Today, listed Vonovia SE, the largest private landlord in Europe, announced its interim results for the first 9 months. It is the first economic report after the takeover of the majority of shares of number 2 in Germany, Deutsche Wohnen SE. Most of the Deutsche Wohnen flats are located in Berlin, where a plebiscite for the expropriation of the apartments of large landlords recently achieved a clear majority. If the demands of this plebiscite were implemented by the state government, the enlarged Vonovia would have to cede its 157,000 apartments in Berlin to an institution under public law in return for compensation. While campaigners in Berlin are calling for a fast implementation of the plebicite, tenants in other parts of Germany are preparing or a long struggle.
Vonovia today owns and leases 568,451 apartments with a fair value of EUR 95.4 billion. Most of these apartments are located in Germany, but there are also 38,467 units in Sweden and 21,596 in Austria. Vonovia is keen to expand to other European countries like the Netherlands, France, or Ireland. But for now, everybody is looking how they manage the purchase of Deutsche Wohnen and whether they become more reluctant to raise their rents under the threat of expropriation.
According to the 9-month report, the profit figure FFO (Funds from Operations), which is decisive for the dividend amount, rose by 11% year-on-year to EUR 1.99 per share. Rents rose by 3.5% (previous year’s period: 3.6%) due to rent increases, higher new letting rents and modernizations. As has been the case for many years, this figure is much above the national average of 1.4%. At 1.8%, rent increases after modernizations again accounted for the largest share of the increase. According to the VoNO!via tenant’s alliance, a network of tenant groups and tenant unions in various Greman cities, these modernizations include maintenance, the costs of which are not chargeable to the tenants in Germany.
International Renoviction Business
“According to a ruling by the BGH (highest court) last year, old components of the buildings must be deducted from the costs,” says Daniel Katzenmaier, the speaker of a tenants’ syndicate in Frankfurt. “We do not know of any case in our alliance in which this has been done in a comprehensible way.”
“Here in Stuttgart, Vonovia’s rent increases after modernization regularly fail at the district and regional court,” adds Ursel Beck from the tenants’ initiative in Stuttgart. “These courts consider the rent increases to be formally ineffective because they do not provide precise enough information about the individual craft services. No Vonovia tenant should pay these increases unchecked.”
Not only in Germany Vonovia is notorious for its use of “modernization”. A recently published study by Ilhan Kellecioglu at the University of Malmö shows how Vonovia is emptying apartments in need of repair in order to rent them out again after an unnecessarily “luxurious” renovation. Vonovia calls this approach “concept renovation”. The tenants call it “renoviction”, expulsion through renovation. The system: Years of inactivity create such a large maintenance backlog that some apartments have to be emptied for renovation. Then, instead of repairs, the landlord carries out value improvements in these apartments, which entitle them to rents that the previous residents cannot afford. It is not without reason that the Vonovia subsidiaries in Sweden were voted among the worst landlords in a large rent survey.
Revenues through Intransparancy
In addition to rent increases, the surpluses from services invoiced within the Group are an important source of income for Vonovia. They, too, are paid by the tenants through utility bills and modernization rent increases. Internal revenues accounted for at least 95% of this business. Accordingly, the surplus over costs before interest, taxes, depreciation and amortization (EBITDA) amounted to around 110 million Euro for 9 months.
The VoNO!via tenants’ alliance considers the surpluses from the group’s internal accounts to be unjustified. According to the applicable tenancy regulations, only those expenses may be considered in the invoices that have really been incurred by the landlord. Internal profit premiums and management costs of a uniformly acting rental group are not included. In the opinion of the tenants’ alliance, the high surplus for the services billed within the Group is achieved by circumventing tenancy law.
According to VoNO!via tenants’ alliance, Vonovia keeps the actual costs for services charged within the Group secret from the tenants and does not prove them verifiable in any case that has become known to them. The “invoices” presented to the tenants come from the group-wide IT system as well as the self-created “proof of payment”. In addition, parts of the intra-group contracts do not contain any price specifications or meaningful specifications.
“Vonovia has not fully proven the actual costs for personnel, deliveries and executing companies in any case known to our alliance,” says Ursel Beck from the Stuttgart Tenant Initiatives. “That is why we are reclaiming the unjustified profits of recent years for all tenants. It’s hundreds of millions of euros.”
Vonovia who has been confronted with such protests since long has not reacted to a letter of demand submitted by the alliance in early spring. Instead, they prefer to deal with their tenants at an individual case level. This is the tactic the VoNO!via tenants’ alliance wants to counter. “We call on all Vonovia tenants to join forces in their residential areas and to demand proof of costs for each tenant party in good time,” adds Daniel Katzenmaier. “The tenants should withhold their ancillary costs and rent increase payments until proof of the costs or, if necessary, make them subject to reservations. We support tenants who join forces for their interests with our experience and sample letters.”
Socialization shall not grand Speculation
While the VoNO!via tenants’ alliance prepares for a long legal and political struggle on details of Vonovias’ management campaigners in Berlin hope for the fundamental solution of expropriation and socialization. It would be a legal act that is allowed by Article 15 of the German constitution but never has been applied. Although they have the support of the majority of voters in Berlin it is unclear whether and when the new Berlin government will negotiate and implement the needed law. Especially leadership of the social democrats try to avoid or postpone a clear implementation.
One of the big conflicts in the debate is the amount of compensation that should be paid for the expropriation. While the business insists on compensation at market values, supporters of the expropriation want to pay much less. Indeed, compensation of the market value would look like a reward for speculation. The average market value of a Vonovia apartment has risen from EUR 63 thousand to EUR 168 thousand since 2014.
If socialisation would grand speculation it would just become another pawn in their game.