German housing companies face increasing resistance to higher charges

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A number of Germany’s largest residential landlords have been feeling a renewed wave of resistance coming from tenants no longer willing to accept extra charges for energy, sanitation and other refurbishment costs imposed upon them by their landlords in the name of improved housing quality.

Tenant associations have been mobilizing also in the face of feared plans to refurbish apartments as a precursor to selling them off to private buyers.

In its latest nine-month report, Germany’s largest private landlord Vonovia is cutting back on energy efficiency improvement for the next two years, slashing planned investments by 40% over tenant concerns about likely future rent rises.

CEO Rolf Buch said in a statement accompanying the report, “We have pursued a systematic approach and we are able to achieve the high standards required under the German Energy Saving Ordinance without any problems. We have, however, found that there is a lack of acceptance for extensive energy-efficient modernization, and that many tenants are also not in a financial position to bear the cost of the associated rent increases.”

“As our focus is on our customers we have decided not to realise the costly projects we had planned for our 2019/2020 program where these s would result in a rent increase of more than €2 per sqm. This means that we are cutting our investments in energy-efficient refurbishment by 40%.”

Listed peer Deutsche Wohnen, which owns and manages 166,000 residential units nationwide, has also been in the headlines recently over its decision to buy 750 apartments on Berlin’s famous Karl-Marx-Allee, an investment that has been subsequently stopped by Berlin District Court pending an enquiry into the complex contractual situation which the vendor, Predac Immobilien, inherited from agreements going back to the mid 90’s regarding the local municipality’s right of first refusal should the apartments be offered for sale.

Tenants in the landmark socialist-realist housing blocks along what was East Berlin’s most prominent boulevard have been protesting since it became known in early November that the M-DAX listed Deutsche Wohnen was to be their new prospective landlord. They believe they are being pressured to accept Deutsche Wohnen’s terms by the short amount of time being offered to them to exercise their own right to buy their rented apartments, and that Deutsche Wohnung could target the apartments for later privatization by undertaking extensive refurbishment.

Another company locked in negotiations with Berlin’s public authorities is Danish pension fund PFA, which recently invested over €1bn in German residential housing, bought from Industria Wohnen, and to be managed by the Munich-based asset and property manager Domicil.

Alongside Hamburg and Munich, Berlin is one of three large German cities where - in certain residential areas designated as Environmental Protection Zones (Milieuschutzgebiete) - local housing associations (Städtische Wohnungsbaugesellschaften) have the legal option to buy tenanted buildings shortly after they have changed ownership in the private sector.

PFA is now negotiating with the municipality of Neukölln to reach an agreement allowing it to retain ownership of the buildings it bought in Berlin. There, in Thiemannstrasse and neighbouring Böhmische Strasse, PFA has until the 7thJanuary to try to retain ownership of the housing units, where tenants have been protesting with the support of local politicians since the sale was announced three months ago. They are worried that their reasonable rents will be increased or that their flats will be turned into expensive condominiums.