The fluctuation set off by renovation is almost four times as high here as on the district average.

Rents, age and household structure, as well as income clearly differentiate the new from old renters. 85 percent of new renters are between 18 and 45 years old, older children as well as seniors are practically non-existent in this group. The majority of new renters live in single person dwellings. The employment quota is above the average in the area. While only a small adjustment can be established for the old renters, the portion of workers, unemployed, retired and assistants in training is very small among the new renters. The financial situation is correspondingly good in the privately renovated houses. Extremely low household incomes of under 1000 DM are no longer very easy to find in the renovated areas, as they were in 1997, when they made up around 15% of the population. Higher income groups have displaced them disproportionally. As a result of this the household size, the equivalent income of new renters, weighed by household size, is distinctly above that of the old renters, just as it is above those who move away; it is also above the average equivalent income of the area population.

Because of their higher income the new renters are also able to afford higher rents. Their average rent paid was about 3 DM/sq.m. above the old renters (cf. Mieterberatung/TOPOS 1998: 25) and with an average of 10.25 DM/sq.m. was also above the rent ceiling and above the reflected rent level.

Privately financed renovation, which made up two thirds of the entire volume of renovation and which was growing in the 90s and is still rising, has very clearly led to a displacement of poorer and larger households, which have been replaced by smaller and better earning households. The manifest changes shown in the analysis of the social structure movements of the whole district has been seen here in extreme form. When one makes the comprehensiveness of renovation investment obvious, then it becomes clear that modernization is the decisive motor behind the social structure changes in Prenzlauer Berg.

Art Product "Prenzlberg"

Parallel to the economic up-grading and to the change of the social structure, Prenzlauer Berg has experienced an unmistakable cultural and medial up-grading. Built on descriptions from the time before the fall of the Wall (more precisely Bernt 1998: 25ff.) "Prenzlauer Berg" transformed to a code for a specific consumer and life style pattern which had never before been seen in Germany.

The pictures of Prenzlauer Berg do not simply reflect reality, but they construe it, in that they take up various topoi again and mix, compress and spatially re-order them. Put crudely the myth of Prenzlauer Berg arose in the 90s from a retreatment of various basic components and which are combined in ever new variants today: 1.) Prenzlauer Berg as new Kreuzberg (16), 2.) Prenzlauer Berg as Montmartre, Soho or Lower East Side of the new "World-class City" of Berlin, 3.) Prenzlauer Berg as microcosm of the "growing together" of East and West.

The quarter was elected by the lifestyle media as unmistakably the "funkiest part of town" in the 90s, and is seen today - as it euphorically proclaims for itself in the otherwise sober official district homepage - as "liveliest district in Berlin". Almost all of the important German newspapers have already published a report on the neighborhood and a Berlin tour guide can hardly afford to appear without a special chapter on the "legend" of this district. Local events such as the re-opening of bars by local matadors of the neighborhood bohemian scene (17) or celebrating "Walpurgisnacht", arouse supra-regional media interest and are fully covered journalistically.

This cultural boosterism became increasingly a foundation for serious investment in a "cultural" infrastructure in the 90s. One can find the typical mixture of cafés, international cuisine, boutiques and delicatessen which are earmarks of the world-wide gentrification regions, in particular around Kollwitzplatz and earlier on Kastanienallee/Oderberger Straße. "Prenzlauer Berg" has become a label in these businesses, and the myths are visible in the names, interior architecture and menus. While, for example, typical Berlin bars became well-known because of their location ("Dunckerquelle", "Pappeleck"), or kitchens for their menu ("Hackepeter"), or the name of the host ("Antons Bierstübchen"), today's bar names - in line with their highly educated clientele - offer intellectual hints and metaphors ("Frida Kahlo", "Pasternak", "Chagall Nr. 1-3", "Bukowski"). On Kollwitzplatz one does not simply eat and drink, but one enjoys the "internationality of the Elsass kitchen" in a restaurant in which US President Clinton has eaten, one appreciates the lifestyle of the Russian aristocracy or the feeling of consuming one's beer amid writers and dissidents.

The infrastructure of "conspicuous consumption" (Beauregard 1986) is presented in a conspicuously concentrated space. With the exception of the area around Hackeschen Höfe in Mitte and the Simon-Dach-Straße in Friedrichshain, there is no quarter in Berlin in which so many gastronomical locations can be found as the area around Kollwitzplatz and streets leading off of it. In contrast to the building renewals, smaller space concentration processes are taking place here also. In the renovation area Teutoburger Platz, the bar licenses are concentrated around the Oderberger Straße and Kastanienallee predominantly, whose over 3,800 bar locations attract almost as many visitors - from infants to the elderly - as there are residents in the surrounding buildings (cf. BV Teutoburger Platz). Further "Plätze" are in similar planning. Only a few streets from this gastronomical boom there is almost nothing to see: in the blocks around Teutoburger Platz there are hardly 0.46 bar stools per resident, in the blocks north and south of Lottumstraße and north of Eberswalder Straße the situation is similar.

