Living at Fair Prices
As a responsible company, we are committed to providing our customers with affordable housing that meets people’s needs. As such, we meet the basic human need for housing. We want to offer as many people as possible a long-term home. The fundamental challenge involves being able to provide a broad supply of housing at fair and transparent prices, while at the same time achieving our climate objectives, which include a virtually climate-neutral housing stock by 2045, even in a more challenging environment.
We believe that social responsibility and the transparency of our rents are important levers in this context. By expanding our core business through letting and new construction, we make a substantial contribution to easing the situation on housing markets. Our rental prices are based on the usual local rents and – if available – on qualified rent indices. We are in favor of regulatory intervention in the housing markets, as we believe that it helps to ensure social balance and creates a stable business environment as a result. When letting, we always observe the applicable country-specific legislation.
We also partner with cities and municipalities to offer subsidized and independently financed homes for people on low incomes and are responding to location-specific challenges with services tailored to needs. In Germany, around 41,000 of our homes are currently price-linked. In order to protect low-income tenants, we enter into individual agreements for rent-controlled homes. This secures our existing rents and play into wider-reaching social agreements. We are concluding more and more extensive agreements with cities and municipal authorities – first and foremost in Berlin, but also in Frankfurt, Cologne, Dresden and elsewhere. The fundamental concept on which all agreements are based is Vonovia’s work in partnership with politicians and society to tackle municipal challenges and that the company takes specific societal and social challenges present within cities into account within its planning.
The use of public subsidies – now and in the future – helps us to make existing and new housing affordable for our tenants and at the same time to implement climate protection measures. In this way, we can contribute to a balanced tenant structure in our neighborhoods.
When passing on modernization costs, we are always mindful to ensure that the burden placed on our tenants is socially just and offer individual solutions as part of our social management system. That said, reasonable compromises must be made in favor of additional climate change mitigation measures.
In Sweden, Victoriahem works with tenant associations to reach agreements on issues such as changes in rent charges. Issues like these are discussed and agreed on in negotiations. Rent increases occur annually and after modernization to a higher standard. All of these apartments are price-controlled.
Individual support programs constitute a further supplementary component of our work to enable fairly priced housing. As part of our established social management system, we apply uniform standards to hardship cases in the event of modernization work and follow guidelines based on those of charitable associations. These standards and guidelines were agreed with the Tenants’ Association and other residential real estate companies in 2021. As such, we are contributing to greater reliability and transparency in cases of hardship.
Our special vested rights for people aged over 70 are also still in place. As of January 2023, these have also been extended to Deutsche Wohnen’s portfolio, just like our active support for people who have fallen into payment difficulties as a result of the coronavirus pandemic.
We also offer solutions for particularly vulnerable people such as refugees and the homeless. We do this through,for example, the framework of special agreements with state governments, cities and municipalities as well as other residential real estate companies (see Inclusion, Diversity and Social Cohesion). We do this because we are convinced that social cohesion only comes about through successful integration and inclusion. And this begins at home.
Rent structures and agreements with municipalities are managed in a decentralized manner via the regions. The individual measures are planned and coordinated in the Portfolio Management department. This department is also responsible for managing cases of hardship. It is supported by community developers in the individual regions in order to provide even better support for the tenants concerned. The Chief Rental Officer (CRO) is the Management Board member responsible for the property management business as well as for customer service and portfolio management.
Objectives and Measures
As homes become increasingly scarce and general conditions deteriorate, we continue to focus on providing homes at fair and transparent prices, suited to every budget.
Our focus is on moderate and socially acceptable rental price development. Across the Group, the average rent price came to € 7.49/m2 (in Germany € 7.40/m2) in the reporting year, which corresponds to an organic increase in rent of 3.3%. This is both less than the increase in the previous year (3.8%) and significantly below the rate of inflation, which averaged almost 8% in Germany in the reporting year. We respect all regulatory provisions such as rent ceilings and rent indices. Index-linked rents, i. e. rents linked to inflation, make up just around 1% of our lease agreements.
Vonovia’s Group-wide portfolio has grown considerably as a result of the merger with Deutsche Wohnen, especially in Berlin. At the same time, the housing situation there is extremely challenging. As responsible partners, Vonovia and Deutsche Wohnen together sent several signals in 2021 that we wish to change the situation in Berlin through cooperation between politicians, society and housing companies.
Partnerships with Cities and Municipalities
As part of the “Future and Social Housing Pact” agreed with the Senate of Berlin in 2021, we have made three voluntary commitments: to strengthen the municipal housing portfolio, build more new homes and limit rises in rents for existing properties. In June 2022, Vonovia – one of only two private residential real estate companies to do so – signed the “Alliance for New Housing Construction and Affordable Housing in Berlin,” which replaces the previous agreement and will remain in effect until at least 2027. The Alliance now provides a new basis for commitments to Berlin’s tenants that far surpass the scope of the old agreement and strengthens protection for low-income people in particular.
Deutsche Wohnen also has its own regulation, the “Tenants’ Promise,” which will apply to its portfolio until mid-2024 and continue to exist in parallel with the Berlin Alliance. However, the agreement that is more favorable for our tenants shall always apply.
