Federal Government Halts KfW Funding

Since funding was suspended in January 2022, the subsidy program for energy-efficient construction has been fundamentally revised. Through the “Climate-Friendly New Construction” (KFN) program, KfW now once again offers funding opportunities for climate-friendly new buildings. Today, the focus is particularly on energy efficiency, the reduction of greenhouse gas emissions, and sustainable building concepts. The previous funding based on traditional “Efficiency House” standards has been replaced by a new funding framework. For builders, funding programs remain an important component of financing, but the requirements have changed significantly.

The Federal Ministry of Economics surprised builders and investors with its decision to halt, effective immediately, the Kreditanstalt für Wiederaufbau (KfW)’s subsidy programs for energy-efficient renovations and climate-friendly construction. As the ministry announced on January 24, 2022, without prior notice, “the approval of applications under KfW’s Federal Funding Program for Efficient Buildings (BEG) […] is subject to a provisional program suspension effective immediately.” In addition, funding for new construction under the Efficiency House/Efficiency Building 55 (EH55) program, which was set to expire at the end of the month, has been permanently discontinued effective immediately. Industry representatives are criticizing this move.

The ministry cites an “enormous flood of applications” in January 2022 as the reason for the temporary suspension, noting that this has already exhausted the federal government’s provisional budget allocation of five billion euros for KfW’s funding of energy-efficient buildings. In particular, applications for EH55 new-construction subsidies rose sharply in January and significantly exceeded the funds allocated for this purpose. Background: In November 2021, then-Economics Minister Peter Altmaier had announced that the EH55 subsidy program would end in late January 2022, which led to a massive “rush” to apply for the subsidy. The provisional suspension announced in January also affects funding for new EH40 buildings, and a decision on their future is expected shortly. A decision will also be made promptly on how to proceed with EH55 and EH40 applications that have already been submitted but not yet approved. The BEG funding programs of the Federal Office for Economic Affairs and Export Control (BAFA), which support individual retrofit measures such as heating system replacement, will continue as usual.

Criticism of the federal government’s actions has been voiced by some representatives of the real estate industry. Dr. Andreas Mattner, president of the Central Real Estate Committee (ZIA), criticizes the sudden halt to EH55 new-construction subsidies as “wrong and irresponsible for social, climate, and economic policy reasons,” while the Federal Association of German Housing and Real Estate Companies (GdW) (GdW) sees approximately 300,000 apartments at risk and is calling for the subsidy freeze to be reversed. The federal government, for its part, views this drastic measure as a necessary step to counteract the misguided climate policies of recent years and to swiftly implement the adjustments that were previously neglected.

The Federal Ministry of Economics announced that it is examining a possible hardship provision for rejected applicants in order to prevent liquidity shortfalls for projects ready for construction. In addition, comprehensive funding for energy-efficient building renovations and climate-friendly new construction is to be resumed as soon as possible. To this end, appropriate, climate-ambitious programs are to be launched in the near future, as stipulated in the coalition agreement of the “traffic light” government.

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