Coping with City Shrinkage: Lessons from Germany

Demographic crisis, demand crisis and residential market crisis in Eastern Germany

Major demographic shifts severely affect the development of cities, especially in Eastern Germany. In Saxony, the dramatic population loss of 0.5 million inhabitants between 1990 and 2005 corresponds to the complete depopulation of Leipzig, the second largest city in Eastern Germany. Demographic trends will lead to a loss of a further 0.6 million Saxon inhabitants until 2020. These demographic changes have precipitated a collapse of housing demand, as excess housing supply has surpassed 400,000 units in 2000, while the vacancy rate amounted to nearly 18 % of total housing stock. The severe disequilibrium on the housing market persists, as demographic developments will weaken demand further. Private owners instead of the government are bearing the brunt of the negative effects of the severe demographic changes. For private owners, public utilities, urban planners and treasurers, the term "development" has lost its positive connotations and has taken on the meaning of "coping with a contracting housing market".

The problem of excess supply will neither be solved by restructuring individual companies, as any reorganisation and recapitalisation in contracting markets would inevitably put competitors at a disadvantage, nor by easing the requirements for declaring bankruptcy, as the vacancy rate would not change. Urgent government intervention is required to prevent a negative scenario of deteriorating infrastructure, a worsening business environment, disinvestment, growing social segregation and "flight from blight" and urban decay from turning into reality. To achieve a long-term stabilization of the housing market, the government grants affected landlords and public utilities financial aid for dismantling excess housing stock and deconstructing obsolete infrastructure as well as subsidies for the repayment of principal and interest. Special tax exemptions in the case of mergers shall facilitate the formation of economically viable actors on the housing market and investments grants serve as incentives for revitalising neighborhoods representing the character and history of a city. These government policies reflect responsibility for social cohesion and prevention of social hotspots in disadvantaged neighborhoods and try to regain the stability of the real estate market. The public programmes are co-financed by the federal and the state government.

Regeneration of shrinking cities - the case of East Germany

Almost all cities in East Germany have lost significant shares of their population since reunification in 1990, some of them more than 25 percent. This is due to three processes:

•  a decline in population because of much fewer births than deaths
• suburbanization
• migration from peripheral, declining regions to better-off places in east and west Germany. As mostly the young and better educated leave, this is leading to a brain-drain and accelerated regional aging.

Even though a post-reunification economic collapse has left whole regions in Eastern Germany de-industrialized, public discussion on city shrinkage started only after massive housing vacancies (more than 1 million) became evident in 2000. Ever since, discussions and urban regeneration activities focus on the most visible part of shrinkage - the housing vacancies. A federal programme for urban renewal, "Stadtumbau Ost", has been laid out, subsidizing the demolition of up to 350.000 flats by 2009. Nearly all eastern cities are participating.

As cities are facing complex problems caused by city shrinkage and demographic change, it is necessary to recognize this complexity and tackle it with comprehensive and multi-dimensional approaches. Today, East German cities focus almost exclusively. the demolition of vacant buildings. Even though this is an important part of the regeneration of shrinking cities, it will clearly not suffice. The popular philosophies of doing things "one-by-one" and "to mitigate the problems" will not automatically generate a change to the better.

To generate positive perspectives for the future, it will also be necessary for East German cities to "strengthen their strengths". As conventional methods of attracting businesses are failing, it is becoming increasingly hard to develop specific, comparative strengths of a city. Some small and medium towns have done so by promoting themselves with a very specialized profile, e.g. City of Homeopathy or City of Sports. Essentially alignments of a city’s urban development strategy, these “new” profiles are typically embedded in local traditions and culture. The regeneration of shrinking cities requires new perspectives in many ways: economic, social, cultural, societal, structural and in the housing market. These could come from a culture of urban creativity, fostering the open exchange of ideas and people.

Buried infrastructure in shrinking cities

Demographic trends indicate a long-term decline in population and employment all over Europe, particularly in rural areas and smaller towns. In larger cities, some quarters will be affected as well. Ultimately, the diminishing population leads to perforated urban areas. There are little chances for densification around centers and along axes of infrastructure. New building activities will continue on a smaller scale than today.

Due to the thinning-out and expansion of the urban area, the demand for infrastructural services will change in time and space. Parts of buried infrastructures will become over-sized, a few of them even obsolete. However, most of them are still needed in the context of the distribution network. This process of shrinking demand for infrastructural services is accentuated by the decline of demand per capita, due to more economical and efficient use of water and energy in accordance with the objectives of sustainability.

Consequently, the specific costs for the provision of infrastructural services increase. Another driving factor for increasing costs of infrastructural services is the need for infrastructure rehabilitation which, on the other hand, provides an opportunity for down-sizing the system and adapting it in a sustainable way to the emerging pattern of demand.

Demographic change, segregation and social urban renewal from a West German perspective

From a West German perspective, the processes of demographic change and segregation are spatially quite differentiated. Most of the larger towns of North-Rhine Westphalia register a declining population due to suburbanization and other forms of out-migration or because of an aging population, resulting in much fewer births than deaths. Especially the cities of the Ruhr-Area, Germany’s biggest old industrial region, are coping with this phenomenon since decades. But at the same time, they are still targets for in-migration and melting pots for people from other countries. But some cities are growing, e. g. Bonn: Their growth in population comes both from to positive migration rates and a positive relation of births and deaths.

In the cities and regions of North Rhine-Westphalia growth and decline exist at the same time. On the city level, the three processes of population decline, growing percentage of elderly and growing percentage of inhabitants with a migrant history do overlap and influence each other. Especially the processes of social, ethnic and demographic segregation are very complex. Coping Strategies differ from those in eastern Germany; they are set in the broader framework of publically funded social and urban development programs.

This article is based on presentations held at the 2006 conference "Coping with city shrinkage and demographic change - lessons from around the globe", organized by the Leibniz-Institute of Ecological and Regional Development (IÖR) and the Schader-Stiftung in Dresden/Germany. The speakers were Peter Flath (Germany), Heike Liebmann and Dr. Tobias Robischon (Germany), Raimund K. Herz (Germany) and Evelyn Sucato (Germany).