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Residential Service Charges: a “Serious Encumbrance” for Tenants

Housing costs on the rise – news of this sort keeps making the headlines with increasing frequency. The topic is usually the rise in rent rates and purchase prices. But housing costs are driven up not just by rising net rents. Public debates often fail to factor in another price driver, namely the residential service charges.

Residential Service Charges as Price Drivers

Especially the high energy prices are placing a heavy burden on tenants and owners. Especially the rising prices for energy and gas are adding quite a chunk to the service charges. The Federal Statistical Office, for one, determined that consumer prices for electricity, gas, and other fuels increased by more than four percent on average between 2012 and 2013. During the same period of time, net rents only rose by 1.3 percent.

Another agency that analyses the energy costs for a four-person model household is the VZBZ Federation of German Consumer Organisations. Here is the latest finding: For 2014, the agency determined a price hike of 35 percent for fuel oil since 2007, and an actual 43-percent increase in electricity costs for the same period. The electricity supplier prices were said to have risen by 0.89 percent between December 2013 and January 2014 alone.

Rent Rates: Increasing Burden on Income

Due to the increase in service charges and rising rent rates in Germany's major cities, the costs of living have kept perking up for many. The Federal Statistical Office determined that housing accounted for one fourth of the consumer spending of Germany's private households in 2013, as 24.4 percent of all expenditures were allocated for the own abode. This more or less matches the level registered in 2012. The reason for saying so is that one in five Germans felt “severely burdened” by their monthly housing costs, according to the Federal Statistical Office. An obvious way for tenants to lower the housing costs is to monitor the energy consumption in their apartments and to reduce them wherever possible. By contrast, the only way to protect yourself against an increase in net rent is by purchasing a condominium – which recommends itself particularly in Germany's major cities where the rental growth is unlikely to slow significantly any time soon.