Importance of service charges highlighted in residential affordability
A YouGov survey on behalf of German residential specialist the d.i.i. group carried out in December 2019 shows that over 80% of residential tenants look at the “warm rent”, not just the rental price.
- Almost half of all tenants find service charges too high
- Many tenants mistrust their landlords when reconciling service charges
Statistics on rental price growth tend to show the development of rents excluding service charges, known in Germany as “cold rents”. But over 80% of tenants look at the total rent including service charges when they estimate whether they can afford to rent a property or not.
“Service charges are often ignored in open discussions on rental prices, but are an important factor in the cost of living”, says Frank Wojtalewicz, MD of the d.i.i. group. In practice it is the “warm rent” which is the key indicator of the affordability of rented housing. It should also be important for landlords to keep service charges to a minimum either by a programme of refurbishments or by negotiating better contracts with utilities providers. “Above all, the larger portfolio owners should be in a position to leverage costs for the advantage of their tenants” concludes Wojtalewicz.
The survey shows that many households have potential to save costs. Almost half of respondents find their service charges too high (33%) or much too high (14%). Almost all tenants are pro-actively attempting to keep service charges down. 83% are trying to save energy and water costs either by the use of more efficient electrical appliances and/or the installation of more efficient shower heads.
Transparency and credibility are also important aspects for many tenants. Over one quarter of respondents are concerned that their landlords are charging them for more service charges than they actually consume.
“It is important to provide transparency and quick access to information” says Wojtalewicz. “Digitalisation offers many options to the landlord. If a tenant receives his service charge reconciliation just once a year and has no other opportunity to access the information or to ask questions efficiently, then that is insufficient to create a trusting relationship.”
The d.i.i. group is an integrated residential property company founded in 2006 and its core business focusses on the development of its existing portfolio, the new-build of residential properties and the structuring and management of residential portfolios for institutional and private investors. It employs a staff of around 160 and has around €2.3 billion worth of assets under management.