When one observes the expansion of gastronomical establishments in the course of time, one recognizes here also the development of the "footholds" and "frontiers" famously named in the American discussion. While the area around Kollwitzplatz and the Water Tower were already well-populated gastronomically in 1992/1993, the area north, east and west bordering Magistrale (primarily Danziger Straße) were seen for a long time as boundaries which normally could hardly be surpassed by high-priced restaurants. The few attempts there gave up: the places went broke or were demolished. Only very recently has the border faded, even on Helmholzplatz and on Oderberger Straße/Kastanienallee one can find restaurants now which are in no way different from their counterparts on Kollwitzplatz. Kollwitzplatz is now described as plain and boring in event magazines, while every attribute which was given to Kollwitzplatz five years ago is now reserved for Helmholzplatz and Oderberger Straße. As the new urban frontier, the S-bahn trench and everything which lies beyond that is "Indian territory" (Smith 1992).

Summary and Conclusions

Our analysis of the change in Prenzlauer Berg has delivered a number of results which we wish to summarize here:

The old-style housing of the district has experienced a distinct increase in investment in the 90s- The investments have not been concentrated but have been spread broadly. Although the rent development has been strongly influenced by the state's intervention, good locations have developed in which high rents can be expected in the long-term. They already receive among the highest rents in Berlin from new renters in renovated houses in Prenzlauer Berg. The resident structure has changed fundamentally and is now dominated by younger singles and double-earning couples without children with higher education. This trend is seen especially clearly in houses renovated with private funds and in which the new renters have a distinctly higher income. Prenzlauer Berg has been symbolically upgraded parallel to starting real investments. The myth of Prenzlauer Berg led to a quick and, on the part of the renovated houses, over-hasty investment in a "cultural" infrastructure which shows a pronounced geographical concentration.

Of the three beginning hypotheses described, two have been fully confirmed. Hypothesis 1 must be modified: The direct and indirect subventions have led to investment not being geographically concentrated but dispersed across various areas. There can then be no talk of Prenzlauer Berg becoming a "slum". The thesis of a "concentrated side-by-side of upgrading and decay" may describe the present condition, but misses the actual development tendency completely. All indications point - at least in large part in the old-style area of Prenzlauer Berg - to changes occurring which are congruent with gentrification processes. The essential motors of this development are the modernization investments in the old-style housing and the establishment of a "cultural" infrastructure for the "new middle class". Since the tempo of renovation - at least in the renovation areas which represent the good locations in the district - is not abating in the foreseeable future (18), the resources in unrenovated houses in Prenzlauer Berg and with it those for poorer income classes will further decline.

To throw illumination on the opening question concerning postulated results and to offer an answer, the Anglo-American gentrification theories offer a useful grid for the analysis of neighborhood change in principle - at least in the case of Prenzlauer Berg. The majority of the prognosticized phenomenon in this model are also reflected in the analysis of the change in Prenzlauer Berg. However gentrification in Prenzlauer Berg shows a new pattern which sharply differs from the American frontier-formation. Because of the spread of investments across a broad area, smaller areas of substandard apartments will remain plentiful for a longer period, which can be utilized by lower income groups. Thereby a longer coexistence of poorer and richer mixed populations, and the transition of the pioneer phase is prolonged as a gentrification phase. Poorer households also have the possibility for a certain time to find a suitable apartment due to rent regulations, but after the time limit runs out, their displacement is only postponed and not abolished.

The influence of social regulations by the state on housing, still organized by a market economy, does not lead to gentrification being stopped here, but rather more to its being slowed and geographically distorted. The effect of state regulatives is then a thorough paradox: on the one hand they lead first of all to guaranteed tax subvention, so that investments in the old-style housing can be profitable, which in turn leads to a great degree to displacement of the old residents. On the other hand these tax subventions lead to a spread of investment such that a certain amount of substandard apartments remain available and the rent price regulatives both keep down and slow the rise in rental prices. The state's intervention, seen internationally and far reaching, do not thereby neutralize the market effect, but they spatially and temporally slow it down.

A further and primarily East German particularity is founded in the simultaneous actions of the transformation processes of a plan toward a market economy. In the 90s this led first of all to a rational expectation that prices in basic property, housing and rent would have to fall (continually seen in international research). The absence of such a background made development highly speculative and susceptible to reversals. Beyond this the effects of renovation which is catching up in East Germany (and funded by the state) overlaps with the migration of an employed population in the West, the differentiation of the population and the up-grading of the inner-cities. Different from the classical examples of gentrification in East Germany there is no back to the city movement; separate temporal and geographic phenomena have instead overlapped up to this point.

These effects of state regulation point to a void in the gentrification research up to now which has certainly been identified but failed to examine the influence of the varying housing sector from one country to the next. An integration of institutional set conditions in the explanation of neighborhood change therefore remains a still unfulfilled field for research.

