Vonovia: Germany based Landlord expands across Europe

Since a couple of years the DAX listed real estate trust Vonovia – a product of sell outs of social housing in Germany to financial investors – is also the largest  private landlord in Austria and Sweden and has a stake in a French housing company. At June 26 it announced the first step of its expansion to the Netherlands. Tenant activists and critical observers in Germany, Sweden, and the Netherlands fear that the growing power of this and other transnational corporate landlords will push the increase of rents across Europe. They demand a re-distribution of Vonovia’s high rent extractions through rent caps and rent reductions, climate just housing renewals and a solidarity fund for social housing support.

Yellow flags hang at the buildings in the Husby district in Stockholm, demanding an abolition of rents. Husby, one of the most disfavored neighborhoods in the Swedish capital, is heavily hit by Corona. “Here in Husby I know many people who have lost their income, and who are now seriously concerned about the expenditure that comes at the end of the month”, Ilhan Kellecioglu, a tenant advisor and researcher from the neighborhood says.  “If people are forced to prioritize, the rent always comes first. Food, for example, comes second. But what happens when no money at all enters your account? Anyone who was recently able to earn a living as a short-term employee or through other precarious employment, today suddenly is without income. We observe that rent debt is increasing fast.” With the “Flag Yellow” campaign Kellecioglu and many others demand three rent-free months for those affected by the pandemic and the stop of all evictions. But what can they expect from one of the main landlords in the district, the profit oriented Vonovia, here better known as “Hembla”?

Built during the 1970ies the municipality sold a part of the social housing schemes to private owners in 1998. The new owners did not do much to repair the estates. Then, five years ago the fund managed by Blackstone took over and increased the rents at new lettings. Rent increases during a contract are not possible due to Swedish regulations. Thus, landlords who want to extract more must wait until the old tenant leaves. Then they can do some renovation inside the apartment and rent it out at much higher prizes- a good business opportunity for strategic rent extractors like Vonovia.

In 2019 Vonovia bought the Hembla portfolio from Blackstone. “So far Vonovia improved nothing. Like Blackstone before, they are only doing some renovation after a tenant has left the apartment. And then they rent it at prizes 40 % higher than before”, Kellecioglu says. “At the same time the service and maintenance remain bad. The local office of the landlord is only open for four hours a week. Some people have holes in their kitchen walls, windows are broken. Many of the tenants are large families and complain over the laundry room. Several machines are out of function and have not been fixed yet.”

Extension of the German model of financialized industrialisation of housing

“As far as I understand, VONOVIA in Husby is exactly doing the same they have  done here in our town and the whole area”, Knut Unger, a speaker and organizer from the local tenant union in Witten, Ruhr Valley, Germany says. For two decades Unger has been observing the development of the “financialized rent extraction machines”, as he calls it. “Through tax exempted share deals private equity funds bought up former housing estates after 2000. Most of them were workers flats of the local steel industries. They transformed them into assets of the global financial market, extracting the rents and doing nothing for renovation. After the German recovery from the financial crisis the funds brought their housing corporations to the stock exchange. A fast concentration process followed. Capital now was invested into so called ’modernization’, standardized insulation projects that in Germany allow huge rent increases. After many protests and changes of the legal regulation Vonovia in 2018 decided to stop the large works on insulation and shifted the method to limited renovations of single empty apartments for new lettings. Like in Husby they demand rents that are partly 40 % higher than the usual local rent for comparable apartments. Although the industrial Ruhr region is not a hot spot of the German housing crisis VONOVIA by this way manages to drive the rents of formerly affordable housing schemes higher and higher.”

Unger owns a few shares of Vonovia and therefore can confront the Vonovia board with questions and countermotions at the shareholder meetings each year. This year he and other “critical shareholders” demand that the company should not pay dividends, but use the money for rent reductions, climate just housing renewals and a solidarity fund for those who lost income during the Corona crisis. He also demands that the Vonovia board must step back because of a continuously untransparent measurement of the bills on charges and rent increasing modernization costs. “They are not satisfied by increasing the rents, they also make money by designing bills on energy, gardening, and construction costs from one firm to the other within their complex trust structure. It is like a monopoly; they dictate the prizes for everything connected to housing. I fear, it is also this model and its implementation into an automated digital system, they want to export to other countries now.”

For Unger, the transnational expansion is a necessary consequence of the companies need for fast growth, and of its limitations in Germany. “They cannot increase rents much faster than the income forever. A new tenant movement has raised and develops more and more radical demands, including the expropriation of large private landlords. Politicians reacted and introduced stricter regulations like the rent cap in Berlin. But Vonovia is forced to grow and expand to satisfy the greed of the capital markets. Therefore, they are very keen to scale up their financially optimized industrial model and extend it to former social housing estate in other countries.”

In the Netherlands it was announced that Vonovia has plans to take a minority stake (2,6%) of Vesteda. Vesteda is one of the largest commercial landlords in the rental sector in the Netherlands, owning 29.000 houses and making a profit of more than 1 billion Euro’s in 2018. They own social housing as well as commercial (‘free sector, unregulated’) real estate and are known for trying to raise rents and cut back on maintenance.

A deep tap into the Dutch housing market

Kees Stad is a housing activist in Amsterdam, member of ‘Bond Precaire Woonvormen’ and one of the founders of the platform Woonopstand, that was organising demonstrations and actions for the international day of Actions last March, that the Corona-crises then aborted. His comment:

“Vonovia’s association with Vesteda will mean that they can tap deep into the Dutch housing market and seek for the property that can be lifted out of the social sector and thus made free from rent regulation. For the commercial part of the stock it will certainly mean a more efficient extraction of rent. Of course, they are not the only ones keen on this. Last week it was made public that Blackstone is intensifying activities too, as local venture capitalists have been doing before.”

“All this happens in a time of climate crisis and corona crisis, in which housing prices in the Netherlands are soaring. People are forced to spend an ever-growing proportion of disposable income on housing costs. They cannot afford to spend even more on climate mitigation measures and on dividends. The exact opposite has to happen: rents have to sink, tenants have to regain control over their buildings. We will join German movements who are demanding the socialization of large commercial real estate companies like Vonovia and demand that they should be expropriated and socialized. This will be the only real solution to the housing crisis.”