ESRS 1 (Annex A, AR2) / ESRS 2 (MDR-A / MDR-T / MDR-M) – Objectives, Actions Taken and Metrics Related to “Living at Fair Prices”

To apply our policies for providing affordable homes to as many people in society as possible, we have set the following targets, implemented relevant measures, and monitor progress using key performance indicators, all aligned with the material impacts of “Contribution to more affordable homes for tenants through adherence to regulatory frameworks” and “Contribution to more affordable homes for tenants through new construction and development activities,” as well as the material risk of “Financial risk due to changes in regulatory frameworks (rents and standards).”

• Fair Rent Pricing: Our rental prices are based on local rent prices, and, if available, on certified rent indices. Our involvement in rent index commissions, including providing data, in numerous locations helps ensure their accuracy and fairness. We monitor compliance with all applicable regulatory frameworks through our central rental management team.

Across the Group, the average rent price came to € 8.01/m² (2023: € 7.74/m²) in the 2024 fiscal year, and in Germany to € 7.89/m² (2023: € 7.63/m²), which corresponds to an organic increase in rent of 4.1%.

Index-linked rents, i.e. rents linked to inflation, make up just around 1% of our lease agreements. The average rent excluding ancillary expenses in our portfolio remains below 30% of the average disposable household income of tenant households in Germany.

In Germany, the costs of energy-related refurbishments can be passed on in the net rent – within a specific framework. The government has limited companies’ ability to pass on costs to € 3/m² (€ 2 in the case of rents under € 7/m²). The resulting increase in the rent is balanced out for the tenants through a reduction in heating costs. When passing on refurbishment costs, we are always mindful to ensure that the burden placed on our tenants is socially just and offer individual solutions as part of our social management system. That said, reasonable compromises must be made in favor of additional climate change mitigation measures. In the 2024 fiscal year, an average of € 1.25/m² in refurbishment costs was passed on (2023: € 1.32/m²).

• Publicly subsidized homes: Our business model ensures that we are always integrated into the urban society where we offer homes. Cities and municipalities are therefore our most important partners when it comes to the concrete design of our local residential offerings. In numerous cities and municipalities, we also offer subsidized and independently financed homes for people on low incomes – in Germany around 33,700 (2023: 38,000) of our homes are currently price-controlled – and are responding to specific challenges with services tailored to local needs.

The supplementary voluntary agreements that we conclude with cities and municipalities include, for example, provisions governing fair rental conditions, the construction of new apartments or the strengthening of municipal housing construction companies and joint neighborhood development.

We also offer price-controlled homes, in particular in Austria and Sweden. Almost 19,000 (>90%) apartments in Austria and 100% of our approximately 40,000 apartments in Sweden are price-controlled. In total, around 17% of our entire portfolio is therefore subject to rent caps.

The fundamental concept on which all agreements are based is Vonovia’s desire to work in partnership with politicians and society to tackle municipal challenges and that the company takes specific local and social challenges present within cities into account within its planning.

• Creating homes to ease the rental market: Rising rental prices (due to factors like increased land costs or underutilized government instruments for housing promotion) and higher living expenses (such as energy costs or regulatory requirements) have made housing unaffordable for many people. This issue is further exacerbated by the transferring of refurbishment costs to tenants and an inadequate subsidy landscape. By creating new, demand-oriented and – in part – subsidized homes in neighborhoods, we are helping counteract the shortage of available homes and mitigate rising rents, particularly for existing tenants. Through our development subsidiary, BUWOG, Vonovia constructs homes for both portfolio retention and sale, focusing on highly sought-after urban areas. A total of 3,747 (2023: 2,460) residential units were completed in this area in 2024, 1,276 (2023: 1,332) units for our own portfolio and 2,471 (2023: 1,128) units to be sold to third parties.

• Comprehensive hardship case and social management: We use comprehensive social management to guarantee living at fair prices and provide our tenants with a secure network. Our objective is to support people’s ability to pay so that they can stay in their homes and their homes remain affordable. As such, we offer individual support measures ranging from rent deferments and payment in installments to assistance with housing allowance applications and relocation assistance. A team of social managers who have been trained to assist with such matters are on hand to help.

As part of our hardship regulations, we apply uniform standards based on those of welfare associations in the event of refurbishment work. These standards were developed in 2021 in collaboration with the tenants’ association and other residential real estate companies, and help to ensure greater reliability and transparency in cases of hardship. In recent years, we have been able to achieve a positive outcome in the vast majority of hardship claims and provide direct assistance to the affected tenants, for example by reducing or waiving the modernization allocation.

