Homes and Customers

Living at Fair Prices

Disclosure

The most important task of the real estate industry is the provision of homes. Due to the high demand in 2020, especially in metropolitan areas, the social aspect of renting is becoming increasingly important – despite the fact that rents are regulated in many cases. This is also evident from the increasing public and political attention that is being paid to the issue, which ensures that the pressure on political decision-makers is growing. Operations in the real estate industry are always subject to the requirements of various stakeholders from society and the political sphere, and to some extent from the capital market. On the one hand, the supply of affordable homes must be guaranteed – the rent freeze debate in Berlin is an expression of such an attempt at the political level. On the other hand, real estate companies are increasingly called upon to implement climate protection measures, which are cost-intensive, particularly in the building sector. This is a particular challenge for private individuals, who make up the largest proportion of owners in Germany. But even for capital market-oriented real estate companies such as Vonovia, this development shows that a sensitive balance is needed between moderate rent increases, reliability in the supply of homes at fair prices, the best possible value for money in climate protection measures, innovations to reduce costs, and appropriate support from the public sector through suitable funding programs.

Even during the coronavirus pandemic, the trend of people moving to cities has remained stable. Especially in metropolitan areas, the demand for housing exceeds the supply. This gap cannot be closed by new builds, at least not in the short term. Due to rising rents, many people are worried that they will no longer be able to afford their homes in the future. The coronavirus pandemic has heightened such concerns in many places in 2020. For the housing industry, this is even more of an opportunity and reason to see itself as part of the solution – and to become actively involved. With over 400,000 apartments, we see our size in the market as an opportunity to relieve residential property markets in metropolitan areas through efficient management, the reliable provision of existing homes and the creation of new homes. If this does not succeed, there is a risk of losing room for maneuvering – for example through comprehensive political regulation of the rental market (see Annual Review 2020).

Our Approach

We want to be able to offer our tenants long-term and secure housing prospects. We achieve this primarily through fair and transparent prices for our homes that are affordable for different sections of society. By further expanding this core business, we are making an important contribution to easing the current situation on residential property markets.

In addition to our new build activities, a moderate rent policy is a basic prerequisite for Vonovia. Our rental prices are based on local rent prices, and, if available, on certified rent indices. From our point of view, this regulation of residential property markets is necessary and conducive to achieving our goals. We would therefore welcome an extension of certified rent indices on all residential property markets. When renting, we always comply with the applicable country-specific legislation.

In Sweden, rent is always negotiated with the tenants’ association. Rent increases occur annually, between 1–2%, or after modernization to a higher standard.

In cooperation with cities and municipalities, we offer subsidized as well as privately financed housing. In Germany, around 10% of our housing is currently price-linked. In doing so, we focus on individual solutions regarding agreements for rent-controlled homes and on securing existing rents as well as more far-reaching social agreements, e.g., to protect certain groups of tenants. The use of public subsidies – now and in the future – also 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 and social heterogeneity in our neighborhoods.

In 2019, we adopted two important voluntary commitments for the German market that have guided our rent policy ever since. For modernizations, we cap the allocation of modernization costs to tenants at € 2/m². In addition, there is special protection for people over 70 years of age, even in the case of regular rent increases, because we do not want them to have to worry about their financial security due to rising rents or to lose their home with us. Both commitments are central elements of our rent policy and essential to achieving our goals.

In addition, all tenants have the opportunity to claim hardship due to exceptional circumstances in the case of energy modernizations. Our hardship management team – which comprises employees working at the headquarters and neighborhood managers working on site – looks at each individual case and works with the tenant to find an individual solution. Our goal is always to ensure that people can stay in their homes and that their homes remain affordable.

We also offer solutions for particularly vulnerable people such as refugees and the homeless. We do this, for example, within the framework of special agreements with state governments, cities and municipalities as well as other residential real estate companies. We do this because we are convinced that social cohesion only comes about through successful integration and inclusion. And this begins at home.

In the context of the coronavirus pandemic, a special need for protection has arisen for people who are even more dependent on the security of their own four walls in uncertain times. Vonovia has made a special guarantee in this regard. Nobody will have to lose their apartment if they encounter difficulties paying their rent due to the coronavirus pandemic. In 2020, Vonovia helped customers living in around 1,600 apartments facing these very challenges by providing them with individual solutions.

