Waiting for the new funding

In January 2022, there was great outrage among companies building apartments in Germany. Axel Gedaschko, the president of the GdW Bundesverband deutscher Wohnungs- und Immobilienunternehmen (Federal Association of German Housing and Real Estate Companies), spoke of a "disastrous signal for the German government's climate and housing construction goals," while Andreas Mattner, the president of the Zentraler Immobilien Ausschuss (ZIA) (Central Real Estate Committee), stated a "rabbit punch" for energy-efficient construction.

The reason for the dismay was the abrupt halt announced on January 24 in the subsidies that the state development bank KfW provides for the construction of energy-efficient buildings. And that was by no means the only upset that the German Federal Ministry for Economic Affairs and Climate Protection has caused the real estate industry in recent months. Because in the course of the year, further short-term changes to the federal subsidy for efficient buildings (BEG) followed, as well as the announcement of a fundamental realignment of the subsidy for new construction from 2023. How the subsidy for energy-efficient new construction will be structured from 2023 onwards has only been determined in broad outline.

However, the real estate industry is convinced that one thing is already certain: the funding chaos is slowing down residential construction and causing the goal proclaimed by the German government of building 400,000 homes a year to become a distant prospect. To illustrate the point: No less than 23 percent of GdW member companies already declared after the first funding freeze that they would have to cancel their new construction plans completely.

The next chapter in the funding tangle followed in the spring: on April 20, a new funding program endowed with one billion euros was launched, which only benefited construction projects with the 40 efficiency house standard. Previously, building projects in the less demanding efficiency house standard 55 had also been subsidized. This was no longer necessary, argued the Federal Ministry of Economics, as this standard was established on the market and would in future represent the legal minimum in new construction.

And then it happened again: after just a few hours, the financial framework was exhausted, and KfW again announced an immediate funding freeze, but not without announcing an immediately subsequent program. Since then, building owners who want to receive money from the state must not only comply with the Efficiency House 40 standard, but also apply to a certification body for the Sustainable Building Quality Seal (QNG). This seal takes into account numerous different criteria, including the recyclability of the building structure and the extent of greenhouse gas emissions.

But this subsidy program, which will run until the end of 2022, is not going down well with project developers and property developers. According to a survey conducted by the Federal Association of Independent Real Estate and Housing Companies (BFW) among its members in the summer, only six percent of the companies want to claim the new subsidy. This is therefore "completely unattractive and ineffective," criticizes BFW President Dirk Salewski.

On the other hand, a spokeswoman for the Federal Ministry of Economics says that the new subsidy has been "well received on the market". According to her, KfW approved a good 1,100 applications with a volume of around 340 million euros between April 21 and the end of October. However, considering that the one billion euros of the predecessor program were used up within hours, this is a comparatively modest sum.

What is clear is that from January onward, the Federal Ministry of Housing, Urban Development and Construction will no longer be responsible for new construction funding, but rather the Ministry of Economics. "The funding system is currently being worked out," says a spokeswoman for the Federal Ministry of Construction. "The individual details of the funding conditions cannot be announced until the funding guidelines have been finalized." According to the spokeswoman, the new "climate-friendly construction" funding program is to start in the first half of 2023.

After all, some key points have already been set. In particular, the greenhouse gas emissions in the entire life cycle of the building are to be the focus in the future. The funding is therefore to be oriented not only to how much energy a building consumes in operation, but also to how much energy is used for its construction (the so-called gray energy). "Against the backdrop of climate policy goals, it is indisputable that the entire environmental impact of buildings must be taken into account," says the spokeswoman for the Federal Ministry of Building. The Sustainable Building Quality Seal will continue to play an important role in the new funding. The funding is to be issued in the form of development loans.

In addition to the criticism from the real estate industry, there is at least one voice that is positive about the change in subsidy policy. The German Sustainable Building Council (DGNB), to which numerous real estate companies also belong, expressly welcomes the focus on the life cycle. It points out that an energy-efficient building today generates more than half of its CO2 emissions during production. Fifty years ago, it accounted for only 20 percent, according to the DNGB. "Gray emissions," says the DGNB, "are simply no longer negligible if you're aiming for a climate-neutral society."

For GdW President Axel Gedaschko, however, another point is paramount: "If affordable housing for the middle of the population is to be created at all, effective funding is more urgent than ever."

By Christian Hunziker. Christian Hunziker is a freelance journalist specializing in real estate topics.