German tenancy law has a clear mandate: It should ensure a fair balance of interests between landlords and tenants. This works in most cases. But with the rapid social changes, the pressure to further develop the legislation is increasing.
How this could actually be done should be clarified by a study commission in the next legislative period. It could develop the basis for making tenancy law fit for the future in a broad consensus between political, social and economic actors.
The referendum on the expropriation of housing companies in Berlin has increased the pressure on political decision-makers. One thing is clear: politicians must take people’s concerns about whether they will still be able to pay their rent in the future seriously and work out solutions.
Expropriation, however, is not a suitable way of addressing the causes of the housing shortage. The merger of Vonovia and Deutscher Wohnen offers an opportunity to better master the challenges.
We stand ready to make our contribution to the urgently needed debate on how people should live and rent in Germany in the future. It is undisputed that the rental housing market must also be regulated in the future. This is the only way to balance the different interests of the contracting parties. Rents should not be exposed to the free play of supply and demand.
This would jeopardize social peace and also make investments unsafe. Current instruments such as the rent control act – albeit with a delay. When used in a regionally targeted manner, the rent brake is an effective means of curbing price increases in re-letting in tense housing markets. On the other hand, a Germany-wide, undifferentiated rent cap would curb price developments in low-growth markets and thus prevent urgently needed investments.
Modernization must not drive tenants out of the apartment
Therefore, the many different housing markets in Germany do not require blanket, but rather specific, tailor-made solutions. With the reform of the rent index, further, objectively comprehensible criteria for the presentation of the local comparative rents will become binding in the future. However, it is important to check whether these criteria cannot be made simpler.
The energy transition and the development of a climate-neutral building stock begin at home, in the neighborhood. The landlord decides whether an energetically sensible investment is made or not. This expense must pay off for him, he needs appropriate incentives. On the other hand, the investment should not burden the tenant unduly.
That is why some fundamental decisions are required, for example on the distribution of the CO2 price between landlords and tenants, who determine consumption based on their usage behavior. A staggered solution based on the energetic state of the building makes sense. Corresponding model approaches are available. A blanket solution does not help here either. In addition, the currently very complicated system of energetic building modernization has to be fundamentally revised and simplified.
Modernization must not result in tenants having to leave their apartments; further development of hardship management is necessary. The burden sharing between the state, landlord and tenant must be reorganized. Energy modernization is often so complicated today that small private landlords in particular, who make up more than half of the market, are overwhelmed.
Housing benefit does not create new apartments
Either way, there will always be cases of hardship. Housing benefit is an important social benefit that cushions tenants’ housing costs that are too high, especially after the housing benefit reform.
Housing benefit cannot, however, replace social housing, as it does not create living space and thus does not solve any structural problems. It is therefore important to ensure that investments in publicly subsidized housing construction make economic sense despite rising construction costs and rising land prices.
A reorientation of the energetic building renovation should be considered together with the use of new rental models and tenant electricity – i.e. electricity that is produced in the immediate vicinity of the customer and is not conducted via the public network. Today it is still largely uneconomical and very complicated to implement tenant electricity models. Meter concepts and property boundaries are just two hurdles that have been holding back the energy transition in the district for years.
The important thing is that the tenant must benefit from the electricity produced on his roof – just as it is the case with homeowners. The prerequisite for this is that the landlord can sell the electricity to his tenants. In this way, CO2-neutral electricity is used and stored, which also relieves the power grid.
In the future, we will urgently need every kilowatt hour that can be produced in a CO2-neutral manner. Therefore, this step must be taken as quickly as possible. It would trigger investments that are currently still on hold.
After the buildings had been “upgraded” energetically, the door to new rental models was to be opened in a second step. The example of Sweden shows: Warm rent models are a simple, reliably calculable solution for tenants and landlords. In addition to a warm apartment (21 degrees room temperature or more), the landlord owes a certain amount of electricity. This makes annoying, prone to dispute and expensive ancillary cost bills superfluous.
We need faster approvals
In this way the much scolded “second rent”, the ancillary costs, could be reduced. It would therefore be desirable for the legislature to enable hot rent models, for example as part of an experimental clause.
Fast and uncomplicated approval and processing of construction and renovation projects is often not possible today because the procedures are still largely analogous. There are numerous suggestions for acceleration, for example in the course of digitization and simplification. Individual federal states such as North Rhine-Westphalia have already set out to achieve improvements.
But overall, the situation in the authorities is still mostly sobering. There is an urgent need for action here. A building minister with stable parliamentary backing must finally break this Gordian knot. Then new processes such as serial renovation or still experimental 3D printing will also have a chance.
Politicians must no longer hesitate to set the course for the housing industry. Representatives of the legislative and executive branches should soon develop proposals in a commission of inquiry on how to make tenancy law sustainable. They have to show how people in Germany, a tenant country, can live in a socially balanced way in contemporary and sustainable apartments.
The author: Rolf Buch is CEO of the Vonovia real estate group.
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