The new coalition agreement in Germany is in place - What are the likely effects for the real estate industry?

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The 177-page coalition agreement of the three parties set to form the new government in Germany provides for numerous innovations in the German real estate sector. In future, building and housing is to be affordable, climate-neutral, sustainable, barrier-free where possible, innovative and with vibrant public spaces.

On 24 November, the parties of the new government coalition presented their coalition agreement in Berlin. In addition to the creation of 400,000 new residential units per year, it provides for comprehensive legislative changes for the construction and housing sector. For example, tax loopholes in connection with acquisitions of real estate by corporations in the context of share deals are to be further closed in order to finance a planned facilitation of the acquisition of owner-occupied residential property. The newly created Ministry for Building and Housing goes to the Social Democrats.

I. Housing

The declared goal of the new coalition is to build 400,000 new residential units per year, 100,000 of which are to be publicly subsidised. In order to be able to implement this plan, the parties are planning a new "Alliance for Affordable Housing" with all important stakeholders. The additional introduction of a construction, housing cost and climate check as well as a register of potential development spaces that is to be kept at municipal level is to create long-term planning perspectives for the construction and real estate industry. As a financing incentive, the linear depreciation for new housing construction is to be raised from two to three percent.

In order to promote the acquisition of property in the private sector, the granting of equity-replacing loans is to be facilitated and the Länder are to be enabled to structure the land transfer tax more flexibly by means of an allowance. As counter-financing, tax loopholes in connection with acquisitions of real estate by corporations in the context of share deals are to be further closed.

Illegal financing of real estate is to be combated by introducing a taxation certificate for commercial and private real estate buyers from abroad for any real estate acquisition in Germany. Paying in cash for the acquisition of real estate will no longer be permitted in the future.

II. Climate protection in the building sector

Climate protection is another core topic of the coalition agreement.

In this context, the introduction of a digital building resources passport is to facilitate the first major step towards a circular economy in the building sector.

In addition, the scheme for promoting the construction of new residential property meeting Kfw standard 55 for energy-efficient buildings (EH 55), which expires in 2022, is to be replaced by a new subsidy programme. The Building Energy Act (GEG) is to be amended to the effect that from 1 January 2025 every newly installed heating system must be operated on the basis of 65% renewable energies; furthermore, from 1 January 2024 all replacment parts to be used in significant extensions and conversions of existing buildings are to comply with the EH 70 standard. The standards for new buildings set out in the GEG will be brought into line with the KfW EH 40 standard by 1 January 2025.

In view of rising heating costs, the parties intend to examine a rapid switch to a new concept of rent whereby basic heating costs will be included in the base rent. At the same time, the modernisation levy for energy-related measures is to be remodelled to form part of this new system, and in this way a fair distribution of the CO2 price to be paid between landlords and tenants is to be achieved. As early as June 2022, a tiered model based on building energy classes is to be introduced, which will govern the allocation of the CO2 price in accordance with the Fuel Emissions Trading Act (BEHG). If this time frame for the introduction of the tiered model cannot be met, the parties plan to have landlords and tenants share the costs of the increased CO2 price equally.

III. Further planned legislative changes

From the point of view of tenant protection, the parties intend to evaluate the existing tenant protection rules and plan to extend them. In this context, qualified rent indices are to become mandatory for municipalities with 100,000 inhabitants or more. In addition, a review of the current tenancy law, especially the existing regulations on grace period payments, is planned.

A comprehensive amendment of the Building Code (BauGB) is planned with the aim of digitalisation and simplification. This is intended to facilitate the full digitalisation of urban land use plan procedures as well as the future mobilisation of building land and optimise the existing procedural structures in terms of timing. An extension of the provision in § 13b BauGB is not planned. Parallel to this, it is envisaged to remove the time limits stipulated for the corresponding provisions of the Building Land Mobilisation Act.

Finally, it is to be examined to what extent the ruling of the Federal Administrative Court of 9 November 2021 on the municipal right of first refusal in areas with a preservation statute could result in a need for legislative action (we reported).

In addition, a reform of the Official Fee Scale for Architects (HOAI) is being considered.

In the context of future-oriented urban development, the parties are also striving for an overall noise assessment in urban areas, which is to be reflected in a modernisation of the Technical Instructions on Noise Protection. In addition, the introduction of areas for inner urban development measures is to be examined.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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