Investment funds are required by housing corporations - Investment Capital Required by Real Estate Firms
In the heart of Germany, the housing industry in Saxony is navigating two significant challenges: securing funds for climate-neutral investments by 2045 and addressing high vacancy rates in rural areas.
Mirjam Philipp, head of the Saxon Association of Housing Cooperatives, and Alexander Müller, director of the Association of Housing and Real Estate (vdw), have both emphasised the need for additional funds to meet the climate neutrality requirements. The housing industry is looking to increase investment efficiency, dispose of uneconomic assets, and forge financial partnerships with banks and public funding to bridge the gap.
Saxony's Infrastructure Minister, Regina Kraushaar (CDU), has noted that rents in Saxon districts are the lowest in the country, even cheaper than in other major cities in Germany. However, after deducting all costs, only two cents remain as a surplus for investments. The housing companies have increased rents by an average of only 1.9 percent over the past ten years, reflecting their socially-oriented nature. The average net cold rent in a cooperative apartment in Saxony is 5.62 euros, with the vdw managing around 310,000 apartments, averaging 5.50 euros per month.
To meet the climate neutrality requirements, housing cooperatives would need an additional 17 billion euros for investments. Higher rents are needed for the housing companies to make necessary investments, but Kraushaar argues for moderate increases due to increased pensions and the possibility of housing benefit, acknowledging the psychological aspect of rent increases.
Meanwhile, high vacancy rates in rural areas are a problem for the housing industry. Around 10% of the approximately 300,000 apartments owned by housing cooperatives are vacant in some areas, reaching up to 20%. This rate is well below the rate of inflation, but it still costs the housing cooperatives around 100 million euros per year, with operating costs being the largest share.
Kraushaar discussed the problems of the housing industry in rural areas on Wednesday. She suggested that moderate rent increases could help address these issues, but stressed the need for careful consideration to avoid deterring potential tenants.
In summary, housing companies in Saxony are seeking a balanced approach to address their financial challenges. By optimising their asset portfolios, engaging with financially strong banking partners, leveraging public climate funds, and executing efficiency savings, they aim to raise the necessary investment capital for meeting climate neutrality by 2045 while minimising adverse rent impacts. Addressing rural vacancy issues through moderate rent increases and targeted strategies could also help stabilise the housing industry in Saxony.
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