Germany's leading real estate group LEG reported a billion loss in the second quarter. Meanwhile, the company announces bad news for its tenants: rents will increase "as much as regulatory possible" in the future.

According to CEO Lars von Lackum, rents will significantly increase as material costs have risen by 30 percent over the last three years and the company has also had to account for salary increases. Due to these factors, it's not possible to offer a sustainable and eco-friendly product for a cheap 6.52 euros per square meter.

Therefore, LEG feels compelled to increase rents as much as allowed.

However, it is questionable to what extent the company can implement these increases. Due to government regulations, residential real estate corporations in many German cities can only adjust rents to a limited extent. For example, rent cannot increase by more than 20 percent within three years. In cities with particularly tense housing markets, there is even a cap of 15 percent.

However, LEG CEO von Lackum criticizes the current legislation and emphasizes that it protects both tenants with low incomes and the higher earners. This ultimately leads to a much too low total price for the product "rent". To find a solution to this problem, he calls for a flexibility of rental prices.

"A rental price flexibility would lead to the possibility of building again at prices profitable for investors," says von Lackum. Of course, this would also have to be supplemented by support for those in need.

Currently, LEG rents out approximately 167,000 apartments in Germany, mainly in North Rhine-Westphalia, but also in other federal states.

Despite the billion-dollar loss in the second quarter, LEG remains one of the leading companies in the German real estate market and is committed to continuing to grow in the future.