Organizational Focus

Rent policy is managed on a decentralized basis by region. The Chief Rental Officer (CRO) is the Management Board member responsible for operational business. The individual measures are planned and coordinated in the Portfolio Management department.

Hardship management is the responsibility of Portfolio Management. Since 2019, it has been supported by community developers in the individual regions in order to provide even better support for the tenants concerned. The team consists of five hardship case managers in Bochum who work closely with the 25 community developers.

Objectives and Measures

Our goal is to be able to offer housing at transparent and fair prices for the whole of society. In doing so, we are staying true to our aspiration of embracing our social responsibility.

We ensure this, in particular, through moderate and socially acceptable rent development. In 2020, the average monthly in-place rent across the Group was € 7.16/m² (across Germany: € 6.95/m²). We respect all regulatory provisions such as rent ceilings and rent indices. In 2020, during the coronavirus pandemic, we avoided rent increases for many months as a matter of principle. In 2020, we have by far not exhausted the framework of our voluntary commitment to limit the modernization allocation to € 2/m² and have only levied an average of € 1.24/m² in Germany. We also continued our over-70 scheme to protect older tenants and have so far been able to help 340 people individually (out of 661 inquiries). Last year, we were able to help 164 people (out of 346 requests). In doing so, we are fulfilling the promise we made in the 2019 Sustainability Report. This success shows that we have taken the right measures for our tenants.

Rent Growth Since

in €/m²

Hardship case management plays a key role in this. Our hardship case team in Bochum, together with the community developers, helps us to further improve customer care in difficult situations. The team can be reached directly via a dedicated telephone number. This ensures that our customers have fixed contact persons. When they receive notification of a case of hardship, the hardship managers perform an initial preliminary review before handing the case over to the community managers for further processing, who then personally contact the tenants concerned. This process ensures that solutions are found together, e.g., with regard to changing apartments, staggering the rent increase or reducing the modernization levy for a certain period of time. Decisions of this kind are made before construction begins. In 2020, we processed 1,017 hardship cases and made 724 positive decisions – i.e., rent increases were not implemented or were not implemented in the planned amount. Since the introduction of hardship management (as of 2018), we have been able to help with modernization costs through the hardship management scheme and more than 3,000 cases through the over-70 scheme.

In 2020, we actively informed our customers in Austria about the possibility of deferring or paying in installments in connection with the coronavirus pandemic. Subsequently, a total of 549 voluntary deferral and installment agreements were made.

In cooperation with cities and municipalities, we have also made individual and voluntary commitment arrangements for subsidized housing for existing buildings. These arrangements serve to protect senior citizens, low-income households/families that have no legal entitlement to publicly subsidized housing, people with lower chances of success in the residential property market, migrants and refugees. One example is the cooperation signed with the City of Frankfurt in March 2021, with which we agreed on a joint scheme for fairly priced housing. In the event of special burdens during construction work, we offer replacement apartments or a rent cap. We have also agreed to refrain from terminating tenancy agreements if tenants are in financial distress due to the coronavirus pandemic. The agreement also contains an additional unique aspect. Vonovia is providing 100 apartments for people who are affected by or at risk of homelessness.

In 2020, we implemented further measures to house vulnerable people in order to provide permanent housing for disadvantaged people. These included, for example, the North Rhine-Westphalian “A Home at Last” initiative against homelessness, the “Essen Standard for Supported Housing”, the “Housing First” initiative in Dresden (see project box "Housing First: A Home at Last") and supporting our homeless center “Haus Strohhalm” in Berlin. We also offer special forms of housing in Austria and cooperate with various service providers and operators.

Our customers come from over 150 different nations. Over a third of our new leases in Germany went to people with a migration background in 2020. Since 2015, we have rented apartments to around 12,000 people from Syria and Afghanistan in Germany alone.

Planned for 2021

• Continuation of voluntary commitment to the modernization allocation and the over-70 scheme
• Continuation of hardship case management
• Implementation of the agreement with the City of Frankfurt on climate-friendly and affordable housing
• Establishing an ombudsperson office as an independent arbitration body for tenants in Dresden (active since February 2021)