ESRS S4 Consumers and End-Users

ESRS 2 SBM-3 – Material Impacts, Risks and Opportunities and Their Interaction with Strategy and Business Model

Material Impacts, Risks and Opportunities

Within the scope of our materiality assessment, we identified four material impacts, risks and opportunities (IROs) related to consumers and end-users:

• Contribution to affordable homes
• Housing tailored to tenants’ needs
• Influence of accessibility and service quality on customer satisfaction
• Increased quality of living for tenants through contribution to neighborhood development and infrastructure

All four material IROs have an impact on our tenants and, as a result, on our customer relationships.

The tangible and positive impact “contribution to affordable homes” first of all outlines the effects of strictly adhering to regulatory rent-related frameworks (e.g., rent indices, standard local comparative rents, rent caps, price controls) on the reliability and stability of landlord-tenant relationships, thereby securing affordable homes.

Second, the impact relates to additional measures for various customer segments – such as special vested rights for tenants over the age of 70, hardship management, the use of social managers, offering publicly funded housing – that allow us to address low-income and vulnerable customer groups so that they can remain in their apartments for as long as possible or continue to have access to affordable homes.

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, also for existing tenants. This relates to local markets where we can offer new construction to a variety of target groups. This impact is tied primarily to urban agglomerations characterized by high demand for homes.

The rental of homes forms the core business of Vonovia. In order to be able to provide these homes in the long term, Vonovia relies on stable rental development. Rent indices, particularly qualified ones, are based on recognized scientific methods and provide us with the guidance we need. In Germany, rent indices are compulsory for cities with more than 50,000 inhabitants. For a stable and reliable housing market, such regulatory frameworks are thus essential to ensure security and continuity for customers and landlords.

Given the massive housing shortage and the fact that there are no signs of the market situation easing, we do not believe that there is currently any need to adjust our business model or strategic alignment.

Our focus on different customer segments is reflected both in our development activities and in our portfolio and the products we offer, which cater to customer demand for modern home amenities. We combine freely financed and price-controlled new home construction for our own portfolio (Development to hold) and for sale (Development to sell). We also remain focused on reducing construction costs to provide sustainable, affordable homes for diverse target groups while introducing a share of subsidized homes to the market.

The positive impacts on customer relationships are thus rooted in the company’s strategy and business model. In addition to the short-term impact, we also expect to see a medium to long-term positive follow-up effect for our customers, as our business model is stable, we plan to build new homes to hold in our own portfolio, and both leases and rent trends also have an impact in the medium to long term.

By offering “Housing tailored to tenants’ needs,” in particular by creating homes that meet people’s needs as they age, we can significantly increase the length of time that people with physical disabilities can stay in their own residences. This extended autonomy positively impacts their living conditions and health as they age. Targeted measures (e.g., accessible housing) enable us to retain existing tenant groups and attract new ones. This creates direct impacts on our customers.

By 2035, demographic change in Germany will have created a need for around 3.7 million fully accessible homes. Only around 1.2 million senior-friendly homes are available at present. This gap is already evident today and will only become more pronounced in the coming years. Even low-threshold (structural) measures can have a positive impact and increase the supply of suitable housing. This is reflected in our product range for accessible partial modernization and new construction, which we have integrated into our long-term investment strategy and business model.

The positive impacts associated with the “influence of accessibility and service quality on customer satisfaction” result from ensuring consistently high service and product quality and from swiftly processing customer inquiries. This allows customers’ varying needs to be identified and addressed in a timely manner. As (potential) tenants are the core target group in our business model, their satisfaction has a key impact on our strategy, our value chain and our processes. It makes a decisive contribution to the acceptance of, and demand for, the housing we offer among tenants and individuals looking for an apartment. As changes in customer satisfaction can have tangible effects in the short term – e.g., in the form of lower demand, more complaints – we survey customer satisfaction levels on a quarterly basis and respond to negative trends with targeted measures at the regional and neighborhood levels. We continuously work on improving service quality and implement corresponding measures (see here section S4-4). These measures therefore make a major contribution to this impact, and have a direct effect on our customers, whose satisfaction depends on their implementation.

The positive impact “Increased quality of living for tenants through contribution to neighborhood development and infrastructure” encompasses the effects of neighborhood development that is specifically geared to the needs of stakeholders as well as positive synergy effects resulting from better neighborhood infrastructure. This benefits not only our customers, but also other users of the neighborhood (downstream value chain).

