Coalition agreement: Green light for the real estate industry?

The coalition agreement between the SPD, the Greens and the FDP sets the political agenda for the next legislative period. It includes many proposals with regard to the real estate industry that were already on the cards. Nonetheless, the parties will face enormous challenges with their plans.

The focus of the coalition agreement is very much on construction, housing and climate change.

Construction and housing: Ministry of Construction, rent control and promotion of home ownership

The coalition plans to build 400,000 apartments a year, 100,000 of which are to be publicly subsidised. A new non-profit housing scheme, including tax support and investment subsidies, will also be launched in order to promote the construction of affordable housing and ensure that it doesn’t revert to market rents after a fixed term, as is currently the case. There will also be tax incentives for new housing construction, with straight-line depreciation of residential buildings being raised from 2% to 3%.

To accomplish these huge tasks, a separate Ministry of Construction will be created, headed by the SPD, and the remit of the Institute for Federal Real Estate (BImA) will be greatly expanded.

With regard to rental policy, the traffic-light coalition proposes extending the so-called “rent brake” until 2029. In addition, the cap on rent increases in tight housing markets will be lowered from 15% to 11% over three years.

Official rent indices will be beefed up to further limit the rise in rents. An extension of the reference period used for calculation purposes is under consideration – the intention is that tenancy agreements going back seven years should be used as the basis. In addition, official rent indices would become mandatory for municipalities with more than 100,000 inhabitants.

Alongside tenant safeguards, the traffic-light coalition is aiming to promote home ownership. An equity loan scheme is set to make it easier to acquire property, while marginal households will receive long-term support when buying a home, e.g. through repayment grants and lower interest rates. The federal states will also be given the option of introducing a real property transfer tax allowance for purchasers of owner-occupied residential property. This proposal will be financed by 

closing tax loopholes when corporations acquire real estate (share deals).

A further adjustment to the recently amended rules on share deals in the Real Estate Transfer Tax Act (Grunderwerbsteuergesetz) thus seems to be a done deal.

The coalition agreement also sets ambitious targets for climate change mitigation in relation to buildings

Extensive amendments to the Building Energy Act (Gebäudeenergiegesetz) are planned, which will impose much tougher energy efficiency requirements on buildings in the years ahead. At the same time, a new funding programme for new house building will be introduced after expiry of the new build subsidies under the KfW Efficiency House Standard 55 programme.

The coalition agreement also calls for rapid transition to a new method of calculating the overall rent in which basic heating costs are included in the rent, while the tenant pays for any additional heating. The modernisation levy for energy efficiency improvements will be incorporated into this system. This new method of calculating rents has its origins in the FDP’s election manifesto. No further details on implementing the new scheme are provided in the coalition agreement.

The coalition agreement does, however, give specific details on splitting the CO2 levy between tenants and landlords. The levy will be payable on top of heating costs. A tier model based on building energy classes will be put in place by June 2022 to determine exactly how the costs are shared. If it is not introduced in time, the CO2 levy would simply be split equally between tenants and landlords.

A one-off heating cost subsidy is planned to counter rising energy prices this winter.

With regard to the proposed changes at European level as part of the Fit for 55 programme, the traffic-light coalition has clearly indicated that it is willing to support the programme concerning the building sector.

Our blog series on the impact of the coalition agreement provides information on how the coalition agreement will affect businesses across a range of sectors.