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Germany’s rental market is under sustained pressure, with affordability declining and supply tightening. A new proposal aims to use tax incentives to encourage small private landlords to rent their properties at lower-than-market rates, offering a model that could complement existing social housing schemes without direct state intervention.
The idea, developed by Arnt von Bodelschwingh of RegioKontext, proposes that private landlords who voluntarily set rents 5-15% below the local index should be exempt from paying tax on rental income for those properties. Eligibility would require tenants to hold a Wohnberechtigungsschein (WBS), ensuring the policy benefits lower-income households.
RegioKontext is a Berlin-based urban development and housing market research institute specializing in policy analysis and housing promotion strategies. The proposal was developed by von Bodelschwingh and his colleagues Katharina Enders and Sophia Wiedergrün, with input from a range of experts, including economist Dirk Löhr from Trier University of Applied Sciences and Jochen Lang from the Berlin Senate Department for Urban Development. Their work focuses on balancing market mechanisms with public welfare considerations to create sustainable, long-term housing solutions.
Germany’s existing non-profit housing law grants tax advantages to cooperatives and social enterprises that commit to long-term affordability. This new scheme could bridge that gap, incentivising individuals to provide long-term affordable rental options while maintaining ownership flexibility. A ten-year minimum commitment would prevent landlords from short-term rent reductions solely to claim benefits.
Positive initial response from politicians
Political response has been largely positive, with support from the Greens, SPD, and FDP. Advocates argue it could bring thousands of units into the affordable rental market with minimal bureaucracy. Critics caution that tax exemptions alone may not be enough to shift landlord behaviour at scale, and warn against potential loopholes. The likelihood of the proposal passing into law remains uncertain, though discussions at the federal level have been receptive. The political climate in Germany, with housing affordability remaining a critical issue, could push policymakers towards its adoption, though the specifics of implementation and oversight remain to be debated.
If widely adopted, the scheme could also influence the Mietspiegel, dampening rental price inflation in key urban centres. For institutional investors, it raises the question of whether similar incentives could be extended to larger-scale landlords. While Germany’s rental sector has traditionally favoured tenant protections, tax policy has remained largely neutral on pricing incentives—this initiative could mark a shift. Large-scale investors and asset managers will be watching closely to see whether such policies could be adapted to the broader real estate sector, particularly as regulatory discussions around affordable housing continue across Europe.
Recent discussions on housing policy in Germany have increasingly centred on the concept of Wohngemeinnützigkeit, or public welfare housing. The federal government reintroduced non-profit housing status in 2023, granting tax advantages to cooperatives and social enterprises that commit to long-term affordability. However, private landlords were notably excluded from these benefits. The proposed tax incentive scheme for small landlords could serve as a bridge, allowing individual property owners to participate in affordability efforts without converting to a non-profit entity. Policymakers are now debating whether integrating elements of Wohngemeinnützigkeit into the private rental sector could be a viable long-term strategy.
The proposal now awaits federal approval, with discussions ongoing about implementation details. If successful, it may provide a scalable model for balancing market-driven incentives with housing affordability, offering a potential precedent for further policy innovation in the real estate sector.