How the real estate crisis is putting housing companies under pressure

How the real estate crisis is putting housing companies under pressure

“The roof is on fire”: The municipal housing companies in Saxony-Anhalt recently turned to politicians with a fire letter after a spectacular insolvency of a provider near Magdeburg had occurred there. Not the only imbalance in the industry – because the problems in the market for existing apartments are coming to a head. Many apartments and houses are older and in urgent need of renovation.

However, in view of exploding material and construction prices coupled with rising interest rates, more and more housing companies are finding it difficult to cope with the financial challenges. All the more so because the increased rents are already a heavy burden for many tenants, but at the same time cannot simply be increased indefinitely.

But it’s not just the adverse economic circumstances that are causing problems for the providers, says Michael Voigtländer from the employer-related Institute of German Economics (IW) in Cologne: “At the same time, political demands are increasing, more renovations have to be done. There is also the threat of a ban on renting , if at some point you don’t meet certain standards. In this respect, many housing companies are actually in trouble.” This was also triggered by the traffic light coalition with its controversial heating law. This not only causes high costs for the housing companies, but also great uncertainty – poison in an industry that has to plan for the long term.

Fatal signal for the industry

The problems also shake Germany’s largest housing company Vonovia. Together with its subsidiary Deutsche Wohnen, it maintains almost 400,000 apartments in Germany. The company, which is listed on the DAX, only recently pulled the ripcord: It wants to sell some of its existing properties in order to pay off debt. In addition, it completely cancels the construction of new apartments.

A fatal signal for the entire industry: It should lead to the tense situation on the housing market becoming even worse. CEO Rolf Buch sees the problem not only in the high inflation and higher interest rates, but above all with those responsible in politics and the lack of coordination in the cabinet:

“The state does far too much in the market”

According to Vonovia, around 40 percent of the high costs are politically related. The company therefore calls for a concession in the case of value added tax and real estate transfer tax. Critics consider this to be whining at a high level and point to the brilliant profits that Vonovia and Co. made during the long phase of low inflation and interest rates.

Some of them therefore call for the expropriation and nationalization of the companies. In Berlin, 59 percent of voters voted in favor of this step in a referendum, and a commission of experts sees it as legally possible. Leading economists doubt that this would improve the situation. “I am of the opinion that the state should even withdraw from the market,” says Steffen Sebastian from the University of Regensburg: “The state is doing far too much in the market, and many of these interventions contradict each other. The state should concentrate on what its task is: to regulate what needs to be regulated, above all to ensure social balance and to give societies the opportunity to actually work.”

Adverse economic circumstances, high levels of uncertainty and political bickering: This cocktail exacerbates the problem with existing properties because it makes necessary quick solutions impossible. Some experts therefore fear the worst: further insolvencies of housing companies like in Saxony-Anhalt.


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