Neighborhood development activities help to develop socially and ecologically sustainable places for people to live together in central urban locations and in metropolitan areas, improving the quality of living of the people who live there. In the long run, this can result in a more needs-based or environmentally friendly portfolio, better infrastructure connections, greater diversity or a higher level of education/average income in the neighborhood. This allows for a reduction in the anticipated costs – for example through modernization measures that are optimized at neighborhood level – and accelerates sustainable neighborhood development.

The holistic neighborhood approach is mirrored in the company’s strategy and business model: around 77% of Vonovia’s strategic portfolio in Germany is located in around 755 contiguous neighborhoods. In this context, we understand a quarter – as per the definition of the German Housing and Real Estate Companies (GdW) – as a visually coherent urban development structure that is seen by its residents as a distinct area and that represents an area for action in which the residential real estate company can make a difference and see positive effects. It generally comprises at least 150 apartments (see Portfolio in Rental Business). Vonovia’s investment, rental and development programs tie in with this portfolio composition – particularly along our strategic climate pathway (see ESRS E1). This makes the holistic neighborhood approach the management level for all ecological, infrastructure-related, rental-related and social measures. The same also applies to our new construction and development activities. Consequently, this approach has – and indeed will continue to have – a significant influence over the company’s strategic direction. Our neighborhood development measures are a direct result of Vonovia’s business strategy and are consistent with the overarching goal of providing housing that meets the needs of all individuals.

The observation period for this impact is limited to a short-term horizon, as it is influenced to a significant degree by the neighborhood-focused investments made in the fiscal year, or planned for the following year. A long-term positive impact can also, however, be expected if several effects related to improved quality of living at neighborhood level are interrelated and reinforce each other in a positive way.

The higher Vonovia’s share of homes in contiguous neighborhoods and the more extensive the measures initiated, the more direct and impactful the neighborhood infrastructure measures will be and the more they will foster customer satisfaction.

In the 2024 reporting year, we reported separately on the two company-specific disclosures “Living at fair prices” and “Neighborhood development and contribution to infrastructure.” As part of the revised materiality assessment process (see ESRS 2 IRO-1), the allocation was adjusted and the topics were incorporated into ESRS S4. As a result, the corresponding IROs – “Contribution to affordable homes” and “Increased quality of living for tenants through contribution to neighborhood development and infrastructure” – as reported under ESRS S4 as of the 2025 reporting year.

The revision also resulted in the following changes for ESRS S4 in particular:

• The material negative impact reported on in 2024 – “Reduced tenant satisfaction due to limited accessibility and service quality” – was dispensed with. The title of the other material positive impact reported in the previous year – “Improved customer satisfaction through better accessibility and service quality” – has been amended and the impact is now referred to as “Influence of accessibility and service quality on customer satisfaction” (still classified as material).
• The material opportunities reported in the previous year, namely “Reduced tenant turnover through the creation of homes that meet people’s needs” and “Financial opportunity from increased customer satisfaction and service quality”, were no longer classified as material in the reporting year.
• The impacts classified as material in the reporting year – “Contribution to more affordable homes for tenants by adhering to regulatory frameworks” and “Contribution to more affordable homes for tenants through new construction and development activities” – have been combined in one impact, “Contribution to affordable homes,” as their content overlaps.

Resilience of Our Business Model

In general, the resilience of Vonovia’s strategy and business model is analyzed and evaluated annually as part of risk management (see ESRS 2 GOV-2).

To evaluate the resilience of our business model in managing our key impacts, we continuously analyze trends in customer turnover and customer satisfaction. This analysis has shown that our customer turnover remains consistently low and our customer satisfaction consistently high. Our management platform provides customers with both a centralized customer service department and local contacts (e.g., caretakers, craftsmen, real estate managers, technicians and landlords), enabling us to constantly address customer needs and concerns.

The high demand for affordable housing in metropolitan areas and the existing gap between supply and demand is not set to change in the medium term.

This ensures that our current measures strengthen the resilience of our business model, with no material risks identified.

Target Groups

The core target group comprises tenants in Germany, Austria and Sweden as well as potential tenants and buyers and customers for property-related services such as green electricity, insurance and multimedia. The information provided in the ESRS S4 reporting framework generally applies to all (potential) tenants and buyers.

Our customers are not end-users of products or services that are harmful to health, increase the risk of chronic diseases or could have a negative impact on rights such as rights to privacy, data protection, freedom of speech or non-discrimination. They do not require detailed product or service information to avoid potentially harmful use and do not belong to particularly vulnerable groups, such as children or financially vulnerable individuals who could be adversely affected by marketing or sales strategies. When it comes to “homes that meet people’s needs,” older or physically impaired tenants represent a customer group that has special needs regarding the homes they live in. These needs are taken into account without any material IROs related to impacts on the health of this target group being identified.