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.
Capped returns, reduced risk, WBS demand on tap
The rent cap of 6.50 to 8.00 euros per square metre limits returns compared to the open market. In exchange, loans of up to 64,000 euros per unit plus the 25 percent repayment grant reduce investment risk, and letting to WBS holders secures occupancy over long periods.
The revision answers years of mismatch in Berlin's market conditions. Demand for affordable housing has outstripped supply for years, while previous subsidy instruments did not sufficiently stimulate new construction.
