Families in need: How the federal government wants to promote home ownership!

Families in need: How the federal government wants to promote home ownership!

The head of the Association of Private Building Societies, Bernd Hertweck, is calling for comprehensive financial resources from the federal government to promote home ownership for families. In the debate about supporting families, he refers to the previous building child benefit, which was offered from September 2018 to the end of 2022. This program provided annual funding of between 8 and 12 billion euros and supported more than 175,000 families, with each family receiving a grant of 1,200 euros per year for each child over ten years, for a total of up to 12,000 euros. On average, each family received a payout of around 20,000 euros.

Looking to the future, Hertweck emphasizes that the new “start-up home ownership assistance” was agreed upon in the coalition agreement between the CDU, CSU and SPD. This support includes not only tax measures, but also help if you lack equity capital. The provision of state guarantees for mortgages is also being considered. Another central point in Hertweck's demands is the abolition of real estate transfer tax on the first purchase of owner-occupied residential property in order to stimulate the construction industry. This step is overdue, particularly for purchase prices of up to 500,000 euros, especially since income from property transfer tax is already falling due to the current low level of construction activity.

New support program for home ownership

Parallel to the building child benefit, the KfW Bank’s “Home Ownership for Families” (WEF) support program was launched on March 1, 2024. This program offers a 20-year fixed interest rate, which is a significant improvement over the previous model, which required the interest rate on loans to be renegotiated after a maximum of ten years. With an interest rate of 1.25 percent over a term of 35 years (ten-year interest rate fixation), the program is intended to increase the home ownership rate and provide low-interest loans. The minimum term of the loan agreement is four years.

The program offers various term options, including 25 and 35 years with grace-free start-up years. On October 16, 2023, further improvements to the conditions for home ownership support were introduced. The income limit for a family with one child was raised from 60,000 euros to 90,000 euros, which increases by 10,000 euros for each additional child. The maximum loan amounts can also increase by up to 35,000 euros.

Focus on climate-friendly construction

A crucial aspect of the WEF program is the focus on climate-friendly construction. Only new buildings or first-time purchases of residential buildings that have a low CO2 footprint over their entire life cycle and meet the energy standard of an Efficiency House 40 (EH 40) are eligible for funding. Private individuals who want to build or buy such eligible residential property for their own use are eligible to apply.

The funding takes place as project funding in the form of low-interest loans and covers all expenses for the building, specialist planning, construction support and material costs if you contribute your own work. However, it should be noted that the Baukindergeld, which has provided a total of 9.9 billion euros since its introduction in 2018, was discontinued on December 31, 2022. However, the federal government has announced a new funding program called “Young Buys Old” that is intended to promote the acquisition of existing buildings in need of renovation for the years 2024 and 2025.

The developments surrounding the promotion of home ownership show that both new programs and adjustments to existing measures are necessary to support families with the housing issue. The increasing demands on home ownership and the increasing financial burdens require a rethink in the promotion and support of families in order to increase the home ownership rate in the long term.

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