Vonovia boss promises: Will better involve tenants in renovations

The largest German real estate group is profiting strongly from the housing shortage – and is now expecting even more profits. He wants to approach his customers at least a little.

Vonovia complains about long waiting times for building permits.

Dhe largest German housing group Vonovia wants to approach tenants earlier when it comes to the controversial modernization of its properties. In particular, hardship management should be improved, said CEO Rolf Buch. The plan is to implement the changes this year. Vonovia will hire new employees for this purpose, Buch announced. Sending modernization announcements up to 40 pages long to tenants is also critical. “That is partly illegible for me, too,” the manager admitted.

The tenants would then often have to wait up to a year for the final settlement of the modernization. “It’s just too late. We want to give the tenants planning security with regard to the rent right after the announcement, ”said Buch. To do this, the new Vonovia employees needed technical expertise and empathy.

Refraining from energetic renovations would be a “catastrophe”

The German Tenants’ Association had previously complained of “often horrific rent increases” in the course of modernizing the Dax group. “Some can no longer afford the rent and move out,” explained the tenants’ association. This could actually lead to a displacement of long-term tenants from their apartments, said the spokeswoman for the tenants’ association in North Rhine-Westphalia, Silke Gottschalk. In cases of hardship, Vonovia can suggest smaller apartments to tenants if the old properties become too expensive for them. Even with new rentals, owners in Germany are demanding ever higher rents.

Buch acknowledged an “increasing social acceptance problem”, especially with energy modernization. This is about saving energy by insulating facades or installing new windows. For the individual tenant, this already means lower heating costs, but the main effect will only be felt when energy costs continue to rise, he said. “It stays that way, the rent rises first of all. However, the comparison of the pure rent without rent is misleading, ”emphasized Buch. For society as a whole, foregoing energy-efficient renovations in existing housing in Germany would be a “catastrophe”, he said.

Long waiting times for repairs

In addition to around 20,000 energy-related modernizations annually, Vonovia would add around 13,000 other apartment modernizations, for example by installing new bathrooms. While nothing is done in the apartments against the will of the tenants, individual apartments cannot be removed during the energetic renovation of entire houses. On average, Vonovia would not allocate the 11 percent allowed, but only around seven percent of the modernization costs to the rent, which would lead to an average increase in the basic rent of around EUR 1.60 per square meter.

Vonovia boss Rolf Buch
Vonovia boss Rolf Buch: Image: dpa

Vonovia invests up to 1.4 billion euros annually in new construction, modernization and maintenance. In view of a “dramatic” shortage of craftsmen, no increase in investment is possible. “I’m happy if we can hold it,” said Buch. For Vonovia tenants, the shortage of tradespeople often leads to longer waiting times for non-urgent repairs. “The tenants accept two weeks. Then I understand the dissatisfaction, ”he said.

“We have enough money”

Vonovia manages around 394,000 apartments in Germany and has grown significantly through takeovers in recent years. In view of the high real estate prices in Germany, acquisitions in Germany are currently more difficult. “At the moment, the rent often doesn’t match the purchase price,” said Buch. “At some point the purchases will be cheaper again, then we will buy again if it fits.” After acquisitions in Austria and Sweden, he could imagine further growth in these countries. France is also considered. The Vonovia boss did not want to name specific goals: “We can live without acquisitions.”

According to Buch, the construction of urgently needed new apartments in German metropolises is not being held back by a lack of financial resources. “We have enough money, this country also has enough money,” he said. There was simply a lack of construction capacities and permits. In addition, there are only limited properties. For Vonovia there is a problem mainly because of the long waiting times for building permits. “We said we would build 2,000 apartments a year, but we couldn’t do it because of the lack of building permits,” he complained.

Group expects more profit again

After the takeover of the Swedish competitor Victoria Partner, the group increased its annual target again. An operating result of 1.05 to 1.07 billion euros is now expected for 2018, the Dax company announced on Friday in Bochum. That would be around 15 percent more than in the previous year.

When the figures for the first quarter were presented, the competitor from Deutscher Wohnen and LEG had already raised its earnings target to 1.03 to 1.05 billion euros due to the acquisition of Buwog in Austria. The operating result in the first half of the year increased by almost twelve percent year-on-year to 510.3 million euros. Rental income rose slightly to EUR 838.8 million.

In the first half of the year, Vonovia went well, mainly due to the housing shortage in major cities. Rents have been rising there for years, and there is no end in sight. The company also benefits from building services and lower financing costs.