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No Housing Policy Changes

Germany's housing summit had long been prepared for, and the date in late September was anticipated with great expectations—it had been touted, after all, as a prelude to the so-called housing offensive by the Federal Government. Moreover, the summit was attended by the most senior stakeholders. Chancellor Merkel herself was hosting it, with other members of the Federal Government in attendance, specifically the Ministers of Finance, Interior, Construction and Justice, along with representatives of the state and municipal levels. But now that the housing summit has come and gone, it turns out that little has changed about the housing policy.

Several items listed in the summit’s outcome document1 had already been decreed by the Grand Coalition ahead of the housing summit. Among them are the child tax credit for first-time home buyers—which has been available to applicants since September 2018—and the special depreciation allowance for rental housing construction, the tightening of the Rent Freeze by introducing a mandatory disclosure of the previous rent level and the reduction of the modernisation allocation level from eleven to eight percent, plus the cap on the modernisation allocation at three euros per square metre over a six-year period.

Landlord-Tenant Law to be further Tightened

Another change to landlord-tenant law that was decreed at the housing summit will extend the benchmark period for the local reference rent from four to six years. As a consequence of the reform, the level of the rent index will be much slower to rise and with it, of course, the permissible passing rents. The corresponding law is supposed to become effective as early as 01 January 2019.

The Grand Coalition also intends to spend at least five billion euros before 2021 to support social housing development. This will require an amendment of the German Basic Law because the federal subsidy program was supposed to expire in 2019. On top of that, the Federal Government wants to lower the estate agent fees for home buyers in order to curb the incidental acquisition costs and thereby to boost the homeownership rate. There are, however, no plans to reform the real estate transfer tax which is probably the biggest driver of incidental acquisition costs.

Virtually no tangible decisions were made to boost housing construction although this had actually been the main purpose of the housing summit at the Chancellery. Digital planning applications are also being contemplated to make it easier and more efficient to file such applications. More important, however, is the intention to back serial and modular construction by integrating the type approval into the model building regulation (MBO).

Release of Development Land an Issue Delegated to Expert Committee

Meanwhile, the German Laender adopted the goal to harmonise their state level building codes according to the example of the Model Building Regulation (MBO) to save property developers the trouble of having to adapt to different regulations in each of the Laender. But unlike with the reform of the rent index, no time frame or other binding requirements were specified for this undertaking. So, it is anybody’s guess whether these plans in support of housing construction will ever be implemented at all and, if so, when that may be.

The issue of the release of development land was largely delegated to an expert committee which is supposed to submit suggestions for a possible new law by mid-2019. Patience is called for, here as elsewhere.

The real estate industry signalled that it is less than satisfied with the outcome of the housing summit.2 But for what it is worth, it also breathed a sigh of relief over an aborted senior staff change. Gunther Adler, the State Secretary for Construction, is now to remain in office—after top government officials had decided ahead of the housing summit to send Adler into temporary retirement to make the position of state secretary available to Hans-Georg Maassen, the former head of the Federal Office for the Protection of the Constitution (BfV).3 The original plan to retire the state secretary for construction of all people made it rather clear for the housing industry where the priorities of the Federal Government lie—and where not.