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Investors in the race for social housing: Funding is becoming scarce!
Investment manager Kingstone RE is planning to purchase 48 subsidized rental apartments in Weil am Rhein. Private investors are showing increasing interest in social housing through attractive subsidies.
Investors in the race for social housing: Funding is becoming scarce!
At a time when the housing market in Germany remains under pressure, socially supported housing projects are increasingly becoming the focus of private investors and institutional players. Kingstone Real Estate (Kingstone RE) recently announced the purchase of a residential building with 48 rental apartments in Weil am Rhein, which will be transferred to the “Kingstone Affordable Living Germany” fund upon completion at the end of 2026. This represents a significant step, as such apartments have so far been held primarily by municipal and cooperative companies. Private influence in publicly subsidized housing is constantly growing.
The CEO of BPD Immobilienentwicklung GmbH, Alexander Heinzmann, confirms this phenomenon by pointing to the increased interest of private investment managers in socially subsidized housing. Bonava also describes an increase in inquiries from family offices and foundations who increasingly want to invest in such projects. This development shows that socially subsidized housing is becoming more important not only from a social but also from a financial perspective.
Attractive returns and subsidies
Particularly noteworthy is the return that Kingstone RE offers investors: between 4 and 4.5 percent, while privately financed new apartments only bring up to 2 percentage points less. Thomas Meyer from Wertgrund Immobilien sees returns in the range of 2 to 3.5 percent for privately financed residential projects and highlights the attractive funding conditions in some federal states. These subsidies can in particular close the profitability gap caused by increased construction and capital costs, as Dr. Sören Gröbel from JLL explains.
In many federal states, including Bavaria and Baden-Württemberg, funding models are available that make new construction and renovation economically viable. The focus is on social rental housing, which represents one of the three pillars of real estate support. In this context, it is not surprising that interest in subsidized housing as an economically viable and socially sustainable investment is increasing.
Competition for funding
Association directors therefore call for long-term commitment to neighborhoods and warn against viewing subsidized apartments as investment properties in the short term. Alexander Rychter from VdW Rheinland Westphalia is in favor of a new approval system that focuses on the quality and social added value of the projects. Given the target of creating 430,000 new social housing units by 2035 and an existing deficit of over 900,000, the increasing pressure on funding calls for innovative solutions to be found.
Cooperations between private and public actors
In this context, successful collaborations between private players and municipal housing companies can also be observed. In Berlin, for example, private companies are developing subsidized housing for state-owned companies, which is seen as a positive example of fruitful cooperation. Florian Lanz from Laborgh Investment GmbH prefers to sell his projects to state-owned companies because he values their stability and positive social impact.
The prospects for socially subsidized housing could be lucrative not only economically, but also for private investors, especially given the ESG requirements, which further increase the attractiveness of this asset class. Investors are increasingly recognizing that socially supported housing is not only a requirement, but also a profitable and sustainable way to participate in the housing market.
Current developments clearly indicate that competition for funding in the social housing sector will increase. The focus is on the need for qualified and long-term investments in order to meet the challenges in the housing market. You can find more information on these topics at Haufe and Landlord Guide.