One of Berlin’s climate protection targets is to make the German capital carbon-neutral by 2050 – and refurbishing the residential building stock will be a key factor in achieving this goal. A recent survey determined the scale of the investments that the refurbishment of residential buildings will require if carbon-neutrality is indeed to be achieved by 2050. To get the job done, a total of 91 billion euros between now and 2050 or about three billion euros annually would be necessary according to the survey, compiled by the Nymoen strategic consultancy on behalf of the Wärmewende renewable energy initiative (source: www.bz-berlin.de).

However, the survey’s authors believe that Berlin’s rent cap stands in the way of implementing the investments. They argue that the investment costs for owners add up to 2.89 euros per square metre and month, of which only one euros may be recovered from tenants due to the rent cap (source: www.ihk-berlin.de). For many landlords, this will probably pose a serious obstacle to their plans to start with the energy refurbishment measures because they would be stuck with the bulk of the costs. If this turned out to be the case, the rent cap would clearly hamper the implementation of the climate protection targets in the buildings sector.  

Nationwide Funding Gap of up to 13.2 Billion Euros

Things are not made easier by an additional 54 billion euros in capital expenditures that will be needed, according to the survey’s authors, to pay for capital improvements of Berlin’s housing stock in terms of handicap accessibility and fire prevention and protection. This would put the total expenditure at 145 billion euros. Without incentives on a corresponding scale, it will hardly be possible for owners to pay for these capex requirements.

Another survey identified an analogous funding gap for energy refurbishment measures on the national level. The German government would have to make funds in the range of 6.1 to 14 billion euros available annually in order to ensure a carbon-neutral building stock by 2050. This implies a gap of 5.3 to 13.2 billion euros. The survey was compiled by Prof. Dr. Sven Bienert of the International Real Estate Business School (IREBS) and commissioned by three housing organisations (source: www.haufe.de).  

Climate Protection without Raising All-in Rents Requires Government Funding

Only if government funding is raised proportionately will it be possible, according to Bienert, to structure the energy refurbishment measures in such a way that all-in rents would not have to be raised. Alternatively, owners would have to pass the costs on to their tenants, which would trigger a major hike in housing costs. Now, if it proves impossible to recover the costs from tenants—and this is precisely the problem with Berlin’s rent cap—the chances that the necessary investments to achieve climate neutrality will be undertaken at all are rather slim.

To be sure, the economic stimulus package that the German government passed in response to the coronavirus crisis does raise the low-carbon building refurbishment program from 1.5 to 2.5 billion euros (source: www.haufe.de). But this would not nearly cover the actual funding requirements.