MUNICH (Reuters) - Berlin city government’s plan to freeze rents for five years will hit renovations, but won’t force Vonovia to change its profit forecast, the head of the German property company said.
The city government’s plan came after thousands of residents in April protested against surging rents and demanded the expropriation of more than 200,000 apartments sold off to big private landlords.
Vonovia CEO Rolf Buch said his firm would not suffer financially from the rent freeze proposals, pointing out that only 10% of Vonovia’s 400,000 apartments are in Berlin. Shares in German property companies, including Vonovia, dropped sharply on the day the plans first became known.
“It’s irrelevant for us,” Buch told journalists in Munich on Monday in comments that were embargoed until Tuesday. “I don’t need to change my guidance.”
The rent freeze will predominantly affect housing cooperatives, which - unlike Vonovia - cannot finance themselves via the capital market and so will not be able to afford new buildings, Buch said.
He added that stagnating rents would result in the cooperatives slashing maintenance costs, resulting in a decline in the quality of living.
Buch said Berlin city government’s plan to require property owners to get approval for renovations that result in rent increases of more than 50 cents per square meter would be counterproductive.
He said it would result in Vonovia not carrying out necessary renovations to make homes more energy-efficient as such work leads on average to a rent increase of 1.52 euros per square meter.
“It will make Berlin top the charts for environmental sins in Germany,” Buch said.Renovations to adapt homes for older people - a growing need in a country with an aging population - would also be hit, he added.
Buch said some regulation of the rental market made sense and Vonovia valued regulated markets as they prevented big fluctuations in prices.
He urged municipalities to do more to ensure property owners comply with regulations such as the “rent price brake” that was introduced in 2015 to limit rent hikes for new tenants in some densely populated areas.
Since then, landlords increasing rents are not allowed to make rents more than 10% higher than the local average unless previous tenants had paid more.
“Many simply don’t adhere to the law. In Berlin almost every offer you see breaks the law,” Buch said.
He said Vonovia would continue to grow via acquisitions though it does not see major potential on that front now.
Reporting by Alexander Huebner; Writing by Michelle Martin; Editing by Riham Alkousaa and Mark Potter