Blackstone Promises Supply Amid Risk of Danish Rent Controls
As Denmark’s government explores ways to prevent excessive rent hikes, Blackstone Group Inc. has promised to address what it says is a lack of housing supply in the country.
Blackstone made the pledge as it awaits the publication of a government-commissioned report that will guide housing legislation in the country. According to a copy of the report seen by Bloomberg, models discussed include capping rents so that firms like Blackstone would potentially see the value of their investments cut in half.
Kaare Dybvad, Denmark’s housing minister, has repeatedly singled out Blackstone for taking advantage of what he describes as “holes” in Denmark’s laws. The government has made clear it will close any loopholes to prevent offshore funds from buying up property and then driving up rents to levels that average income earners can’t afford.
In an emailed comment to Bloomberg, a spokesperson for Blackstone said: “Though we only own 0.5% of the rental stock in Copenhagen, we are seeking to address the under-supply of housing by creating new units in previously unused spaces, and investing significant capital to renovate units—some of which are over 100 years old—while making buildings more environmentally sustainable. All of the income we have generated has been reinvested back into our assets.”
According to the Danish report, which is due to be published early this week, one model includes scrapping a provision in the housing law that lets property owners increase rents substantially if they carry out renovations for more than 183,000 kroner ($27,300). The model shows that owners would see the value of their investments fall by as much as 47%. Residents would face average rent increases of about 40% instead of the current average of 80% after landlords complete renovations.
In an interview with Denmark’s state broadcaster, DR, Blackstone’s head of real estate in Europe, James Seppala, said:
“The average rents in our portfolio are 8,900 Danish crowns per month, with some -- this is for a 100 square-meter apartment on average -- as low as 4,000 Danish crowns per month. And that compares to average social housing in Copenhagen of approximately 8,000 Danish crowns per month. So it may be that in certain instances a new tenant chooses to rent an apartment that is at a higher rent than the former tenant was paying, but in some cases that former tenant was renting an entirely unrenovated apartment with a lease signed 20, 30, 40 years ago, and that apartment may have been untouched, largely, for that period of time.”
“Our focus is on creating housing across Copenhagen that is high quality for our tenants and for the communities in which we operate. That requires meaningful capital investment. We’re putting in new bathrooms, new kitchens, significantly improving that unit’s environmental sustainability, so I think it’s reasonable that any landlord that makes that kind of an investment would need the rent to be higher than was the case on a previously unrenovated unit that may have been untouched for decades.”
“Our focus is on creating units that are high-quality living environments for our customers. And in many cases that involves very substantial investments into new kitchens and new bathrooms and improving that unit’s environmental sustainability.”
“We are focused on long-term value creation for our investors that are predominantly public-sector pension plans from all over the world.”
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