High construction costs slow down social housing

Hanover. The state can no longer finance challenges such as economic transformation, climate neutrality, digitization, but also cushion crises solely from the budget – says the head of NBank, Michael Kiesewetter in an interview for this newspaper. A development bank can help with this.

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Mr. Kiesewetter, inflation is racing, building prices are very high, and now interest rates are set to rise as well. Is NBank well prepared?

Over the past two years, we have shown that we can deal with the crisis. During the corona crisis, the number of processed applications increased tenfold and the funding volume sixfold. We can be proud of it. This made us the center of attention of politicians and in public perception. NBank is also well prepared for the current crises.

“The state cannot finance everything”

What changes are you currently seeing?

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We learn that the demand for our subsidies for social housing is greater as interest rates are generally rising. Above all, NBank supports the construction of social rental housing or families and people who cannot afford their own home with regular loans. In social rental housing, we offer zero interest for 35 years plus discounts on repayment at the end. The attractiveness of our offer, especially for long-term investors, increased as loans from commercial banks became more expensive. But it won’t all go on like that.

From Nord / LB to NBank

Michael Kiesewetter has been the CEO of NBank in Hanover since November 2010. Responsible for the areas of corporate development, consulting, audit, subsidies and business / infrastructure. Born in Westphalia, he is married and has two children. After completing his International Business / Diploma in Business Administration studies in Dortmund and Plymouth, Kiesewetter has held various management positions at NORD / LB. Among other things, he was in charge of corporate development in 2006-2010.

Established in 2004, NBank is an investment and development bank in Lower Saxony. He supports the state in its tasks in the field of structural and economic policy. NBank is the central point of contact for European Union, federal, state, and municipal funding programs. NBank’s areas of responsibility include the promotion of social housing, infrastructure activities and the provision of venture capital. The balance sheet total of NBank at the end of the financial year 2020 amounted to EUR 4.9 billion.

What are you afraid of?

With the current construction costs, subsidizing them up to the rent provided for in social housing is becoming more and more difficult from an economic point of view. As construction has become so expensive, we fear builders and investors will be more restrained. In private-financed housing, we are already seeing a significant decline in permits for the construction of single-family houses, while a solid increase in multi-story apartments. The outlook remains difficult as there is great uncertainty on all sides. This may mean that not as many new construction projects are planned and ultimately implemented as in previous years. The state cannot just step in and finance everything. Planned flats will only be replenished thanks to the coordinated action of municipalities and the real estate industry.

Is energy demand also a problem?

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Generally, it is about what requirements are placed on new construction projects in social housing. Let’s put it a bit nonchalant: if you expect all the clinker, passive houses as standard and underground parking spaces for social housing, we will see relatively few projects that will be completed.

“We did a very good job during the corona crisis”

However, there were some serious starting problems with the help of the Corona you mentioned.

We were very quick with the first program, and then the demand was so great that the systems didn’t stand up. It was irritating to us. Almost every state had the same problem. We were the first to tease each other once and then switch systems in 36 hours. Despite all the minor mistakes, politicians did a good job of dealing with the economic impact of the pandemic. And we as development banks have also done a very good job.

“There was an enormous amount of money in the Corona crisis that will no longer be in the future,” NBank chief Michael Kiesewetter calls for other, more intelligent solutions.

What’s N-Bank’s balance sheet after two years of Corona bailout?

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Lower Saxony disbursed a total of EUR 6.5 billion in crown aid, of which a good half a billion was a loan. The rest are just grants. This prevented the fearsome wave of bankruptcy. However, the blockade did not last as long as initially feared. Since then, there have also been catch-up effects. For many companies, the corresponding amount of funding was therefore lower than that applied for at that time.

How much money did you get back?

We have written to approximately 134,000 people seeking emergency assistance of up to € 25,000, of which approximately 107,000 have made a declaration so far. Many can keep the money in full, but nearly € 182 million has already been voluntarily paid back. We will certainly ask the other 27,000 applicants again. We have a duty to the taxpayer. Then it may happen that there are still payments. Anyone who received a little too much according to the regulations has to pay it back only in mid-2023.

So a lot of money helps a lot?

There was a tremendous amount of money during the corona crisis, but this will not happen in the future. The state cannot finance all challenges, such as the transformation of the economy, climate neutrality, digitization, but also cushion crises from the budget. There must be other, more intelligent solutions. we are a bank We can use it even more.

“We still have potential here”

What do you suggest?

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Just look at the fact that Lower Saxony is the fourth largest economy among federal states. NBank ranks twelfth in terms of total assets, but in terms of economic strength and population, we are number sixteenth of the sixteen federal states. This cannot be the claim of Lower Saxony. We still have potential here that we just don’t use. This is because Lower Saxony has more traditional financing structures. The other states are on. We are still very focused on the components of the grant.

What’s the problem with that?

If we give a subsidy, it will disappear. If we give out mutual funds, one euro from the budget is one euro for a loan. If we refinance it in the capital market, we have a leverage of at least three. This means that we can pump three times more volume. However, this requires an increase in NBank’s equity capital, which may be made in the form of an in-kind contribution through the existing housing promotion assets without any budgetary impact. We are talking about EUR 1.2 billion.

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Do you want to transform your N-Bank into a commercial bank?

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no. We are a promotional bank, we will continue to be a service provider for the state and we can only continue to operate where incentives are given to the promotion policy. We are not a commercial bank like Nord / LB or savings banks. We do not operate entirely on the market. You won’t see us with checking accounts or normal business finances. 75 percent of the balance sheet total of development banks is always a purely promotional activity, of course we will continue to grant subsidies, but we would rather give more loans than subsidies because the loans are repaid. It is more efficient. As with cookware: Reusable cookware is often more useful and better than disposable cookware.

“You can do more with NBank”

Are you counting on changes after the state elections?

We are politically neutral. But all democratic parties see that more can be done with NBank. This is also reflected in the election programs. However, some things would have to be changed in the funding policy. The number of funding programs is far too high. During the corona crisis, we implemented approximately 50 programs. I don’t think that’s the way to deal with future challenges.

Your personal forecast for the coming year that many find difficult?

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We are going through a difficult period. The European Central Bank had to do something, it reacted too late in the fight against inflation. Now there is a risk that the ECB will have to put more pressure on the brakes than expected. This may cause a tendency to recession. The good thing is that the economy is much stronger than we thought. Their innovative strength in crisis situations should not be underestimated.

By Marco Seng

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