Child benefit for home construction, social housing and reforms – a new course in housing policy

Child benefit for home construction, social housing construction and property tax reform – the grand coalition is taking a new course in housing policy.

The new course in housing policy agreed upon by the CDU/CSU and SPD includes several measures to control rent increases. Furthermore, the grand coalition plans to improve the housing situation in Germany through measures such as a child benefit for home construction, increased funding for social housing, and a reform of the property tax.

Housing should become more affordable for average earners. According to the plans of the grand coalition, two groups in particular will be strengthened: renters in expensive metropolitan areas and young families who want to buy their own home.

Parents who decide to build or buy their own home will receive a subsidy of €1,200 per child per year. This child benefit for home construction will be paid to families with a taxable annual income of up to €75,000, plus a tax-free allowance of €15,000 per child, for a maximum of ten years.

Rent control is being tightened

In addition to providing support for homeownership, the governing parties have surprisingly agreed to tighten rent control. Previously ridiculed as a toothless tiger, the measure is now intended to be more effective thanks to increased transparency. Landlords will now be required to disclose the previous rent when re-letting a property, and not just upon request from the tenant. However, landlords who fail to comply with the law will not face any legal consequences, as Ulrich Ropertz, Managing Director of the German Tenants' Association, points out.

Reform of modernization law

Another change to tenancy law is the reform of modernization regulations in areas with high housing demand. The coalition partners plan to reduce the modernization surcharge from the current 11 percent to 8 percent. For example, if a modernization costs €20,000, only €1,600 per year can be passed on to the tenant, instead of the current €2,200. To ensure that rents remain affordable even after renovations, SPD Vice Chair Natascha Kohnen stated that a cap will also be introduced. According to this proposal, rent increases may not exceed €3 per square meter within six years. For smaller projects costing up to €10,000, a simplified procedure will apply: After deducting a flat rate of 30 percent, only €7,000 will be chargeable to the tenant.

Qualified rent index

A minor reform aims to ensure that the rent index accurately and reliably reflects the local comparative rent in the upcoming legislative period. (The rent index is a crucial basis for the rent control law, which stipulates that rents may not exceed the local comparative rent by more than ten percent.) The qualified rent index will be valid for three years instead of the current two. Whether the period for its compilation will also be extended has not yet been decided

The federal government continues to promote social housing construction

Since the need for affordable housing has increased dramatically across Germany, the governing coalition plans to extend federal funding to relieve the burden on municipalities. Federal funding for social housing was originally set to expire at the end of 2019. However, the federal government is now acknowledging its continued responsibility and intends to increase the subsidy for social housing, which currently stands at €1.5 billion this year, by an additional €500 million starting in 2019. This is expected to enable the construction of up to 1.5 million new apartments by 2020.

New: the "Property Tax C"

Furthermore, a reform of the property tax is planned to improve the housing situation. Municipalities will be permitted to levy a "property tax C" on undeveloped land. The higher taxes are intended to motivate owners to develop their land as building land rather than using it for speculation.

Sources: mietrecht-reform.de, bundesregierung.de, finanzen.de, zeit.de, n-tv.de, rbb24.de, spiegel.de, merkur.de