Frankfurt, Berlin After Germany’s largest landlord Vonovia, other large German housing groups are also preparing their tenants for increases in view of the high inflation. This includes the Düsseldorf group LEG Immobilien. It can be assumed that if inflation continues, wages and salaries and ultimately the willingness to pay more money for rent will also increase, said a spokesman.
The real estate giant emphasized that these increased rents will flow into the then higher rent index, which the housing companies use as a guide. “The rental market will therefore not decouple itself from the general price development.” LEG has around 166,000 rental apartments in which around 500,000 people live.
The company is one of the largest private landlords in Germany and is concentrating on North Rhine-Westphalia with its housing stock, but is also expanding into other federal states. In the first quarter of 2022, LEG’s rents increased by an average of 2.7 percent compared to the same period of the previous year, and the target figure for 2022 as a whole is three percent, the company said.
In an interview with the Handelsblatt newspaper, Vonovia CEO Rolf Buch said that he believed that significant rent increases were inevitable if inflation continued to be above average. “If inflation is permanently at four percent, rents will have to increase accordingly every year in the future,” he said. Otherwise, many landlords would get into serious trouble. “We can’t pretend that inflation is bypassing rents. That will not work.”
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Thomas Meyer, CEO of Wertgrund Immobilien AG, does not contradict Buch, but sees no nationwide increase and would like to see a sense of proportion when it comes to rent increases. Renovating an apartment now costs twice as much as it did four years ago. Against this background, an increase in rents is “unfortunately an expected consequence,” he said.
The German Tenants’ Association is appalled
A long time ago, his company switched to signing leases that allowed regular increases. “Nevertheless, we will of course not pass double-digit inflation rates on to the tenants, even if the lease would allow it.”
The German Tenants’ Association was meanwhile “appalled by the media announcement of rent increases” by Vonovia. “The fact that tenants have to be held responsible for Vonovia’s collapsed share price and higher interest rates on the capital market shows that the business models of listed housing groups are antisocial and speculative,” commented the President of the German Tenants’ Association, Lukas Siebenkotten, on the announcements by the Bochum-based Dax group.
The real estate economist Michael Voigtländer from the Cologne Institute for Economic Research (IW) warned against scaremongering. “Real wages are falling and with them the ability of tenants to pay,” he said. “At the same time, from the tenants’ point of view, rental costs are rising because energy prices are rising significantly.” He therefore expects rent increases to be below the inflation rate, at least this year.
The Berlin real estate investor Jakob Mähren explained: “The pressure on the rental housing market continues to increase.” The refugees from the Ukraine continued to drive the demand for apartments, especially in Berlin. In addition, inflation is rising. “Of course, that has consequences for rents.”
The real estate market faces a variety of problems, Moravia said. These included rising construction prices and delivery bottlenecks. “It is becoming increasingly difficult for project developers to build houses that can be rented out in a socially responsible manner. It just doesn’t pay off.”
Greens: “Clear call to strengthen tenancy law”
According to Moravia, a rent adjustment is a “logical consequence of the current situation”. The first calls “for even more regulation will certainly be heard soon,” he warned. However, it should not be the task of politicians to worry about further restrictions, but to get the enormous inflation under control and create more living space in Berlin and other metropolitan areas. “Only when tenants can easily choose their apartment again from a wide range of options, and can enlarge or reduce their size, will we see a significant relaxation on the rental market.”
More Handelsblatt articles on the challenges in the housing market:
The first signs of further interventions in the rental and housing market show reactions from politicians. The Greens in particular are upset. “Vonovia is turning the screw at the expense of the tenants in order to stabilize the company’s profit expectations,” Christina-Johanne Schröder, spokeswoman for housing policy for the Greens in the Bundestag, told the Handelsblatt. “Such a corporate policy thwarts the relief packages of the federal government.”
Schröder said that she felt the statements by the Vonovia boss “as a clear call to massively strengthen tenancy law, to introduce the new non-profit housing scheme and to support local authorities in stockpiling land”.
The housing market is tight, especially in big cities.
(Photo: imago images/Bernd Friedel)
Daniel Föst, spokesman for construction and housing policy for the FDP, explained: “I don’t see any rent increases due to the current inflation at the moment.” But it is correct “that we have to counteract the price pressure and inflation”. The price spiral starts with housing construction. “Rising prices for energy, raw materials and a lack of skilled workers are making construction more and more expensive,” said Föst. Above all, it is important to get the construction costs under control, to promote openness to technology and innovations, to accelerate procedures and to simplify bureaucracy. “That would already save a lot of costs and thus dampen rents.”
Jan-Marco Luczak, the Union’s construction and housing policy spokesman, also stated that he did not see any short-term rent increases across the board. Rents are generally not linked to inflation. In any case, rent increases in existing buildings are only possible up to a maximum of the local comparative rent or after modernization.
“Of course, the high inflation will not leave the tenants unaffected,” said Maren Kern, head of the Association of Berlin-Brandenburg Housing Companies BBU. “Nevertheless, we do not see comparable increases in Berlin.” The scope for rent adjustments is clearly regulated in the Civil Code. Inflation between April 2021 and 2022 was 7.9 percent. “Housing costs only rose by 2.2 percent over the same period, and therefore more slowly,” she said. “That shows the dampening effect of tenancy law.”
More: Where real estate prices continue to rise and where not: an overview