We also offer subsidized and independently financed homes for people on low incomes in other cities and municipalities and are responding to location-specific challenges with services tailored to needs. We have reached agreements with a number of municipalities for this purpose. The focus of such services can vary: In Frankfurt am Main, we are addressing the issue of homelessness, for instance, while in Cologne we are focusing our efforts on a new construction offensive, and in Dresden our aim is to strengthen the municipal housing association as well as to work together to develop neighborhoods and ensure a coordinated climate strategy.
Moderate Rents and Modernization Costs
In Germany, the costs of energy-related refurbishments can be passed on in the net rent – within a specific framework. The state has restricted the ability to pass on costs to € 3/m² (€ 2 in the case of rents under € 7/m2). The resulting increase in the rent is balanced out for the tenants through a reduction in heating costs. In the 2022 reporting year, an average of € 1.20/m2 in modernization costs was passed on – and thus actually decreased in comparison with the previous year. This shows that we are usually well below the legal limit.
Nevertheless, there will always be people who are unable to handle rent increases caused by modernization costs by themselves for a number of different reasons. Tenants have the opportunity to claim hardship due to exceptional circumstances in the case of energy modernizations. The team – which comprises five hardship managers working at the headquarters and 25 neighborhood managers working on site – looks at each individual case and works with the tenant to find an individual solution. This can include deferring or reducing rent increases. In the case of personal hardship, this may also mean that we help tenants to move house, rearrange their furniture or find alternative accommodation. The hardship team can be reached directly via a dedicated telephone number. This ensures that our customers have fixed contact persons. During the reporting year, 546 customers submitted hardship cases to Vonovia, of which 391 were approved – a rate of more than 70%.
We have made a special promise to protect people over the age of 70 so that our elderly tenants can safely stay in their homes – including in cases where there are rent increases that are normal for the area. This has enabled us to help 185 people so far in the reporting year (from 334 applications).
Comprehensive Social Management
Another popular topic for public debate in Germany in 2022 was the price of energy – particularly gas. Prices rose sharply as a result of the Russian invasion of Ukraine, which has had a significant negative impact on the available household income of many tenants. In 2022, the German government introduced a number of measures to help people in Germany. In addition to a one-off credit for gas and heating customers, the price of gas and heating will be capped by the government as of January 1, 2023 (see our website (in German)). Though these measures will help counteract the high prices, all tenants are encouraged to reduce consumption and thus lower costs. We have gathered advice and tips that we have made available to our tenants via our website (in German) and our customer magazine. We have also taken other measures, such as lowering the temperatures in our portfolio at nighttime in order to save energy and help prevent energy shortfalls.
However, regardless of modernization work or higher energy prices, there may still be situations where our tenants struggle to make payments. This is where our social management steps in. The available options range from deferring rent and allowing payment to be made in installments, to offering help with housing allowance applications and other dealings with the authorities, relocation assistance and other practical forms of help. Our goal – as it is when it comes to hardship management – is always to support people’s ability to pay so that they can stay in their homes and that their homes remain affordable. We employ 17 trained social managers for this purpose.
The German General Act on Equal Treatment (AGG) is designed to prevent discrimination. This includes having access to a home. Housing is a human right and was included in the Universal Declaration of Human Rights back in 1948. It is particularly important to us that we offer homes without discriminating. This explicitly includes, even if it is not legally covered by the AGG, social background and socio-economic circumstances. This means that we, as a landlord, never exclude anyone and are fundamentally open to all tenants.
Room for Vulnerable People
People who are homeless or at risk of becoming homeless are a particularly vulnerable group in society that often experiences discrimination. Supporting them is a matter that is particularly important to us. As such, we continued to engage in a number of projects and measures in this area in the reporting year. Our “Housing First” approach ensures that homeless people are provided with a standard tenancy agreement with all of the normal rights and obligations, regardless of any mental or physical health conditions that they might have. It is only after this that they are offered help in order to get some stability into their lives. Vonovia provides homes for this purpose as part of numerous cooperative initiatives and provides further support through various other accompanying measures. In Bremen, we support “Gast-Haus,” an important contact point for people in need run by volunteers.
We also provide homes for refugees. Currently, in 2022, we are providing housing for people who have had to leave Ukraine due to the ongoing war. We have provided homes as quickly and unbureaucratically as possible and are providing further support in the form of, for instance, furniture donations (see Direct and Rapid Help on Arrival in Germany). Around every tenth new rental agreement in 2022 was entered into with Ukrainian citizens. In Berlin, Deutsche Wohnen cooperates with Gemeinsam Vielfalt leben e. V., an association run by a youth support charity, in order to help a particularly vulnerable group – unaccompanied minors. Shared apartments were set up as soon as the crisis began in order to create contact and arrival spaces for minors. This is a professional partnership that has paid off: Even three quarters of a year later, the young people who arrived in May 2022 still live in these shared apartments.
Partnerships for Homes
We’re not just interested in protecting the especially vulnerable when it comes to making homes available to particular target groups. In order to support the mobility transition and contribute to the stability of an important component of the country’s infrastructure, Vonovia also cooperates with Deutsche Bahn. The railway company’s employees can rent homes from us at favorable conditions. The aim is to give the company’s train conductors, drivers and technicians the opportunity to find affordable and appealing homes near their place of work. Through this cooperation, we have already entered into more than 630 lease agreements, many of them in large cities and more than 100 in Berlin.