Germany's 2018 coalition: What new housing policies mean for Berlin property owners

The new German coalition government of CDU/CSU and SPD set ambitious housing targets in 2018: 1.5 million new apartments nationwide, plus a brake on rent increases in existing stock. The details were to be negotiated at the announced "Housing Summit 2018." For property owners and investors in Berlin, the plans created tension between tighter regulation of existing buildings and tax incentives for new construction.

Stricter rent regulation

The planned reform of the rent cap (Mietpreisbremse) affects Berlin landlords directly. Going forward, a simple objection from a tenant would suffice to challenge the rent level. On top of that, tenants would gain the right to request information about the previous tenant's rent, making the cap easier to enforce. These measures target existing properties in regulated markets such as Neukoelln and Friedrichshain-Kreuzberg.

Particularly noticeable for renovation projects: the modernization surcharge in tight housing markets would drop from eleven to eight percent for five years. At the same time, rent increases following modernization would be capped at three euros per square meter within six years. Both measures reduce the profitability of energy efficiency and quality improvements, and need to factor into any investment calculation.

Incentives for new construction: Special depreciation and child construction grants

To reach the new construction target, the coalition relied on tax levers. The special depreciation allowance (Sonder-AfA) for new rental apartments in the "affordable segment" would let investors claim five percent of construction costs over four years. Limited until 2021, it aimed to mobilize private capital for housing construction.

In parallel, the Baukindergeld supported families buying their own home: 1,200 euros per child per year over ten years. The income threshold was set at 75,000 euros in taxable household income plus 15,000 euros per child. Even though the program targeted owner-occupiers, the rising demand in the entry segment could push prices for apartments in Berlin overall.

Property transfer tax: Allowances and share deals

The property transfer tax remains a persistent issue for buyers. In Berlin it stands at 6.0%. The coalition was examining a federal allowance for the first purchase of owner-occupied property. Whether Berlin would forgo the revenue (around 1.06 billion euros in 2017, roughly one sixteenth of total state tax income) remained open.

Share deals also came into focus. This legal structure for selling real estate through company shares avoids the transfer tax because no change of property ownership takes place. The tax already applies when more than 95 percent of shares are transferred. The coalition wanted to tighten this threshold.

What this means for Berlin's market

The coalition's plans put Berlin property owners in a double-edged position. Existing stock faces tighter regulation and lower returns on modernization. New construction benefits from tax incentives. For owners and investors, particularly in central locations like Mitte, it pays to follow the legislation closely and adjust strategies early.