Accelerated depreciation for rental housing: Berlin qualifies as a funding area

The German cabinet has approved a draft law introducing tax incentives for new rental housing construction. Berlin, as an area where the rent control law (Mietpreisbremse) applies, automatically qualifies. For investors and developers looking to create new apartments in the capital, this changes the equation.

The conditions in detail

The incentive is designed to create affordable housing, not subsidize luxury apartments. The rules:

• Construction cost cap: maximum 3,000 euros per square meter of living space
• Eligible costs: no more than 2,000 euros per square meter of that
• Accelerated depreciation: 10 percent of eligible costs in the year of completion and the following year, 9 percent in the third year (on top of the standard 2 percent annual depreciation)
• Use restriction: at least ten years of residential rental use

Why Berlin automatically qualifies

The draft law ties the incentive to areas with strained housing markets, specifically areas where rent control applies. Since Berlin's rent control has been in effect since June 2015, the entire city qualifies.

Window: 2016 to 2018

Only projects with building applications filed between early 2016 and the end of 2018 are eligible. The last accelerated depreciation claim can be made in 2022. The time limit creates an incentive to move planned projects forward quickly. Finance Minister Wolfgang Schaeuble: "Apartments are lacking, especially in major cities. We need to set the right incentives now and promote new housing construction in a targeted, time limited way."

Where in Berlin the incentive works best

In central locations like Mitte, high land prices make it harder to stay within the construction cost cap. In the development areas of outer boroughs such as Lichtenberg, Pankow, or Treptow-Koepenick, the math looks different. Land for new development projects is still available, and construction costs are more likely to stay within the eligible range.