This is a good day for all tenants, said Federal Construction Minister Klara Geywitz (SPD) about the surprising agreement within the traffic light government on tax incentives for affordable housing. “With the new housing non-profit organization, we are creating another strong pillar for more affordable housing in our country alongside social housing,” added Geywitz.
It is planned that companies, associations and foundations that permanently offer apartments at prices below the market rent will receive comprehensive tax relief. In contrast to social housing, in the case of non-profit organizations, the apartments must be permanently offered at prices below the market price. The rent restrictions do not expire.
According to the Ministry of Construction, companies in particular are interested in financing company housing under the umbrella of non-profit organizations, for example for trainees. Skilled workers would hardly be considered for this, as there are clear income limits for tenants. For singles, these are five times the standard rate of citizen’s income, which is currently 563 euros per month, and for single parents, six times the standard rate of citizen’s income.
With the planned change to the tax code, the federal government – primarily the Social Democrats, but also the Greens – wants to return to non-profit status in housing construction 34 years after it was abolished. In 1990, non-profit status was abolished by the then government under Chancellor Helmut Kohl (CDU).
At the time, it was reacting to the scandal surrounding the non-profit construction and housing company “Neue Heimat”, which belonged to the German Trade Union Confederation. Self-enrichment, corruption and mismanagement had brought the social housing policy that had been active for decades into disrepute.
Now, in view of the crisis on the housing market, non-profit housing is to be reintroduced. The SPD, Greens and FDP had already agreed on this during the coalition negotiations in 2021. On page 69 of the contract, it was stated that “a new non-profit housing system with tax incentives and investment allowances will be launched in the near future.”
The tax incentives are now to come, but the announced investment allowances are not. Here, Geywitz was unable to prevail against Federal Finance Minister Christian Lindner (FDP). “Investment grants were not part of the coalition agreement in this sense,” he said after the agreement.
The criteria for non-profit status are now being applied. “More than that is not possible and is also not financially viable,” said Lindner.
Unlike Geywitz, tenant representatives spoke of a bad day. “We warn against a hasty legislative shot into the void,” said Sebastian Bartels, managing director of the Berlin Tenants’ Association (BMV). In his opinion, it is far from enough to simply pass tax relief.
The state must create further incentives to revive the instrument that was abolished in 1990. “We expect that the Bundestag will now properly launch the narrow-gauge traffic light project and thereby initiate a nationwide debate about the chances of a comprehensive legal regulation of the new non-profit status,” said Bartels.
At least the Greens are apparently prepared to do so. “The regulation now agreed upon by the cabinet seems more like a drop in the ocean,” Christina-Johanne Schröder, housing expert for the Greens in the Bundestag, told the Reuters news agency.
It considers comprehensive investment subsidies to be unavoidable. According to the draft law, only 100 companies and around 105,000 tenants will benefit from the regulation. The Ministry of Finance did not provide any information on expected tax losses.
Economists also see a narrow-gauge solution. “The regulation will remain ineffective,” said Michael Voigtländer from the German Economic Institute (IW) in Cologne. With only tax exemptions and no direct investment allowances, this would hardly be attractive for companies.
“Foundations and municipal companies have little tax advantage because they hardly pay any taxes anyway,” said Voigtländer. In his view, the traffic light government is formally working through another point from the coalition agreement with the agreement – but no more.
The economist does not regret that the traffic light coalition partners were unable to agree on a more comprehensive solution. “Further subsidies would be very, very expensive. The accuracy is low,” said Voigtländer.
He has long been critical of the reintroduction of non-profit housing. Instead, he advocates simplifying building regulations, removing requirements and designating more building land. These are more effective instruments for creating more and therefore more affordable housing.
The housing industry believes that the planned reintroduction does not go far enough. The instrument could help “institutions such as clubs and foundations to become providers of affordable housing,” said Axel Gedaschko, President of the Association of the Housing Industry (GdW). However, given the “huge” housing shortage, this is “far from” enough.
There is now a shortage of 800,000 apartments in Germany, explained Gedaschko. What is needed is a “functioning support system for affordable housing in significantly larger quantities,” said Gedaschko.
Socially oriented housing companies must first be “put in a position to build again”. He called for a short-term interest rate program that would cap the increased construction interest rates at one percent.
The CDU/CSU parliamentary group wants to openly examine the new non-profit housing system, said Antje Tillmann, spokeswoman for financial policy. Some points regarding tax law are still unclear. In her view, the regulation is also vulnerable to abuse because the tenant only has to explain his personal situation at the beginning of the tenancy and when the rent is increased. “An unemployed person in need of help who finds a job three months after the start of the tenancy would then continue to benefit from reduced rent with tax subsidies,” said Tillmann.
