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The German election and the housing industry

On September 24, 2017:

Germany decides

 

German election 2017With the last Sunday in September fast approaching and election campaigning reaching fever pitch, Germany’s political parties are busily jockeying for position. It seems highly likely that Angela Merkel will continue as Chancellor, but another coalition government is definitely on the cards. Will the current Grand Coalition of Union (CDU/CSU) and SPD receive a new mandate, or will the FDP win enough votes to get back into government? Could the SPD, Greens and left-wing Linke do at a national level what they are doing at state level in Berlin?

Whatever the eventual result, there’s one thing all of the parties already agree on: Germany desperately needs to build more homes. Where the parties differ is on how best to achieve this aim. Their policies on the future of rent control (in the form of the Mietpreisbremse) are also poles apart. Let’s take a look at their different positions.

Fixing the housing market

 

The Union is promising a new help-to-buy scheme, which involves annual payments to families with children to reduce the costs of homeownership. The SPD also wants to help families to buy homes, but with one-off payments for each child in a family. The AfD promises interest-free loans and the abolition of property transfer taxes. Despite the different approaches, each of these measures has the same goal: to make it easier for families with children to buy property.

In contrast, Germany’s main left-wing party, Die Linke, wants to massively expand the provision of social housing, while the Greens have underlined their commitment to affordable housing by promising to build one million new rent-capped apartments. A number of parties are also pushing for a revamp of the way housing benefit is calculated and paid. The FDP, for example, claims that its proposed reforms will guarantee that all housing benefit claimants are able to pay their rents in future. In turn, the FDP would tighten up the rules that govern who is eligible for subsidised housing.

 

The Union of CDU / CSU has promised that, if elected, they won’t pass any new laws that would increase the cost of building new housing. They have also announced tax breaks designed to promote the development of new rental housing and set a target of 1.5 million new apartments between 2017 and 2021. Their manifesto also includes a new help-to-buy scheme, Baukindergeld, which would promote homeownership among families with children. The scheme would benefit families to the tune of €1,200 per child per year, with payments made for a total of ten years. First-time buyers who buy a house for their own use would benefit from tax allowances for each adult and child to reduce the amount of property transfer tax they have to pay on their new property. The Union has promised to reform housing benefit, but hasn’t published any firm details yet.

The Social Democrats (SPD) have reaffirmed their commitment to increasing the provision of social housing. They also want to make building new housing a more attractive proposition. For low- and middle-income families, the SPD is also planning a new, progressive help-to-buy scheme, which the party has christened Familienbaugeld. Property taxes have also been earmarked for reform, as has the Mietpreisbremse (rental price brake), while a general commitment has been made to strengthening tenants’ rights. Housing benefit will be reviewed more often, which the SPD says will allow disadvantaged tenants to stay in their familiar neighbourhoods. As a basic principle, the SPD has stated that no one should be required to pay more than one- third of their income on rent.

 

The left-wing Linke party has called for a complete reset of Germany’s social housing system. They aim to create, by building or buying, a minimum of 250,000 social apartments per year. And they would set aside more than €5 billion to do so. Where the development of new apartments has been subsidised by the state, the party believes that rent controls should remain in place for ever. The party’s overarching goal is to make rental housing affordable for everyone: No one should have to spend more than one-third of their income on their rent. The party would replace the current iteration of the Mietpreisbremse with a nationwide rental price brake that would be applied without exception. They would also increase housing benefits, introduce heating fuel payments and couple these with a climate protection component.

 

The Grüne are campaigning on the basis of their aim to create one million permanently affordable rental apartments and want to strengthen communal housing associations. Their plans to promote the construction of new housing are primarily targeted at families and households on moderate to low incomes. The party wants to limit the influence of large-scale investors on the housing market and is planning punitive taxes to stamp out speculation. According to the Greens, housing should not be the object speculation. A more effective Mietpreisbremse forms the core of the party’s plans to restrict rent increases. In addition, the party has promised to double housing benefits to take better account of rising heating costs. Housing benefit claimants would also receive extra payments to promote the energy-efficient modernisation of their apartments.

 

The FDP wants to make the development of new apartments more attractive. One component of the party’s plans involves tax incentives that would increase annual tax depreciation allowances on new buildings from two to three percent. The Liberals also want to abolish the Mietpreisbremse, claiming that it represents an obstacle to investment in new housing. The party has also promised to make sure that federal funds for housing will be strictly ring-fenced and that states won’t be allowed to divert the money to plug holes in their local budgets. The FDP has promised to restrict access to social housing. The FDP has also called for the state to pay housing benefits at a suitable level and to annually adjust these payments to reflect local rental price developments.

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