For real estate developers and private home builders, the week begins with the worst possible news: On Monday, the federal government stopped most of the federal funding programs for efficient buildings, BEG for short, with immediate effect.

According to the Ministry for Economic Affairs and Climate Protection, the background is a veritable "flood of applications" in January.

The ministry of Robert Habeck (Greens) attributes this to the fact that the grand coalition only announced in November 2021 that it would end funding for new buildings according to the KfW efficiency standard 55 at the end of January.

The result was a "run" on these funds.

With these applications alone, the 5 billion euros available at KfW have already been exhausted.

Julia Loehr

Business correspondent in Berlin.

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The KfW subsidies for new buildings according to the even more economical Efficiency Standard 40 have dried up for the time being, as have the subsidies for comprehensive energy-related renovations. Now the traffic light coalition wants to quickly discuss a realignment of the funding policy. It is not yet clear when the details will be known. Only this much: In the future, subsidies should be used in a targeted manner where the CO2 savings are greatest, said Secretary of State for Energy Patrick Graichen. In the building sector, this is particularly the case with renovation measures. "We are currently funding the wrong thing, and this money is then not available for actually effective climate protection measures, for example for the very important building renovation."

The efficiency house classification of the state development bank KfW is the standard for numerous development programs in Germany.

The EH55 standard states that the building consumes only 55 percent of the energy required by a standard house that only meets the requirements of the Building Energy Act (GEG).

In the coalition agreement, the SPD, Greens and FDP agreed that significantly stricter requirements should apply from January 2025.

Then the standards laid down in the Building Energy Act are to be "aligned" with the criteria of the KfW Efficiency House 40.

In other words, new buildings should only use 40 percent of the energy of today's standard house.

criticism of the previous government

The ministry justified the provisional funding freeze with criticism of the previous government, which was unusually clear by Berlin standards. One is reacting “to a massive climate policy and fiscal mismanagement in recent years,” write Habeck’s employees. "Necessary adjustments have not been made in recent years." The Efficiency House 55 standard has long since established itself as the standard in new buildings. "In 2021, 6 billion euros in tax money - and thus around a third of the total funds available for building efficiency promotion in 2021 - were promised for a building standard that had long since established itself on the market."

What is not mentioned in the corresponding communication: The fact that so many buildings were recently built according to the EH50 standard was largely due to the fact that there was funding for it.

Now the construction industry feels deceived - and threatens that nothing will happen with the new traffic light plans.

"The sudden stop of the BEG funding means an emergency stop in climate protection in the building sector," said Axel Gedaschko, President of the Association of the Housing Industry (GdW).

He warned that real estate companies could now refrain from building projects that have already been applied for.

There is already a so-called construction backlog of around 800,000 apartments in Germany that have already been approved but have not yet been built.

Construction costs are likely to continue to rise

The goal of the new government to initiate the construction of 400,000 new apartments per year is not fundamentally in question with the funding freeze. However, if new buildings are only subsidized to a limited extent and only if they meet the strictest energy saving targets, construction costs are likely to increase further, with corresponding consequences for purchase prices and rents. "We now need planning security quickly and at least medium-term requirements and funding programs," said Felix Pakleppa, General Manager of the Central Association of the German Construction Industry.

It remains to be seen what will happen to applications for funding for new buildings that have already been submitted but not yet approved.

According to Habeck's fundamental criticism, it is unlikely that additional money will be made available for this purpose.

The Ministry of Economic Affairs writes that a loan program for private builders whose applications have not been approved is currently being examined.

In September, Habeck's predecessor Peter Altmaier (CDU) almost doubled the funds for the "immediate program for buildings" by 5.7 to 11.5 billion euros.

At the time, he was still talking about “money well invested” for climate protection.

Property owners can still benefit from at least one point: The Federal Office for Export Control (BAFA) implemented funding for individual renovation measures, such as replacing a heating system, should continue.