Our vested rights for people aged over 70 are likewise still in place.

• Homes for Vulnerable Target Groups: People who are homeless or at risk of becoming homeless, as well as refugees, are a particularly vulnerable group in society when it comes to housing. Vonovia therefore makes these target groups a key focus of its social commitment efforts. As such, we continued to engage in a number of projects and measures in this area in the reporting year. Our “Housing First” approach ensures that homeless people are provided with a standard tenancy agreement with all of the normal rights and obligations, regardless of any mental or physical health conditions that they might have. It is only after this that they are offered help in order to get some stability into their lives. Vonovia provides homes for this purpose across Germany as part of numerous cooperative initiatives. This is also a focus of our support for refugees. By partnering directly with municipal administrations nationwide, we can quickly and efficiently provide housing for refugees, particularly from Ukraine.

These initiatives are planned to continue into the future.

The measures relate primarily to the German market, but also apply to some extent in Austria and Sweden. These measures relate specifically to Vonovia’s core business area, focusing on tenants’ utilization of the initiatives.

All measures aimed at fair rental pricing are designed to prevent excessive financial burdens on (potential) tenants in the short term. At the same time, their effectiveness is generally intended to extend beyond the immediate duration of the measure (e.g., hardship measures). These actions are treated as ongoing responsibilities. without fixed timelines for completion, given the detailed and granular nature of individual measures. However, their outcomes are regularly evaluated.

Measures for fair rental pricing do not lead to significant operational or capital expenditure. Instead, they tend to limit revenue, as potential margins are not fully realized.

An exception is the construction of new homes: development operating expenses came to € 41.7 million in the 2024 fiscal year (2023: € 39.6 million), representing 5.3% (2023: 17.5%) above the previous year’s level (see chapter “Earnings performance – Development segment”). Investments in new construction for the portfolio totaled € 224.5 million in the reporting year (2023: € 291.2 million, see chapter “Earnings performance – Rental segment”). For 2025, we expect a significant increase in CapEx in the development segment (see chapter “Forecast report”).

Metric “Average Rent per Square Meter”

This metric represents the average rent across all rented apartments in Germany, Austria and Sweden (see metrics). Currency conversion for Sweden is based on the reference date of December 31, 2024. A separate figure covering all rented apartments is reported for Germany as it is Vonovia’s core market. The average rent per square meter reflects the monthly contractual rent divided by the rented area. An average value is calculated across all rental properties, with the figure given in euros.

Metric “Number/Proportion of Price-controlled Apartments”

In Germany, rent restrictions typically apply to publicly subsidized apartments, subject to contractual or statutory cost-based rent limits. In Austria, price controls are based on the applicable rental model outlined in the lease agreement or unit classification. Price controls are generally tied to the organizational structure of the company at the time the apartment was built. In Sweden, base rents are negotiated annually with local tenants’ associations. They must be reasonable and cost-based, leading to collective restrictions that classify all rents or apartments managed by Vonovia in Sweden as price-controlled. The metric “Number/proportion of price-controlled apartments” describes the total number of apartments classified as “price-controlled” within Vonovia’s portfolio. To determine the percentage of price-controlled apartments, the number of such apartments is compared to the total portfolio.

Metric “Average Modernization Cost Allocation (in Germany)”

In Germany, the costs of energy-related refurbishments can be passed on in the net rent – within a specific framework. The government has limited companies’ ability to pass on costs to € 3/m² (€2 in the case of rents under € 7/m²). As this cost allocation model does not exist in Austria and Sweden, the KPI applies only to the German portfolio. The metric “Average modernization cost allocation (in Germany)” represents the average rent increase per square meter for all modernized apartments in Germany during the reporting year, with the figure given in euros.

Vonovia has not established specific targets for the material sustainability aspects related to this topic. This is because compliance with regulatory standards is not a quantifiable metric but rather reflects the company’s fundamental alignment and its dependency on the design of regulatory frameworks, over which the company has no direct influence.

The chosen metrics serve as a benchmark to demonstrate the nature of responsible rent setting, particularly in comparison to industry benchmarks.

Additionally, we consider the planned organic rent increase for the following year to be an appropriate approximation for a target metric. This increase aligns with customary local rents or rent indices. Central rental management monitors the development process and all regulatory requirements. For 2025, we anticipate an organic rent increase of 4.0% compared to the 2024 base year.