Subsidies for renovation will be reduced

Subsidy programs for reorganization are touched: less Fölrderung for the individual, more for all

Who would like to redevelop its real estate, must count on clearly less subsidies. Although more money is to flow into comprehensive renovations and individual measures for greater energy efficiency overall, the responsible Federal Ministry of Economics has announced – in most individual cases, however, the direct support will be lower, in some cases considerably so. Depending on the planned renovation, this could mean thousands of euros less flowing to the owner. The fact that subsidies for refurbishment are being cut has to do with a predicted shortage of money: Nearly 10 billion in funding for redevelopment was approved from January to July 2022.

This is already almost twice as much as in the The federal government is now running out of steam: if things continue at this pace, the same scenario as for new construction subsidies at the beginning of 2022 looms, namely a complete halt to subsidies. The federal government now wants to counteract this.

New guidelines for subsidies for renovation

Altogether the requirement of the individual with the building reorganization is shortened. As reason for this shortening the Federal Government calls as reason, so that more real estate owners can get promotion and/or. so that the pot of subsidies will last longer.

In the future, there will be less money for individual measures, such as replacing windows or heating systems. Now it's clear: Renovators of old buildings will have to bring in more of their own money in the future. Those who had previously applied for a complete renovation received up to 75.000 euros grant. With immediate effect, only a maximum of 67.500 euros will be. For new windows it is currently a maximum of 15.000 euros, from the 15. August then only 12.000 euros.

In principle, all subsidy rates will be reduced by five to ten percent. In the case of complete renovations, on the other hand, there will be a switch to low-interest loans and repayment subsidies in view of the rising interest rates on building loans. This means that from as early as 28. July the new promotion for reorganization with the national promotion bank KfW. For individual measures in renovation such as window replacement, the new subsidy conditions for applications to the Federal Office of Economics and Export Control (BAFA) will apply from 15. August.

It is to be promoted altogether more

Sounds paradoxical at first glance: the individual subsidy rates fall. But the financial resources made available as subsidies for refurbishment are on the rise. Starting this year, the federal government plans to spend 14 billion euros per year on subsidies for efficient buildings. By way of comparison, around five billion euros were approved in 2020 and eight billion euros in 2021.

In the future, the focus will no longer be on subsidies for new construction, but on subsidies for refurbishment.
Up to 12 billion euros are then earmarked for this purpose. For new construction subsidies are then only one provided. The reason: according to the Ministry of Economics, the effect on energy savings and climate protection is 4.5 times higher for energy-efficient building renovation than for new construction.

New construction subsidies will be regulated at a later date

The subsidy for new buildings is still under discussion and is to take effect later from 2023 onwards. It is already clear that the promotion of new construction will be switched almost exclusively to low-interest loans. In addition, subsidies will be reduced to five percent. Building owners of new buildings will also have to provide more of their own funds for energy-saving measures.

Reorganization of the promotion programs is in full swing

As early as August 2022, KfW will provide significantly less funding for comprehensive refurbishment measures. If an old building was brought up to the standard of an efficient house, loans with repayment subsidies of between 25 and 50 percent of the loan amount were previously available. Now this subsidy will drop to values between five and 25 percent, depending on the efficiency standard achieved. The new installation of gas heating falls completely from the promotion programs.

However, there is an additional incentive if the existing property has particularly poor values (worst performing building) and is among the least efficient 25 percent of all buildings. In addition, KfW will no longer grant low-interest loans for individual measures and will also no longer pay out subsidies. In return, a significant interest rate reduction will be granted when taking out a loan.

New responsibilities of the BAFA for subsidies for redevelopment

From the 15. August 2022, the subsidy from the Federal Office of Economics and Export Control (Bafa) will also be changed. BAFA will then be solely responsible for all individual measures on buildings – z. B. if only the heating system is renewed or the windows are replaced. The maximum possible subsidies will also be reduced and gas heating systems will no longer be eligible.

Already the 3. Change in KFW guidelines this year

Thus in January suddenly all applications for the promotion program to the KfW 55 standard was stopped. The follow-up program for new KfW 40 houses was already closed in April after only three hours because of too high a flood of applications. According to the Ministry of Finance, 17 billion euros will be available from 2023 to promote more climate-friendly buildings, but only one billion of that is earmarked for new buildings. This is what the cabinet decided with the budget for the Climate and Transformation Fund. Here, the government assumes that for every tax euro used (in refurbishing old buildings), you get a more efficient CO₂ reduction than from new buildings. In 2021, the state had paid out six billion euros for the new construction of KfW 55 buildings alone. This subsidy program was also eliminated in favor of a subsidy for rehabilitation.

Uncertain times for subsidized construction financing loans and subsidies for refurbishment

Whether funding for rehabilitation or planning for new construction, the uncertain times are also affecting the financial planning of private households. A lot of energy can be saved, especially in the existing stock of more than 20 million buildings in Germany. Almost half of all households are heated with gas. A number of new savings requirements have already been announced for this, including a mandatory "heating check" for all gas heating systems by spring 2024. This increases the pressure on owners of existing properties to invest in energy-efficient refurbishment. Climate protection also plays a role. For years, experts have been warning that the stock must be adjusted to efficiency much faster if Germany is to be climate-neutral by 2045.

From this perspective, owners:inside of old buildings as well as prospective new builders are now required to consistently deal with financing planning in order to be able to react quickly to implement necessary energetic measures. As it looks currently, subsidies for renovation and new construction will be adjusted in the future again and again to the financial possibilities of the state. And in the future it is more likely that they will be reduced than extended. Particularly in the case of complete refurbishment projects, which in addition to grants and KfW loans also rely on traditional construction financing – z. B. If you are dependent on an annuity loan – a scenario that often occurs when buying an existing property – flexible and rapid action is currently advisable.

New building subsidy with a KfW loan including repayment subsidy becomes more complex. What you need to know before you decide.

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