Building Minister Klara Geywitz (SPD) has now presented a key issues paper for a new non-profit housing scheme (NWG). The idea behind it: If housing companies commit themselves to permanently low rents and forego returns, they receive tax incentives and investment subsidies.
Three options are now presented in the paper, because the project could “be implemented through different concepts and with different effects”. But economists are critical: the plans are very expensive, ineffective or even dangerous.
According to the plans of the Minister of Construction, housing companies would be transferred as a whole to the NWG or founded as NWG companies. This would go hand in hand with the permanent obligation to “rent at significantly lower prices”. Prices are assumed to be 20 percent below the local comparative rent.
Since the companies suffer financial disadvantages as a result, these should be offset by tax breaks and allowances. In return, companies could be exempted from corporation and trade tax and receive relief on property tax. The ministry is also considering an entry fee as an incentive to encourage housing companies to contribute inventory to the NWG in the first place. In addition, a new construction and investment subsidy is intended to serve as a financial incentive for expanding the portfolio in the NWG.
The Minister of Construction has now presented various options for the implementation of non-profit housing.
(Photo: IMAGO/Political Moments)
According to Michael Voigtländer, real estate expert at the employer-related Institute of German Economics (IW) in Cologne, this option means that previous municipal, private and cooperative companies would have to be enticed with considerable amounts of funding. The economist is convinced that if private companies are not otherwise in financial difficulties, the NWG would hardly be an option for them.
Significant compensations are necessary simply to bring rents permanently below the local comparative rent. After all, the increase in new contracts also serves to secure earnings for municipal and cooperative companies, especially in view of the rising costs for personnel and repairs.
The IW expert points out that the City of Vienna spends around 600 to 800 million euros a year on non-profit organizations. Austria’s capital is known for a high number of comparatively cheap apartments. However, the sum only relates to ongoing operations, at the beginning significantly more financial resources would have to be expended. “For the three cities of Hamburg, Munich and Berlin alone, you would be quick with annual costs of three billion euros,” calculates Voigtländer.
Tobias Just, Professor of Real Estate Economics at the University of Regensburg and Managing Director of the IREBS Real Estate Academy, criticizes a “silence in concrete terms”: Details on specific amounts, limit values, timetables and test mechanisms have not yet been given. The paper does not give any answers either.
Option 2: Tax relief
According to the ministry’s paper, this approach would be intended for companies with an “accented social orientation”. The NWG could be implemented within the existing tax law. For this purpose, the catalog of tax-privileged purposes in the Fiscal Code (AO) would be expanded. Then there would be a special “housing non-profit” purpose.
Economists are not yet convinced of the minister’s proposals.
(Photo: dpa)
There would be no allowances for the housing companies with this variant. They would be exempt from corporate and trade tax and receive relief on property tax. In the case of donations to the non-profit company, an exemption from inheritance and gift tax and tax deductibility would apply. The Geywitz paper is also considering further simplifications, such as the formation of revenue reserves in order to save funds for larger investments in new construction and renovation.
However, IW economist Voigtländer considers the group to which this model is aimed to be “very manageable”. What is meant are foundations, churches and others that have not yet had any profit intentions. “But the rules could make sense here, especially since no additional subsidies are promised,” says the expert.
Real estate expert Just considers the model to be “possibly the simplest way” since only one adjustment would be required within the existing tax code. He warns: “But be careful, the actual questions are still the same: When is this specifically worthy of funding and to what extent?”
Option 3: Flexible approach for companies
In the third variant, the housing company as a whole would not concentrate permanently and bindingly on renting at reduced prices. It would only be about a certain part of the company or certain apartments. For example, the company could commit itself in its statutes to renting out at least five to ten percent of its inventory for the benefit of the public. Only then would there be discounts. Targeted funding measures are also conceivable in order to “generate an economic incentive to participate,” the paper says.
IW real estate expert Voigtländer considers this proposal to be “particularly dangerous” because there is a risk “that companies will push unsaleable parts of their company into non-profit organizations and pass on the responsibility for undermanaged stocks to the community”.
Professor Just takes a similar view: How should it be prevented that companies outsource their “lemons” to a NWG portfolio and get rid of a problem caused by renovation with state subsidies, for example?
The conclusion of the economists:
IW economist Voigtländer is “very critical” of the NWG. The proposed ways are either “very expensive or ineffective”. Lots of things can be regulated with a lot of money, “but since money is also scarce in the federal budget, it can certainly be used better”.
For real estate economists Just there are two crucial reservations: the question of financing and whether EU state aid law would speak against an option. Both have not yet been checked. “When it comes to financing, doubts remain as to whether the FDP-led Ministry of Finance would be the driving force here – probably not,” says the professor.
For him, the question therefore arises as to whether it would not be easier to adjust the housing benefit. That would also involve more expenditure, but it would be easier to regulate in the existing system.
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