Challenges, Opportunities and Risks
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The German federal government would like to create approximately 1.5 million new apartments over the next four years. In light of this, as the largest provider of apartments with the corresponding amount of new construction activity, Vonovia is one of the focal points of the discussion. The three aspects of importance to the German government – boosting investment activity, reviving social housing construction and support in the form of balanced tenancy law and social policy – present both risks and opportunities for us in providing affordable housing.
Construction costs have risen sharply, firstly due to new and stricter legal regulations for new construction, such as the energy saving ordinance (EnEV) and rising quality and accessibility demands and, secondly, higher taxes and fees. If these costs continue to rise, it will be more difficult for Vonovia to provide affordable new housing.
Long approval times are also posing a challenge. According to current studies, the construction of an apartment building takes around four years from project planning to completion. With our modular construction approach, we could speed this process up considerably and create the desperately needed housing fast.
Tenancy law also has a considerable impact on our business. Over-regulation in the area of tenancy law carries the potential risk of lowering incentives to create new housing and renovate existing housing. One effect of this is a reduction in fluctuation caused by elderly tenants moving from a large non-accessible apartment to a small accessible apartment, thus making room for families. A regulated rental market also creates reliability, thus providing opportunities and development possibilities.
We fundamentally believe that we are on the right track with our serial/modular construction approach. It allows us to take advantage of space potential in existing real estate and to create housing in areas where people want to live. As a pioneer in cost-effective construction, we have the opportunity to increase the popularity of new construction and densification, even in high-influx cities.