References

(1) On the political stage as well, the evaluations of change are contested: the first view is held to varying degrees by renter associations, housing representatives and in part district politicians, while the latter interpretations are shared above all by the State Government, the renovation commissioners and the housing industry. As a result not only are contradictory definitions of the problem put forward, but also mutually exclusive political demands.

(2) Corresponding to the variously positioned research interests (see below) several different types of definitions of gentrification can be held. While "gentrification" for Neil Smith is a "back-to-the-city-movement by capital, not people" (Smith 1979), it is for Kerstein (1990) already "physical renovation and social-class upgrading", while for Friedrichs (1996) it is only "the exchange of a lower status population by a higher status population" by name (Friedrichs 1996: 14) - and without modernization of building materials. For Chris Hamnett (1991) gentrification is finally even "simultaneously a physical, economic, social and cultural phenomenon" which "incorporates" the displacement of the old residents by middle-class households and the renewal of building materials. Jürgen Friedrichs even puts the methodology in question by which the different positions and hypotheses can be combined at all into one theory (cf. Friedrichs 1996: 15).

(3) However the suitability of the stadium model has also been repeatedly criticized as too simple (cf. Caulfield 1994; Rose 1984; Dangschat 1999). Gentrification is clearly more complex than represented by descriptive stadium models with simplified social types.

(4) The number of households rose between 1991 and 1998 from 1,754,600 to 1,795,200, that is, just 2.3%. The increase is thereby almost exclusively traceable to the increasing number of singles-households

(5) For the year 2000 there are as yet no precise numbers. According to information from the renovation agency about 50 of the objects have been renovated, the portion of public subvention has sunk to one quarter of the entire volume.

(6) In the wake of the tax reform, the special deductions for East Germany were abolished in 1998. The tax advantages were reduced in comprehensiveness and reduced to "renovation areas" as well as being replaced by an "investment bonus".

(7) "Cases" here means permits, though for one house with partial measures various permits could be applied for. Cf. also 20. and 21. Report on city renewal in Berlin.

(8) At Kollwitzplatz ca. 50% of the buildings were renovated by the end on 1999, while only barely 40% of the rest of Prenzlauer Berg was. Even the portion of modernized houses, at 38%, was clearly above the average of 30%.

(9) Rental contracts in houses which were built or renovated with public funds were excluded.

(10) A differentiation between market locations is not only taking place in different districts, but also within these. A further study of Prenzlauer Berg was able to demonstrate it thus: that with increasing chronological distance from renovation (and along with that, the rent ceiling regulation expiring) the new rental contracts in the north of Prenzlauer Berg are falling, while those renovation areas south of the S-Bahn Ring are rising (TOPOS 1999:30).

(11) The wave-like development of the number of GDR school diplomas up to 1995 (Polytechnical College /POS) demonstrates first of all increased numbers of arrivals of East Berliner and East German households. The clear decline since 1995 can have two causes: the increased departures of East German households from the area and, to a presumably far lesser extent, the remedial striving for college education in evening and adult schools.

(12) With an equivalent income the living standard of various household sizes and household structures can be compared. Here monthly household net income is weighed against standardized needs. The calculation cited (see table) follows the revised OECD-scale and weights the household leader with 1.0, other adults with 0.5 and children up to 14 years with 0.3 (see Statistisches Bundesamt 1999: 582 ff.; Hanesch and others. 2000: 48 ff.).

(13) In the 80s it was still up to 15 percent. Prenzlauer Berg was not therefore behind, as often claimed, "always the transfer district", but the fluctuation has risen enormously.

(14) Workers in the area who give counseling for renters are now speaking of "renovation nomads". More and more frequently they meet residents during the renewal steps who have already fled numerous times ahead of renovation to substandard apartments, and are again and again overtaken by modernization.

(15) In a similar study in 1995 the portion of new renters was still 40 percent (cf. Mieterberatung/TOPOS 1995)

(16) An ARD television series was quickly changed its title from "Liebling (Darling) Kreuzberg" to "Liebling (Darling) Prenzlauer Berg".

(17) In recent times one intensively exploited highlight of this kind was the re-opening of "Kaffee Burger" by the "dada poets" Papenfuß-Gorek, who combined several Prenzlberg myths (former meeting place of the East Berlin dissidents, Russian disco, association with the "Volksbühne"). The coverage ran just as intensively: not only did the majority of Berlin's daily papers report fully - the "Tagesspiegel" even with a full page report - on the event. And in the supra-regional media as in the "Spiegel" and on television one feels obliged to report on location. The culmination of the coverage was certainly a report on "Tagesthemen" and the appearance of the "Burger" DJ Wladimir Kaminer on the "Harald Schmidt Show".

(18) The reason for this assumption here too lies in the German tax law which makes large tax cuts still possible in renovation areas and in memorial sites for real estate investors. The investment activity has therefore concentrated on renovation areas in the past few years, and - according to information of the district officials - leading to a continual rise in sales prices for real estate there.

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