LightFieldStudios/Envato
Germany’s new CDU/CSU-SPD coalition has unveiled its governing programme for the 21st legislative period, laying out a dense agenda to tackle the housing shortage, reform energy policy, and modernise planning and building procedures. The 146-page agreement, Verantwortung für Deutschland, was met with a combination of cautious optimism, sectoral frustration, and sharp calls for credible implementation.
Among the more immediate proposals is a draft bill due within the first 100 days to accelerate housing construction—framed as a ‘Bau-Turbo’. It promises to simplify planning, procurement and environmental law, formalise Building Type E, and remove legal risks associated with deviating from recognised technical norms. Serial, modular and systemic construction methods are to be deployed more extensively, and digitalisation via Building Information Modelling (BIM) is to be further embedded.
Key Measures at a Glance
- Rent freeze extended for four more years in tight housing markets
- New controls planned for indexed leases, furnished flats, and short-term rentals
- Housing ‘turbo’ law promised within first 100 days
- EH55 standard temporarily reinstated
- Building Type E legally protected to reduce liability risks
- CO₂ emissions to replace energy efficiency as main retrofit metric
- €15/sqm affordability target via new state-backed investment fund
- KfW funding simplified into two programmes: new build and modernisation
- No changes to property transfer tax
- First-time buyer support to include guarantees and equity-replacing tools
The SPD retains the construction ministry. The EH55 energy standard, briefly shelved in 2022, will also be reinstated—albeit temporarily. Notably, the Building Energy Act (GEG) is to be reworked, with CO₂ reduction—rather than energy efficiency—becoming the primary metric. This shift, long demanded by housing providers, is seen as a pragmatic correction to the policy turmoil triggered by the previous coalition’s failed heating law.
“This cuts a Gordian knot,” said Axel Gedaschko, President of the GdW. “A CO₂-based approach lowers costs for landlords and tenants, and provides a practical route forward for retrofitting existing stock.”
From Turbo Talk to Targeted Funding
To address the chronic housing shortfall—estimated at 550,000 units nationwide—the coalition plans to launch an investment fund, combining KfW guarantees with private capital. The aim is to deliver new homes in tight housing markets at below €15 per square metre. The fund is to be exempt from EU state aid restrictions, and municipal housing companies are expected to play a central role.
Tax relief is on the table for first-time buyers, along with state guarantees for mortgage financing. However, expectations of a long-demanded reduction in the real estate transfer tax (Grunderwerbsteuer) were not met. “Disappointing,” said ZIA President Iris Schöberl, who argued that transaction tax relief remains essential to supporting home ownership and mobility.
The rent freeze (Mietpreisbremse) will be extended by another four years, while new controls are planned for indexed leases, furnished flats and short-term lettings. A national rent report will be introduced, and a new commission of tenant and landlord groups will examine the reform of rent usury rules and related sanctions. For many investors, this introduces a new level of legal ambiguity. “Any regulation of indexed or short-term leases would hit recent development projects hard and jeopardise financing,” warned Roman Heidrich, Lead Director Residential Valuation at JLL. “Uncertainty here could hang over the market like a sword of Damocles.”
The proposed regulatory changes have met with varied reactions across the sector. The GdW and VNW welcomed the increased support for social housing, praising the coalition’s shift toward carbon pragmatism and the promotion of co-operative and municipal housing. Andreas Breitner of the VNW described the approach as “free of ideological zeal, and finally grounded in practical reason.”
Others were less sanguine. The IVD, BFW, ZIA and Haus & Grund voiced concern that tighter tenancy law would continue to depress private sector investment and slow the already faltering pace of residential construction. “The housing turnaround hoped for by the property industry has not materialised,” said IVD President Dirk Wohltorf. “Tightening tenancy law while failing to reform ownership incentives is a contradiction.”
Market observers were also quick to note the strain on construction capacity. Massive parallel investments in infrastructure—funded through the new €500 billion special fund—risk absorbing skilled labour and pushing up material costs. Roman Heidrich of JLL pointed to the risk of crowding-out effects: “The construction industry cannot serve all segments at once. Labour bottlenecks and price inflation are a real threat to housing output.”
Limits of the Coalition's Promise
Despite these concerns, the agreement represents a measurable shift in tone. The legal protection of Building Type E (Gebäudetyp E) and the commitment to align DIN norms with a more flexible standard suggest the federal government is serious about reducing build costs. Likewise, the new emphasis on streamlined subsidies and the consolidation of KfW programmes into two broad channels—one for new construction, one for modernisation—offers greater clarity for both institutional and retail investors.
However, substantial gaps remain. There is no coherent strategy for reducing acquisition friction. Bureaucratic inertia, particularly at the municipal level, continues to be a critical bottleneck. And while rhetoric on digitising planning processes is well-established, past performance gives little reason for confidence.
Florian Bauer, Managing Director of Bauer Immobilien, captured the ambivalence of many industry voices: “There are a number of encouraging proposals. But without rapid execution, especially on permit reform, we risk perpetuating the same problems under a different government.”
For institutional capital, the signals are clear but uneven. Subsidised housing and retrofitting aligned with CO₂ targets offer stable public-private alignment and ESG-compatible returns. Developers focused on serial or modular construction will find support under the Type E framework. Yet for private landlords and home ownership platforms, the outlook remains clouded by regulatory risk and limited fiscal relief.
The coalition has set out its vision. Whether that vision translates into delivery will depend on administrative resolve, legal clarity, and political execution—areas where Germany’s real estate sector has long learned to remain sceptical.