Denmark to change law to stop Blackstone rent hikes
Denmark is set to change its laws to stop property investors from ratcheting up rents, as the center-left government made clear it wants to target Blackstone Group Inc. and companies like it.
Housing Minister Kaare Dybvad said he's realized that existing legislation wasn't designed to withstand the kind of speculation he says firms like Blackstone do. His concern is that rents have risen to levels that now prevent average income-earners from living in Denmark’s main cities.
"Blackstone is infamous for using methods that we haven’t seen before in the Danish housing market," Dybvad said in an interview in Copenhagen on Tuesday. He expects the new legislation to be in place before parliament breaks for the summer.
"The lesson is that Denmark is a country where you can easily earn money on real estate investments, but there is an expectation that people think long-term," the minister said. "You can’t use the same methods here as you do in New York. [...] It's fair that other countries believe that real estate is a market thing in which politicians should not meddle. But that’s not how it works in Denmark."
Blackstone has spent recent years investing heavily in Denmark's rental market. The government says the U.S. firm has taken advantage of a law that allows property owners to hike rents if they renovate properties.
Blackstone has countered that it only owns about 0.5% of the Copenhagen rental market. It also says it’s a long-term investor and that it complies with the law. Its head of real estate in Europe, James Seppala, told state broadcaster DR that the focus is on properties that haven't been renovated "for decades." He says the goal is to create “units that are high-quality living environments for our customers."
Any changes to the law won't put Blackstone off investing in Denmark. "We are committed to continuing to build on the approximately half a billion kroner we have already invested to renovate units and create high-quality, well managed rental homes," a spokesperson for the firm told Bloomberg.
Denmark is now considering how best to change the law, based on a report compiled by an expert panel and published on Tuesday. One path would be to scrap a provision that lets property owners increase rents substantially if they carry out renovations for more than 257,894 kroner ($38,300). If Denmark chooses that model, owners like Blackstone would see the value of their investments fall by as much as 47%. But residents would face average rent increases of about 40%, instead of the current average of 80%.
"I think Blackstone has seen an opportunity to push people out of their homes to get fast returns," Dybvad said. "We have not been used to that approach" in Denmark. "It challenges our culture of trust." According to Denmark's state broadcaster, there are examples in which rents jumped as much as 400% after Blackstone took over a property.
Since taking office in June, the Social Democrat government of Prime Minister Mette Frederiksen has made fighting what it characterizes as corporate greed something of a political slogan. That follows a period in which Denmark's biggest lender, Danske Bank, was embroiled in a vast money-laundering scandal. The government is also trying to reclaim lost revenue after falling victim to a dividend tax-rebate scandal.
Against that backdrop, Dybvad says he's not worried that his actions targeting Blackstone might frighten off potential offshore investors.