Real Estate News - July 2023

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July 2023

Heating law on hold

The second and third readings of the Building Energy Act in the Bundestag scheduled for July 7 have been halted by the Federal Constitutional Court in summary proceedings. The adoption of the so-called Heat Act by the traffic light coalition of SPD, Greens and FDP will not take place for the time being. The Federal Constitutional Court ruled that the readings could not take place before the summer recess. The judges expressed doubts as to whether the rights of members of parliament would be safeguarded during the deliberations.

Thomas Heilmann, a CDU member of the Bundestag, had applied for a temporary injunction to prohibit the final deliberation and vote on the Building Energy Act, arguing that the bill had not been sent to the members of parliament in writing in good time. The Second Senate of the Federal Constitutional Court ruled by five votes to two.

Despite the long coalition dispute, a decision on the GEG will now not be taken until September, when the Bundestag regularly reconvenes. The SPD, Green and FDP parliamentary groups emphasized that they still stand by the Heat Act and that no more substantive changes are to be made. The new law is now to come into force on 01.01.2024, which is considered unrealistic.

Real Estate Transfer Tax Reform

Federal Finance Minister Christian Lindner (FDP) is proposing to reduce or completely abolish the real estate transfer tax for owner-occupied residential property in order to enable more people to purchase owner-occupied residential property. The Federal Ministry of Finance has forwarded a discussion draft to the federal states, which provides for greater flexibility in the real estate transfer tax and at the same time wants to take action against arrangements such as "share deals".

The states could respond with a reduced tax rate or an allowance, with the real estate transfer tax representing an important source of revenue. In 2022 alone, the federal states generated around 17 billion euros in real estate transfer tax. Since 2006, the states have been allowed to determine the real estate transfer tax rate themselves. Since then, many states have taken advantage of the opportunity and continuously increased the tax; only in Bavaria were the tax rates unchanged. Should the law pass through the Bundestag, the Bundesrat must approve it.

Meanwhile, studies show that lower real estate transfer tax rates could encourage housing construction, but so far the states have little incentive to lower rates because the real estate transfer tax is an important source of revenue.

No changes in furnished living

Federal Minister of Justice Marco Buschmann (also FDP) rejects the application of the rent brake to furnished apartments and short-term leases, as he sees no need for regulation here. A market analysis shows that the share of furnished apartments in advertised rental apartments has increased significantly. However, the study by the Federal Ministry of Justice found no evidence of a systematic conversion of vacancies into furnished housing following the introduction of the Mietpreisbremse. Nevertheless, the federal states want to regulate the furnishing surcharge by law in order to make it more difficult to circumvent the Mietpreisbremse and to strengthen tenant protection in the case of short-term rentals. The bill is before the Bundestag for a decision.

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