Building and housing in the coalition agreement: An overview for the real estate industry

The coalition agreement is in place. What does the real estate industry need to prepare for?

The coalition agreement between the CDU/CSU and SPD for the 21st legislative period is in place. Here we will summarise the most important projects of relevance to the real estate industry.

Package of measures with the aim of strengthening new (residential) construction

The German Federal Building Code (BauGB) is to be revised in two stages. In the first 100 days, there is to be a bill to "turbocharge housing construction", followed by a fundamental reform to speed up construction. The Technical Guidelines for Noise Reduction, the Technical Air Pollution Control Directive and planning law are to be further developed to better resolve conflicts between residential, commercial and agricultural use. Furthermore, building standards are to be stripped back and a legal framework provided for building type E. The new government can build on the preliminary work of the Traffic-Light Government here. In future, deviations from the acknowledged rules of technology will no longer constitute a defect. This will most certainly have to apply to building type E. The coalition agreement also commits to serial, modular and systemic construction, which is intended to maximise acceleration potential. The role of municipal housing companies is also to be strengthened.

Accompanied by further support measures

In order to promote new construction and the renovation of existing housing, tax measures are to be improved, measures to substitute equity capital are to be created and the assumption of state securities is to be examined. The German development bank's (KfW) promotional programmes are to be merged into two key programmes: one for new construction and one for modernisation. The EH55 standard is also to be subsidised again for a limited time in order to reactivate construction projects. An investment fund for residential construction is also to be set up to provide equity and debt. The financing costs for construction work are to be reduced through state support. The coalition agreement states the goal of creating a large number of apartments for a basic rent of EUR 15.00 per square metre in tight housing markets. The expertise of and cooperation with the housing economy are also emphasised in this context.

Regulations for renting are being expanded

Rent controls in areas with tight housing markets will expire on 31 December 2025 under current law. According to the coalition agreement, it is now to be extended by four years,

even though the period of time discussed during the coalition negotiations was just two years. A commission of experts is to make proposals for the further development of regulations for renting by 31 December 2026, including provisions on fines for violations of rent controls. No such penalties have been provided for to date. In addition, in tight housing markets, index rents for residential lettings, furnished and short-term lettings are to be subject to expanded regulations. This could put pressure on the business models of serviced living providers. The demands for a stricter capping limit on rent hikes, a rent freeze or a rent cap that were rumoured during the coalition negotiations are not part of the coalition agreement. However, beneficial changes for renters are planned with regard to the modernisation levy and the requirements for ancillary cost statements. Finally, national rent reporting is to be introduced.

Legal basis for conversion bans extended by five years

Since 2021, state governments have been able to prohibit the conversion of rental into owner-occupied homes in areas with tight housing markets. Conversions are only permitted in certain (exceptional) cases. Berlin, Hamburg, Bavaria and Lower Saxony, among others, have made use of this option. Under current law, the ban on conversion will expire on 31 December 2025. According to the coalition agreement, it will now apply for another five years. Previously, residential buildings that did not yet exist when the conversion ban came into force could still be converted so as not to stifle new construction. Depending on the legal form of the extension, however, residential buildings completed in the meantime could be considered existing buildings and subject to the conversion ban. The existing room for manoeuvre for such buildings until the end of 2025 should therefore still be used if applicable.

Municipal pre-emptive right strengthened

The municipal pre-emptive right is to be strengthened in protected neighbourhoods, among other places. This is likely a reaction to the decision of the Federal Administrative Court from 2021, according to which any possible intentions of the buyer to use the property for something contrary to neighbourhood protection law are not sufficient to exercise the pre-emptive right under neighbourhood protection law. In doing so, the Federal Administrative Court had cut the ground from under those engaging in a widespread municipal practice of forcing buyers to conclude "avoidance agreements". In addition, circumventing municipal pre-emptive rights through share deals is to be prevented. It will be interesting to see the legal arrangement in this respect. A corresponding push by the Traffic-Light Government in 2024 was very mixed, but did not become law.

Climate protection in the building sector will continue

The coalition agreement describes the building sector as central to achieving climate targets. The "Heating Act" is to be abolished. However, this probably only refers to the amendment to

the German Buildings Energy Act (GEG) passed during the Traffic-Light Government, not the German Buildings Energy Act (GEG) itself. Instead, it should be made more open to technology, more flexible and simpler. The key control parameter should be the achievable avoidance of CO2. However, the renovation and heating subsidy is to be continued. Furthermore, the interplay between the German Buildings Energy Act (GEG) and municipal heat planning is to be simplified and the national building efficiency classes in the German Buildings Energy Act (GEG) are to be harmonised with neighbouring European countries. Finally, the coalition partners want to advocate for an extension of the implementation deadlines for the EU Energy Performance of Buildings Directive (EPBD), which under current law must be transposed into national law by 29 May 2026. The existing scope for implementation should be fully utilised.

From beginnings to implementation

To summarise, the coalition agreement contains a number of initiatives that could potentially make new (residential) construction faster and more affordable. To be effective, they must firstly be formed into practicable laws and secondly be implemented by the administrations with as little bureaucracy as possible. The general bureaucracy reduction drive mentioned in the coalition agreement would possibly help here. It will be exciting to see how the numerous other regulatory measures will be crafted.