German landlord says rent cap is better than becoming like London

[MUNICH] Germany's biggest landlord unexpectedly welcomed Berlin's decision to freeze rents, saying the intervention is needed to give the city time to avoid becoming like London.

The German capital's plan to cap rents for five years -- slated to go into effect next year -- is "necessary," Vonovia SE Chief Executive Officer Rolf Buch said at an event in Munich on Monday evening. Berlin needs to use the time to address deeper problems in the market, such as the lack of reasonably-priced living space and the need to accelerate renovations.

"We don't want cities like London,'' where only the super-rich can afford to live in downtown neighborhoods, Mr Buch said. Vonovia owns apartments for about 1 million people.

By freezing rents, Berlin's government is taking the most radical step yet to protect residents from a housing crunch, which has become a growing political issue around the world. The move risks scaring away investment, stalling everything from upgrading windows to constructing much-needed new apartments.

Mr Buch himself highlighted the problem, pointing out that Germany's real estate industry needs additional funding of at least 80 billion euros (S$123.18 billion) a year for the next decade to overcome the market's underlying problems. Vonovia itself won't be seriously affected by the rent freeze since only 10 per cent of its properties are in Berlin, Buch said.

The comments from Vonovia shows how big landlords are trying to counter their image as property predators and reduce the risk of more regulation. Deutsche Wohnen SE, which owns about 112,000 Berlin apartments, said it will link any future rate increases to wages "so that a household only needs to spend a maximum of 30 per cent of its net income" on rental costs excluding heating.

"We want to improve the situation on the German residential market and will take our tenants' individual capacities more into account in future," Deutsche Wohnen CEO Michael Zahn said in a statement Monday.

BLOOMBERG