Berlin housing subsidies 2015: two models for developers

Berlin's Senate has revised its guidelines for new construction subsidies with immediate effect. The aim is to speed up the construction of rental apartments for low and middle income households.

Two subsidy options

Developers can choose between two models:

Option 1 provides a public construction loan of up to 64,000 euros per unit. The average net cold rent is set at 6.50 euros per square metre, with individual apartments allowed to vary between 6.00 and 7.50 euros. In addition, a repayment grant of 25 percent on the disbursed loan amount is included.

Option 2 offers a loan of up to 50,000 euros. The initial rent is 8.00 euros per square metre, but is reduced to as low as 6.00 euros through income-based subsidies for tenants.

Both options require that apartments are let exclusively to holders of a valid housing entitlement certificate (WBS).

Planned funding targets

The Senate plans to subsidise 1,000 apartments in 2015, 2,500 in 2016 and 3,000 in 2017. The focus is not only on large development areas on the outskirts but also on infill sites in denser boroughs such as Neukoelln.

What this means for investors

The rent cap limits returns compared to the open market. In exchange, the loans and repayment grant reduce investment risk. Letting to WBS holders offers stable occupancy over long periods.

The revision is a response to the dynamic market conditions in Berlin: demand for affordable housing has outstripped supply for years, and previous subsidy instruments had not sufficiently stimulated new construction.