New Property Laws and How they Affect You

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In some cities the rising rents and scarce living space have become a massive problem. The government has decided to intervene in this matter and in the coalition talks between the CSU and SPD the parties involved agreed on a “package for affordable housing and living space”. The following is the outcome:

Cap on rental property prices

For the first time prices for rentals property will be capped. The new regulations stipulate that the landlord can only increase that rent to a maximum of 10% whenever he gets a new tenant but this increment should not exceed the current rent chargeable in that area where his property is situated. This is in a bid to help out tenants in large cities  and university towns who are currently paying 30%-40% more than the average rent in those regions. This will help keep the rents stable because they will be rising more slowly.  Currently rents increase at 15% every three years.

The catch: These rules do not apply nationwide, but are to be implemented by the federal states. These states are free to determine if they would like to implement these rent capping regulations.

Agents’ fee

A particularly big annoyance among tenants is that they have to pay the agents although he is usually engaged by the landlord. In the future agents will have to be paid by whoever engages them. It is expected that fewer landlords will engage agents in the future as a result of this law. In addition there could be increased competition among the agents as they try to look for contracts.

The catch: If the landlords cannot increase the rents as they wish and also have to look for tenants they might be tempted to pick up the money in other ways as compensation.

Housing benefits

The house heating allowance for housing benefit recipients which was abolished in 2011 will be reintroduced.

The catch: This proposed reintroduction will a cost around 250 million euros and like like any other proposals it is subject to availability finances.

Energy efficiency renovations

For energy efficient renovations landlord in future will only pass on 10% of the renovation costs to the tenant as compared to the current 11%.  In return it will be easier for the landlord to deduct these costs from tax payable.Also the state building renovation program of the KfW- bank will increase the funds available for landlords for purpose of renovations.

The catch: The less the landlord can pass on renovation costs to tenants the less incentive there is to invest in energy efficient renovations. If landlords get tax concessions or subsidies from the state for renovations this will be at the expense of taxpayers.

Housing

It is suggested that to solve the problem of affordable accomodation the construction of housing should be encouraged by the use of tax incentives. Investments in housing should be supported by them tax deductible over the so-called declining balance depreciation in the early years. However, the details of how such a procedure should look like are yet to be negotiated.

The catch: Critics say that these new housing incentives were ineffective as it is hard to determine whether more affordable housing will be developed and that preference will not be the construction of high end apartments.

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