Geislinger Konvention: A Benchmarking Method for Operating Expenses of Housing Units

Operating expenses are increasingly important for lease agreements. In many German regions (with the exception of the larger and affluent cities) the net rent level has stagnated during the last few years. Operating expenses, however, have risen continuously. For the tenant, this additional charge to the net rent represents the decisive factor regarding rental decisions as his is budget is limited: High operating expenses might be a reason for tenants for not signing a lease agreement for an apartment.In 2000, a number of housing associations, larger housing companies and Nürtingen-Geislingen University agreed to observe and to analyse operating expenses. For this purpose, the ""Geislinger Konvention"" was established. The goal was to find ways how to stop successfully operating expenses from rising. In order to compare operating expenses benchmarks were developed. This required a cooperation of the ""Geislinger Konvention"" with IT-companies, which are able to manage big databases. Until today data of 4 million housing units from all over Germany have been collected by two IT-companies. The participation of housing companies is not required by law; however, when housing companies participate in the project they must accept the rules and procedures of the ""Geislinger Konvention"". The rules and procedures comprise three parts. Firstly the housing units of a housing company are registered including all their specifications. Secondly, companies are obliged to manage their operating expenses budgeting according to the rules and regulations of the Geislinger Konvention"". This step is indispensable to standardize and to compare the operating costs between different companies. Thirdly the data provided by the companies is processed and benchmarked in order to enable compare performance and analysis. By accepting these rules, housing companies are entitled to use the protected brand name ""Geislinger Konvention"" for the operating expenses statement provided to their tenants.In over 15 years it could be shown, that operating expenses levels differ significantly within Germany. Housing companies, however, can only influence some of these expenses. Many operating expenses are determined by the respective community (e.g. taxes, rates or public charges) or energy markets.