The German government announced on Monday that it is postponing proposed building regulations as part of a 45-billion-euro ($47 billion) relief package aimed at bolstering the struggling construction industry, which has been hit hard by high-interest rates and increasing costs.
Berlin intends to allocate 18 billion euros for affordable housing until 2027, with additional funding to be provided by federal states and municipalities.
Chancellor Olaf Scholz emphasized the need for a significant expansion in housing construction, stating, they must massively increase their efforts in housing construction. More affordable housing is required.
The government’s plans to implement stricter building insulation standards have been put on hold indefinitely, a move sought by the industry, citing the expenses associated with these measures.
Furthermore, the government expressed opposition to new proposed European Union legislation that could mandate upgrades to millions of buildings through methods such as insulation or efficient heating systems. Critics of the law are concerned about the financial burden it may impose on both the government and homeowners.
After years of low-interest rates fueling a property boom in Germany, a rapid increase in rates has led to a downturn, resulting in insolvencies among developers and a decline in property prices. In fact, government data showed that German housing prices experienced their sharpest decline on record in the second quarter.
Felix Pakleppa, head of the Central Association of the German Construction Industry, welcomed the government’s recognition of the seriousness of the housing market situation and called for prompt implementation of the announced measures.
Additionally, the government plans to incentivize the conversion of vacant offices and shops into residential units with 480 million euros over the next two years, potentially creating 235,000 new apartments.
Construction Minister Klara Geywitz highlighted the impact of this funding, stating that with their new funding, more people will have the opportunity to purchase a house, whether it’s existing or new.
The government is also introducing measures such as extending a “speed bonus” to support environmentally friendly heating installations and increasing the subsidy amount from 20% to 25% for renovating heating systems. These initiatives aim to provide liquidity to the construction sector, according to the German Construction Industry Association. Tim-Oliver Mueller, the association’s chief executive, emphasized the need for incentives for investment rather than subsidies.
