Creating Appropriate Living Space and Affordable Rents

Challenges, Opportunities and Risks

Providing new homes that are also affordable carries both risks and opportunities for Vonovia. This is because we are active in an area where social housing, tenancy law and social political issues are intensely scrutinized publicly.

Over the past few years, construction costs have risen significantly – partially due to the higher cost of construction materials and services, a multitude of statutory requirements and regulations, and higher land prices, taxes and fees. In addition, we must also assume time delays in both the construction approval process and in the availability of construction services due to the construction sector working at full capacity. For example, the construction of an apartment building currently takes around two years from project planning to completion. This makes it increasingly difficult for Vonovia to create affordable homes the short run. By using serial construction methods, we can counter these developments a little by shortening construction times, but not fully compensate for them.

Tenancy law is also constantly changing and impacting our operations. Stricter regulations carry the potential risk of lowering incentives to create new housing and renovate existing housing. On the other hand, these regulations also contribute to making the situation more predictable and secure for both tenants and landlords.

In our opinion, serial/modular construction methods are an important way forward as they enable us to create new homes. The lower level of disruption that these construction methods cause for residents also increases acceptance for new construction and densification further in society. Nevertheless, the company still faces challenges. Individual local building regulations make the building process and adaptation of modular systems more difficult. Wooden hybrid construction properties, for example, cannot be erected in all federal states as intended due to different fire protection requirements. In addition, the requirements that apply in terms of accessibility have an impact on the modular concept and, as a result, on the construction costs.