(Bloomberg) -- Denmark has put together a plan to halt short-term property speculation after months of tense debate triggered by a spate of purchases by Blackstone Group Inc.
Housing Minister Kaare Dybvad unveiled a number of steps that include a decade-long moratorium on rent hikes. The question now is whether the measures are too broad as members of Denmark's $450 billion pension industry warn that the government risks choking investment.
The revised legislation will ensure that landlords can only push through rent hikes in connection with renovations after they've owned a property for 10 years (the rule won't affect other categories of rent adjustments). The Social Democrat government is also raising environmental requirements for such renovations.
Dybvad says he's confident the plan will only hit speculators and protect long-term investors. But he already faces considerable push-back from lawmakers and Danish institutional investors.
Pension Funds React
“We acknowledge that there are problems in corners of the industry,” said Michael Bruhn, head of real estate investments at PFA Pension, which manages about $100 billion. “But we're worried that the minister's proposal is too broad and will, in practice, mean that necessary investments and renovations will grind to a halt.”
Bruhn said the 10-year rule is “particularly problematic.” PFA has about $450 million in properties that will be affected, he said.
“We'd rather see a plan that specifically targets the rotten apples, instead of hitting all property investors, including several Danish pension firms,” Bruhn said.
Read more: Blackstone Targeted as Denmark Slams ‘Infamous' Investment Model
Dybvad has repeatedly singled out Blackstone as an example of an investor that he has called “infamous” for its business model. The minister has accused the firm of exploiting “holes” in existing laws to drive up rents. At the same time, Dybvad has said that revised legislation wouldn't only target Blackstone, and that the new rules will affect all landlords with short-term interests.
Blackstone has said it owns too small a chunk of the Copenhagen market to materially influence rents, an assertion that is backed up by the Danish Property Federation. It has also said it's a long-term investor with a goal of improving the properties it owns, and that it complies with the law.
Lawmaker Talks
Dybvad held talks with lawmakers over several weeks before putting forward his plan. A formal vote following negotiations has yet to take place.
Jens Rohde, a member of parliament's housing committee for the Social Liberal Party, said there's no agreement yet inside the government bloc. “I still have plenty of questions about the 10-year freeze” on rent hikes, he said.
The revised rental law will aim to protect Denmark's cooperative housing projects, according to Dybvad. But he has yet to convince lawmakers of that.
Heidi Bank of the opposition Liberal Party told broadcaster TV2 that the government's plan was too simplistic. She also questioned whether the proposal will ultimately help tenants, as intended.
Mette Hjermind Dencker, who represents the opposition Danish People's Party on the parliament's housing committee, said the 10-year rule goes too far. “It will hurt renters and cooperative owners and property conditions will deteriorate,” she said.
Read more: Denmark Applauds Warren's Attack on Blackstone's Business Model
--With assistance from Christian Wienberg.
To contact the reporter on this story: Morten Buttler in Copenhagen at mbuttler@bloomberg.net
To contact the editors responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net;Christian Wienberg at cwienberg@bloomberg.net
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