U.S. Markets open in 4 hrs 18 mins

German Landlord Says Berlin Rent Cap is Better Than Becoming Like London

Oliver Sachgau and Andrew Blackman
(Bloomberg) -- Germany’s biggest landlord urged Berlin’s 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 Officer Rolf Buch said at an event in Munich on Monday evening. 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 downtown neighborhoods, Buch said. Vonovia owns apartments for about 1 million people.By freezing rents, Berlin’s government is taking the most radical step yet to protect residents from a housing crunch, which has become a growing political issue around the world. The move risks scaring away investment, stalling everything from upgrading windows to constructing much-needed new apartments.Buch highlighted the scope of the problem, pointing out that Germany’s real estate industry needs additional funding of at least 80 billion euros ($91 billion) 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 10% of its properties are in Berlin, Buch said.Counter MeasuresThe 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 30% 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 22% this month, while Vonovia has lost 9%.“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 Monday.The tone was softer than comments Zahn made at the weekend. In an interview with Berlin-based Tagesspiegel am Sonntag newspaper, the CEO warned that 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.”(Adds Deutsche Wohnen CEO comment beginning in eighth paragraph.)To contact the reporters on this story: Oliver Sachgau in Munich at osachgau@bloomberg.net;Andrew Blackman in Berlin at ablackman@bloomberg.netTo contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net, Chris Reiter, Andrew BlackmanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

(Bloomberg) -- Germany’s biggest landlord urged Berlin’s 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 Officer Rolf Buch said at an event in Munich on Monday evening. 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 downtown neighborhoods, Buch said. Vonovia owns apartments for about 1 million people.

By freezing rents, Berlin’s government is taking the most radical step yet to protect residents from a housing crunch, which has become a growing political issue around the world. The move risks scaring away investment, stalling everything from upgrading windows to constructing much-needed new apartments.

Buch highlighted the scope of the problem, pointing out that Germany’s real estate industry needs additional funding of at least 80 billion euros ($91 billion) 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 10% of its properties are in Berlin, Buch said.

Counter Measures

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 30% 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 22% this month, while Vonovia has lost 9%.

“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 Monday.

The tone was softer than comments Zahn made at the weekend. In an interview with Berlin-based Tagesspiegel am Sonntag newspaper, the CEO warned that 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.”

(Adds Deutsche Wohnen CEO comment beginning in eighth paragraph.)

To contact the reporters on this story: Oliver Sachgau in Munich at osachgau@bloomberg.net;Andrew Blackman in Berlin at ablackman@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net, Chris Reiter, Andrew Blackman

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.