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For many homeowners, heating becomes a double cost trap

The relief package announced at the weekend is aimed primarily at financially weak income groups and benefit recipients.

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For many homeowners, heating becomes a double cost trap

The relief package announced at the weekend is aimed primarily at financially weak income groups and benefit recipients. It is obvious that tenant households in particular with low incomes are likely to be overwhelmed by rising energy costs. However, another population group is currently getting into difficulties that you would not immediately suspect.

Private small landlords who do not rent in top locations or highly efficient new buildings, but in older and only partially renovated housing stocks, are also reaching their performance limits.

You are faced with two financial challenges at the same time: Increasing demands for payment from the energy suppliers flutter into your house, which you can only pass on to the tenants after a few months' delay.

In addition, the refurbishment requirements are also increasing: the building sector should move away from gas heating as quickly as possible. However, the energetic conversion, especially of older apartment buildings, is particularly expensive, especially in the current situation.

This also applies to large housing companies, but even more so to private landlords who calculate tightly and have not increased the rent significantly in recent years.

"A lot of the feedback from our more than 910,000 members is dramatic and usually ends with the realization that we have to give up the rental," writes the President of the Haus owners' and landlords' association

The situation is particularly difficult for those small landlords who rent out several apartments. Here they have to advance a multiple of the costs that normally only one household has to pay. Only an amicable agreement between tenants and landlords on a higher monthly payment is permitted. This agreement, according to Haus' observations

The amounts that the same landlord would have to spend to convert an apartment unit from gas to heat pumps, for example, are at least five figures. "We have quite an outdated heating system in the living area, a large part is older than 20 years," says Felix von Saucken, head of the housing division of the real estate service provider Colliers.

The expert observes how tenants and landlords are running practically unchecked into an energy price trap. Von Saucken makes this clear using the example of an older apartment building from the 1950s in Hamburg, for example: "Here there is often still gas floor heating," says von Saucken. "If it fails, the landlord cannot simply replace it, but has to install a whole new heating system for the entire building - which can cost between half a million and a million euros."

Background: From 2024, only heating systems that use at least 65 percent renewable energy sources will be allowed to be installed. The gas floor heating is passé, apartment buildings have to be converted en masse.

According to the heating conversion strategy of the Federal Minister for Building and Economics, there is a transitional regulation for floor heating: Owners or condominiums initially have three years from the first defect to decide how the house should be converted. But sooner or later the costs will come due.

A new central heating system in the basement is not enough either. Because it is arguably coming down to heat pumps, landlords also need to optimize the building envelope and install brand new radiators to keep the electrically powered devices running efficiently.

Von Saucken estimates that around 60 percent of all rental apartments in Germany are owned by private “non-professional” landlords. These do not have strategically working finance departments that can, for example, stock up on cheap loans.

And unlike a group like Vonovia, they don't have their own construction departments. That is why von Saucken believes that the speed of renovation in this sector can hardly be increased: "There is only a certain capacity in construction, and that has been reached," says the Colliers expert.

Saucken expects a particular effect of the explosion in energy costs in rural regions: Tenant households there would have more options to move and, for example, to move into a somewhat smaller or more energy-efficient apartment. In the properties that are less in demand, the net cold rent will “fall massively” as a result.

In the larger cities, on the other hand, the financial burden is transferred from the landlords to the tenants over time: initially in the form of higher ancillary heating costs, then in further increasing net cold rents and finally in the form of modernization charges due to upcoming renovations.

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