German residential landlord Vonovia SE said a plan by the Berlin government to implement an absolute rent ceiling as part of a rent freeze law currently being drafted could result in a one-off rental income reduction of up to €25 million for the company's Berlin portfolio in 2020.
The projected reduction represents approximately 10% of the company's rental income in Berlin and about 1% of its overall rental income, based on annual rental income figures, as of the first half of 2019. It does not expect any change to its earnings guidance for 2019 from the planned Berlin-specific legislation.
The Berlin state government aims to cap rents at €7.97 per square meter per month as part of a rent freeze, Reuters reported Aug. 26, citing Berlin daily Der Tagesspiegel.
Vonovia said it believes the rent freeze law is unconstitutional and "would be going in the wrong direction and in no way solve the problem for tenants in Berlin or for the tens of thousands of people who move or want to move to Berlin every year."
The final rent freeze law is expected to be enacted in January 2020.
