Swiss Life Asset Managers Germany
Affordable rents – Is a rent cap the right solution?
Anett Barsch is a member of the Executive Board of Swiss Life Asset Managers Deutschland GmbH. As Head of Real Estate Project Development, the architect is responsible for the project development business in Germany. She has been a member of the NRW State Executive Board and the Federal Executive Board of the Bundesverband Freier Immobilien- und Wohnungsunternehmen e. V. (BFW), based in Berlin, since 2016. In her guest article, she explains the conditions for creating affordable housing – throughout Germany and with a particular focus on the situation in Berlin.
Photo @Swiss Life Asset Managers
People always live, they say – but you have to be able to afford it. In view of the ambitious prices in some urban areas, the issue of affordable housing is and remains a perennial issue with a major social dimension. There are many reasons for the sometimes rapid rise in rents. But the main reason is and remains the relationship between supply and demand. A shortage of supply drives up prices – at least in a free market. If supply increases, the price increase will be dampened.
New construction activity can increase the supply of housing and have a positive effect on rents. But it is only part of the solution. It is important that vacant apartments are also available on the market. In Berlin in particular, there are many apartments with very old and inexpensive rental contracts that are kept as second homes but are not lived in. High rents also result from the extreme investment requirements that must be implemented due to the Green Deal. Our neighborhoods should and must becomeCO2-neutral, increasingly barrier-free and affordable for all sections of the population. Smart metering and digital applications are the key to this. However, this also means that the substance of existing buildings, including the entire building technology, has to be renewed in large parts of the portfolio. In new buildings, this requires smart solutions from the outset for a sustainable life cycle that is geared towards future requirements. These are investments that only pay off in the long term. The owner makes an advance payment, which must be securely financed from the outset. A rent freeze and uncertain legal situations very quickly stifle precisely these investments. Then there will be neither new construction nor modernization.
When building new apartments, every project developer needs costing certainty – over a long time horizon. If this certainty is not given or the legal situation is uncertain, a serious entrepreneur will not invest. In order to build more housing, we need fast and efficient approval procedures as well as reliable framework conditions that are not called into question by politicians after every election. This is particularly true in view of the fact that project developments for entire city districts take longer than one legislative period. Construction is generally associated with major cost risks that no government can take away from investors. These are also driven by high investment pressure, the shortage of resources for building materials and the lack of availability of construction companies and planners. To counter this, you can try to build more cheaply. But this will only be possible with fewer requirements, more digitalization and shorter and more predictable approval processes. And with more scope for entrepreneurial creativity and innovation.
In any case, we project developers are not short of ideas. We can create affordable living space. However, a rent cap is not part of the solution, but only part of the problem.
