Inflation unavoidable: Vonovia announces significant fare hike

inevitable due to inflation
Vonovia announces significant increase in fares

6/1/2022 6:33 am

Inflation affects all German citizens. In the future, this will likely apply to housing costs as well. Germany’s largest housing group is already announcing a rent hike. Hundreds of thousands of homes are affected.

Millions of German tenants have to cope with rising housing costs: Germany’s largest real estate company, DAX Group Vonovia, sees significant rent increases as inevitable given high inflation rates. “If inflation is permanently at four percent, then in the future rents will have to increase accordingly every year,” Vonovia CEO Rolf Buch told “Handelsblatt.” Otherwise, many landlords will be in serious trouble.

“We can’t pretend that inflation will bypass rents. It won’t work,” Butch continued. The real estate giant owns about 565,000 apartments, most of them in Germany. Vonovia’s average rent rose to 7.40 euros per square meter in the first three months of this year – up 3.1 percent from a year earlier. This is still well below the current inflation rate of less than eight per cent.

Landlords are included in the CO2 cost

To combat rising prices, the federal government is trying to provide relief to tenants. For example, the cabinet decided that landlords would have to contribute to the cost of a carbon dioxide tax introduced in 2021. It should be implemented from next year. The landlord then bears 90 to zero percent of the cost. The more energy efficient the home, the lower your share of the cost. This should be an incentive to replace the old heater or windows. The Stage model includes over 13 million apartments. In the case of commercial real estate, tenants and landlords must initially bear half of the CO2 cost.

So far, tenants have borne the burden of the CO2 tax alone. “Affected residential buildings currently have an estimated carbon dioxide cost of one billion euros, which will be entirely borne by tenants,” says the draft law presented to Reuters. The tenants’ union put the CO2 cost for a model home in a non-renovated apartment at 130 euros for gas heating and 190 euros for oil heating in 2022. In the coalition agreement, the SPD, Greens and FDP announced that the cost would be shared from July 2022.