Germany’s largest real estate company announces another round of rent increases

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Germany’s largest housing company, Vonovia, has announced major rent increases and other real estate companies are expected to follow suit. For millions of families in Germany, housing has already become unaffordable.

Vonovia’s CEO, Rolf Buch, justified this announcement by an increase in inflation. “If inflation is permanently at 4%, rents in the future will also have to increase accordingly every year,” Buch told the business newspaper. Handelsblatt. Otherwise, he claimed, many owners would experience difficulties (!).

Workers and residents demonstrate against proposed rent increases. [Photo: WSWS]

Vonovia’s reference to higher inflation is just a pretext: the driving force behind the planned increases is simple greed.

Vonovia raised its rents in the first three months of this year to an average of €7.40 per square meter, 3.1% more than a year earlier. In Berlin, the company has increased rents by up to 8%. Overall, rents in Germany have increased by an average of 1.7% over this period, meaning Vonovia is ahead of the pack. Over the past six years, apartment rents in Vonovia have increased by almost 22%.

In this context, Vonovia’s promise to increase average rents by no more than 1% per year for the next three years, then in line with the rate of inflation, cannot be taken seriously. It was already clear in early 2021 that the so-called “Future and Social Pact” between the Berlin Senate and Vonovia was not worth the paper it was written on, with many tenants reporting increases of up to 9% .

Vonovia is Germany’s largest housing group with a total of 565,000 apartments in Germany, Austria and Sweden, with most of its properties in Germany. After taking over the Deutsche Wohnen group last year, the company owns around 150,000 apartments in Berlin alone.

As a result, the group of real estate companies make fantastic profits at the expense of tenants. In 2020, it increased its operating profit by more than 10% to 1.35 billion euros, even after the Berlin Senate imposed a (very temporary) cap on rents following massive tenant protests. Last year, the company’s profits reached €1.7 billion and, with a share price of €1.66, paid the highest dividend in its history.

Along with Vonovia, other major real estate companies have also raised rents, in some cases drastically. Nationwide rents have risen over the past year by 4.6% for existing apartments and 7.6% for new buildings. Berlin leads in rent increases, followed by Cologne, Frankfurt and Hamburg.

Internet real estate company Immoscout24 expects further massive rent increases over the next 12 months, of up to 6% in Berlin and 4% in Hamburg, Frankfurt, Munich and Cologne. Rents for new apartments are expected to rise by 8% in Berlin and by 7% across Germany over the same period.

Thomas Schroeter, Managing Director of Immoscout24, also clarified that rent increases are only conditionally linked to rising inflation rates. “Even before the drastic increase in the rate of inflation, rents had risen significantly, especially in major cities,” he said. “It is not only becoming more and more expensive, but also more and more difficult to find an apartment in urban areas.”

In addition to the rapid rise in rents, households are faced with sharply rising ancillary charges. For an average apartment with gas heating, heating and hot water costs increased by 35.7% from February 2021 to February 2022. The cost of electricity increased by 13% over the same period, according to Immoscout24 .

For a 70 square meter apartment, this represents an additional cost of approximately €31 per month compared to last year. If energy costs continue to increase, the additional costs for heating, hot water and electricity will soar to around €92 per month by the end of the year, ie for a 70 m². lump sum, an additional annual charge of approximately €1,100.

In addition, Vonovia and other real estate companies have announced that they will reduce their investments. Share prices of some real estate companies have come under pressure following the recent decision by central banks to reverse their ultra-low interest rate policy. Investors therefore expect cuts. This means that fewer apartments will be built, which, under conditions of increased demand, creates the pretext for even greater rent increases.

Resistance to the unscrupulous greed of real estate sharks has been building for years. More and more people have to spend a large part of their income on rent and utilities, housing demand is pervasive and growing in all major cities, and even two-income families are struggling to find affordable housing. Throughout Germany, and especially in Berlin, there were large demonstrations against excessive rents. Last September, in a popular referendum, almost 60% of the population of Berlin voted in favor of the expropriation of the large housing companies.

While the majority in Berlin was clearly in favor of expropriation, the city’s Senate – a coalition of the Social Democratic Party (SPD), Greens and Left Party – not only ignored the referendum result, but he continued to advocate for real estate sharks.

The Senate’s response to Vonovia’s latest announcement is totally hypocritical. The two presidents of the Greens in Berlin, Susanne Mertens and Philmon Ghirmai, said that in the context of soaring energy prices, “Vonovia’s announcement to raise prices is a slap in the face for tenants”.

The truth is that the Greens, together with Berlin Mayor Franziska Giffey (SPD), oppose the expropriation of large real estate and, as part of a so-called “housing alliance” between the Senate and the real estate sector, have intensified their cooperation with real estate sharks against tenants.

A recent proposal by Senate parties to cap rents at 30% of net income is nothing more than hot air. The proposal is intended to distract from the fact that the Senate is ruthlessly enforcing the interests of real estate companies against the people. The fact is that the SPD-Left-Greens Senate is directly responsible for Vonovia’s latest rent increase proposal.

Last summer, the SPD, the Greens and Die Linke explicitly supported the merger of Vonovia and Deutsche Wohnen, even though it was perfectly clear that the costs of the takeover would be passed on to the tenants.

At that time, Giffey’s predecessor, Michael Müller (SPD), announced a “new cooperation between politics and business” which was “not confrontational but cooperative”, thus defending the interests of Vonovia and Deutsche Wohnen. Then-Senator for Town Planning and Housing Sebastian Scheel (Left Party) also welcomed the merger and called the cooperation between the companies and the Senate “progress”.

In fact, the relentless torrent of rent increases illuminates only one thing: housing is a basic right and cannot be treated as a commodity. The large real estate companies must be expropriated without compensation. This is only possible by mobilizing the working class on the basis of a socialist program.

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