German Election #4: Real estate and rental policies

On 23 February 2025, almost 60 million German voters will elect a new federal parliament in snap elections after the collapse of the governing coalition of Chancellor Olaf Scholz's Social Democrats (SPD) with the Greens (B90/Die Grünen) and the Liberals (FDP) in November 2024. A change of government with the participation of the Conservatives (CDU/CSU) and their lead candidate for Chancellor, Friedrich Merz, seems likely. In addition, a spin-off of the Left Party (BSW) will be a new party on the ballot, which has already entered government coalitions in two federal states. Polls show that the AfD will likely emerge from the elections as the strongest opposition party. All other parties have indicated not to enter a coalition with the right-wing party. Irrespective of who wins, a change in the political majorities in Germany is to be expected, which will also have an impact on European and international politics. Freshfields has the latest developments and positioning in view. In this article, we will focus on the parties’ real estate and rental policies.

Key takeaways from the party manifestos on real estate and rental policies

1. It is to be expected that the level of rents in Germany will continue to be regulated in the future, at least regionally, due to an almost cross-party consensus. Only the liberal FDP explicitly favours abolishing rent control measures such as the rent brake.
2. Bureaucratic hurdles in residential construction are identified as a problem across party lines. The expansion of existing properties and the reduction of bureaucracy in construction and planning are being pushed as a countermeasure.

Different stances on rent control

Various OECD countries have regulations in place to control the level of rents. In Germany, the debate on statutory rent control is being conducted under the buzzwords rent brake (Mietpreisbremse) and rent cap (Mietendeckel). In this context, sections 556d et seq. of the German Civil Code (Bürgerliches Gesetzbuch – BGB) play a prominent role in federal law. These provisions empower federal states to designate regions experiencing housing market pressures, thereby regulating rental prices within these areas, setting a maximum threshold of 10% above the local comparative rent. The initial introduction of these federal regulations was temporary, and in 2020, the law was extended to 2025, thereby consolidating and enhancing the rent control framework. 

The phasing out of the rent brake is accompanied by different demands from the parties. The CDU/CSU remains vague on the issue of the rent cap, saying that effective and appropriate protection of tenants is needed through regulations on the level of rents. The Greens advocate a regional rent cap in areas experiencing high demand. The SPD along with the Greens support the extension of the rent brake and are calling for adjustments to the calculation of comparative rent and the upper limit to make them more tenant-friendly. In this context, the Socialist also call for a maximum rent increase of 6% over three years compared to the local comparative rent and that index-linked rental contracts be based on the development of the net cold rent instead of the inflation rate as before. The FDP wants to retain graduated and index-linked rental contracts in their current form. They reject instruments of rent control and rent caps altogether and are calling for a balanced regulation between tenants and landlords, as well as a simplification of the law on operating costs.

Simplifying the acquisition of housing property

There is cross-party agreement that more measures must be taken to enable more people to access the housing market. The Greens want to reduce estate agent and notary fees, while the SPD wants to strengthen local models and concept tenders for the designation of building land. The FDP wants to make company pension funds usable for home ownership, following the Swiss model. The Greens and BSW propose modifications to the existing share deal provisions.

Facilitating and reducing costs for construction

The parties agree on the need to reduce bureaucratic requirements in order to lower construction costs and planning times. The CDU/CSU, Greens and FDP want to promote the expansion of existing properties by adding storeys or converting them. The CDU/CSU, for instance, proposes a tax deduction for energy-efficient renovations. The party also intends to advance the „building type E“ (Gebäudetyp E) standard as a model for low-cost construction, as well as the SPD and FDP. Serial construction in new residential projects is advocated in various manifestos.

Outlook

The political debate on rental and construction policy in this election campaign mainly focuses on the same topics as in previous campaigns. In the near future, the legislature will address the question of extending the rent brake, and in this context, existing exceptions for furnished apartments and short-term rentals would need a prolongation by the end of 2025. Among the new ideas are the CDU/CSU‘s proposal to make energy-efficient renovations tax deductible for inheritance and gift tax purposes. On the intersection of housing and energy policies, the debates around the German heating law will be a crucial debate for the further path of decarbonising the housing sector. Read more about the parties’ positions in our energy briefing on the 2025 German elections.

This blog post is part of our German Election Supercycle series.

Co-Author: Leon Köhler, Public Affairs Germany research assistant