Merkel proposes property tax reform to battle rising rents, reveals €5B social housing funding

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Chancellor Angela Merkel said Friday that incentivizing private investors to build homes was crucial to solving Germany’s housing shortage, as many cities grapple with rapidly rising rents.

State support alone could not solve the scarcity, Merkel said at the German Tenants’ Association (DMB) gathering in Cologne. “Instead we must create an atmosphere where people want to build.”

Franz-Georg Rips, the head of the DMB, recently called for urgent measures to make housing more affordable and warned that tenants are losing faith in the government’s ability to tackle rent rises.

The debate over the cost of accommodation in many German cities has intensified in recent months, triggering large protests in Berlin and Munich, among others.

Chancellor Merkel noted that lack of affordable housing is a problem throughout Europe. She said that the German government will set aside an additional 5 billion euro funding for 350,000 social housing units, which brought the total public funds spared for the issue to 13 billion euros.

Merkel said the state needed to do more than in the past to ensure the housing stock, but that investment in housing needed to remain an “interesting” prospect.

One suggestion from the chancellor, who belongs to the center-right Christian Democratic Union (CDU), was reform of property tax, frequently cited as an off-putting cost for home-builders.

But a leading figure from Merkel’s junior coalition partners, the Social Democrats (SPD), proposed a different tack on Friday, calling for a national rent cap.

The policy’s aim would be to stop rents from increasing further in highly sought-after areas, Thorsten Schaefer-Guembel, one of three provisional leaders of the center-left party, told the Tagesspiegel newspaper.

“This would give us time to build, build and build even more,” Schaefer-Guembel added, saying he wanted to relieve some of the pressure in the rental market.

“The aim must be that people don’t spend more than a third of their income on rent,” Schaefer-Guembel added.

According to a study by urban planning specialist Andrej Holm from Humboldt University, rents in existing contracts rose 11.4 percent between 2013 and 2018. The study evaluated living costs in more than 300 towns and cities.

In Berlin, campaigners have been calling in recent months for the expropriation of assets of property firms with more than 3,000 dwellings and nearly 250,000 apartments worth billions from corporate owners.

The “Deutsche Wohnen und Co Enteignen” campaign, which wants to see these housing units taken over for public benefit, told dpa on Friday it had handed over a petition for a city referendum on the matter.

The initiative said it had collected 77,000 signatures since April. The minimum threshold for a referendum is 20,000. The proposal will now go to the Berlin state government for legal consideration before the matter can be put to a vote.

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