Tuesday 15 October 2019

Berlin landlord sees rent cap as chance to rethink city living

Vonovia boss Buch says city doesn't want turn into another London

Affordable: Berlin remains a major city that is still affordable to most people
Affordable: Berlin remains a major city that is still affordable to most people
Headquarters: Vonovia rents out one million apartments in Germany

Oliver Sachgau and Andrew Blackman

GERMANY'S biggest landlord has urged Berlin's city government to use its rent-freeze plan as an opportunity to find long-term solutions to its housing crisis and avoid becoming like London, taking a surprisingly non-combative tone to the latest regulatory backlash.

The German capital's intention to cap rents for five years - slated to go into effect in 2020 - will give the city time to address deeper problems, Vonovia SE chief executive Rolf Buch said at an event in Munich this week.

These include a shortage of reasonably-priced living space and buildings in need of renovation.

"We don't want cities like London,'' where only the super-rich can afford to live in city centres, Mr Buch said.

Vonovia owns apartments for about one million people. By freezing rents, the Berlin city administration is taking the most radical step yet to protect residents from a housing crunch, which has become a growing political issue around the world.

However, the move risks scaring away investment, stalling everything from upgrading windows to constructing much-needed new apartments.

Mr Buch highlighted the scope of the problem, pointing out Germany's real estate industry needs additional funding of at least €80bn a year for the next decade to overcome the market's underlying problems.

Vonovia itself won't be seriously affected by the rent freeze since only 10pc of its properties are in Berlin, Mr Buch said.

The conciliatory comments from Vonovia show how big landlords are trying to counter their image as property predators and reduce the risk of more regulation.

Deutsche Wohnen SE, which owns about 112,000 Berlin apartments, said it will link any future rate increases to wages "so that a household only needs to spend a maximum of 30pc of its net income" on rental costs, excluding heating.

Berlin's effort to protect renters - the majority of the city's population - has hurt both property companies.

Deutsche Wohnen shares have dropped about 22pc this month, while Vonovia has lost 9pc.

"We want to improve the situation on the German residential market and will take our tenants' individual capacities more into account in future," Deutsche Wohnen CEO Michael Zahn said in a statement.

The tone was softer than comments Mr Zahn made at the weekend. In an interview with Berlin-based 'Tagesspiegel am Sonntag' newspaper, the CEO warned the freeze in its current form could cause "chaos and discord".

For its part, Vonovia responded last month to the backlash against rising rents with a "reformulated" business philosophy, highlighting how it helps provide more affordable housing and address "pressing socio-political questions".


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