In the short time remaining before the parliamentary summer recess, the new German Government intends to write its first housing policy resolutions into law. In a closed coalition meeting on 7 and 8 May, the heads of the coalition’s two parliamentary groups passed a package of measures to that effect. It includes the child tax credit for first-time home buyers, meaning a fiscal allowance to promote housing construction, along with further constraints for the rent control legislation commonly called the “rent freeze” and finally a reduction of the permissible modernisation allocation (source: rp-online.de).

Child Tax Credit for First-Time Home Buyers

The child tax credit for first-time home buyers is to apply retroactively for deeds signed or planning permissions granted on 01 January of this year or thereafter. The idea is to grant families financial support who are about to buy their first home for the purpose of owner-occupancy. The allowance is for an annual amount of 1,200 euros per child over a ten-year period. The subsidy is limited to families whose taxable annual income is 75,000 euros plus 15,000 euros per child or less.

Special Depreciation Allowance for Housing Construction

Moreover, the Grand Coalition is introducing a special depreciation allowance for housing construction. The allowance is meant to subsidise the construction and acquisition of new buildings and condominiums that will be let for housing purposes over the next ten years. The special depreciation allowance equals five percent annually and will be granted over and above the straight-line depreciation in the amount of two percent. It will be granted over a period of four years and apply to development projects whose planning application is filed between 01 September 2018 and 31 December 2021.

Tightening the Rent Freeze

The rent freeze will be expanded to include an obligation to quote the rent rate previously paid for a given flat. Whenever a landlord justifies the quoted rent rate by referring to the previous rent level, he or she will from now on have to disclose that former rent rate.

Lowering the Modernisation Allocation Level

Going forward, landlords may no longer allocate eleven percent of the incurred modernisation costs to tenants per year, but only eight percent. On top of that, a rent increase cap for modernisation-related rent hikes will be introduced that will limit them to a maximum of three euros per square metre of residential floor area over a six-year period. The provision is temporally limited to five years. The Grand Coalition is also writing an optional, simplified rent-increase procedure into law that will cover small-scale modernisations where 10,000 euros or less need to be allocated only.All of the measures now passed were already identified in the coalition agreement, and therefore do not come as much of a surprise. Worth noting is that none of the four measures go beyond the stipulations of the coalition agreement but stay strictly within the parameters of the agreed projects. For instance, the draft bill introduced into the Bundesrat, Germany’s upper house, by the state of Berlin to tighten the landlord-tenant law was not taken into consideration. Berlin’s Senate has called for an abolition of exemptions from the rent freeze, a tightening of the rent increase cap and an extension of the reference period used to calculate the local reference rent for the rent index, among other proposals (source: tagesspiegel.de).