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EXPLAINED: Munich’s radical new approach to solving the housing crisis

Bavaria's biggest city has a dearth of inexpensive rental properties, but the city coalition government has come up with a radical plan to change that. Here's what you need to know.

EXPLAINED: Munich's radical new approach to solving the housing crisis
The pressure on Munich's housing market has meant that even the remotest suburbs of the city are becoming pricey. Photo: picture alliance/dpa | Sina Schuldt

What’s going on?

Munich’s city council plans to bring a new law into force in August to ensure that the vast majority of newly built properties are rental properties, according to a report by regional broadcaster RB24.

The council, which is run by a coalition of Green Party and Social Democratic Party (SDP) councillors, also wants to ensure that a large proportion of these rental properties offer affordable rents of between €10-15 per square meter – a vast improvement on the current €17 square metre average flat price.

To achieve this, the so-called Green-Red coalition will put in place what RB24 have termed a “complex points system… with multiple components”. 

When a housing construction firm or investor applies for planning permission, the council will award them points based on a number of different factors. 

These include the proportion of subsidised apartments, the proportion of rental apartments, a 40-year commitment period, the infrastructure fee, the proportion of building land sold to the city and the proportion of building land sold to cooperatives.

The more affordable and rental homes they promise to build, the more points they are awarded – with 100 points being the minimum requirement for a green light to build. 

In addition, developers will be encouraged to sell off some of their land to the council or housing co-operatives.

A Munich housing co-operative. Co-op houses will remain an important part of the city’s affordable housing policy. Photo: picture alliance/dpa | Sven Hoppe

READ ALSO: German housing co-ops: What are they and how do I sign up?

What are they trying to achieve?

With the new system in place, the council thinks they’ll be able to have a much greater influence over the type of homes being build in the city, which it hopes to push heavily in the direction of rentals that people can afford.

In order to secure planning permission and make a profit, the council estimates that developers will generally opt to build around 80 percent rental properties, of which 60 percent will be social or low-cost housing.

If four in five new properties built in the Bavarian capital are rentals, this would set the city apart from everywhere else in Germany, the council claims. 

Ok, but why is this even necessary?

Housing prices have been soaring in Munich in recent years, while the stock of rental flats has increasingly declined. 

While in 2008, the average price of a rental apartment was €10 per square meter, this had shot up to €17 per square meter in 2020. And though the city lost its title of ‘most expensive German city’ for the first time in two decades in 2018 (it’s now Stuttgart), the city and four of its suburbs continue to feature in the top 10 most expensive rental areas.

READ MORE: Housing: How did it get so expensive to live in Munich? 

Though population growth and interest rate stagnation have played a role in this, there have also been mass sell-offs of rent-controlled apartments to private investors, which has naturally contributed to the scarcity of affordable flats in the city.

Now, the Greens and SDP want to rectify this. 

Doesn’t Munich already have strict planning laws in place?

It does – although the new plans are far more ambitious than their predecessors.

Munich’s existing law – Socially Just Land Use (or SoBoN for short) – also relates to how property developers are awarded planning permission and has been in place since 1994.

Whenever an investor wants to build a big apartment block, for example, they’re expected to pay a surcharge per square metre that can be used for social projects in the city that benefit the greater good, like social housing or a daycare centre. 

READ ALSO: It’s not impossible: How to find housing in Munich

In recent years, this surcharge has been €100 per square metre, and since 2017, investors have had to include a 40 percent quota of rental flats in each of their developments.

From August, however, the council wants to implement a new version of SoBoN which will pull in an average of €175 per square metre from developers and double the rental property quota to 80 percent of a development. 

That’s quite a big change – what are the developers saying?

As you might expect, the developers don’t seem thrilled by the prospect of the additional costs and regulatory burdens.

Speaking to BR24, Patrick Slapal, the CEO of the Bavarian branch of Federal Association of Independent Real Estate and Housing Companies (BFW), said the plans would create a “bureaucratic nightmare” that would “hinder the construction of affordable properties”.

The latest version of SoBoN, which came into force in 2017, was meant to last at least a decade, but is now being replaced after four years, he added. 

The BFW – which represents medium-sized housing developers – plans to conduct a study to assess the scale of the damage that the new requirements and costs may do to this type of business.

What are the SPD and the Greens saying?

In a press release on the reforms, Christian Müller, head of Munich’s SPD fraction, called the move a “quantum leap” that would benefit “all citizens”.

“We’ll achieve many more affordable apartments – and above all apartments that offer long-term security – so that Munich remains a city for everyone, not just for people who are high-earners.”  

Their coalition partner, the Greens, also had high hopes for the new planning system.

“The new SoBoN is not simply a continuation, but an innovative approach that combines its goals – more subsidised housing, significantly more rental housing and longer commitments – in a points-based system,” said Green Party fraction leader Anna Hanusch.

“We’re implementing our goal of transferring up to 50 percent of the space to the city not as a mandatory requirement, but rather providing strong incentives [to do so]. That’s how are securing affordable, subsidised living space for urban society in the long term, despite fairly empty coffers.”

Have other political parties weighed in on this?

The Christian Social Union (CSU) – the Bavarian sister party to Merkel’s Christian Democratic Union (CDU) – joined the developers in criticising the plans. 

The move is likely to scare off the exact developers who have been responsible for building 90 percent of affordable housing in the city in recent years, they said.  

Haven’t other cities tried to make housing more housing affordable?

Yes, it’s a big battleground in German cities. Berlin brought in a five-year rent freeze in 2020, but it was, infamously, deemed null and void by the federal constitutional court in April this year. It led to tens of thousands of Berlin tenants facing immediate price hikes on their rent and back payments, often costing thousands of euros. 

READ ALSO: ‘Stressed and depressed’: How Berlin’s rent cap fiasco has affected foreign tenants

Now a grassroots group with the aim of trying to socialise homes belonging to large landlords has gained massive support. The “Expropriate Deutsche Wohnen & Co.” initiative managed to get enough signatures to hold a referendum. Berliners will vote later this year on whether to force major property companies to sell thousands of their flats to the city. 

Member comments

  1. The new planning law in Munich is not particularly radical. Local authorities across Europe use similar mechanisms to extract ‘planning gain’ across development sites. It may be straight forward social benefits. This happens in the UK but there has to be clear relationship to the development, typically transport infrastructure. Also local authorities tie in mechanisms to extract a substantial proportion of social housing. In the UK this was typically a percentage of ‘affordable housing’ , but percentages of large and small units can also be applied. In countries like the Netherlands, Councils often make sure they keep land ownership whilst the new build is leased out. This way they can enforce greater control of rents.

    Of course developers supported by politicians, such as the CDU/CSU in Munich, will argue that such policies or controls will dissuade developers from developing. But the bottom line in somewhere like Munich, is that everyone knows there is a massive demand for housing. Ultimately, the laws of demand and supply decide.

  2. The main problem is that NOT SINGLE ONE of the German parties has a plan do create “Affordable housing”. The state should build apartments for regular families (with average income) for normal price.
    Currently – developers are building new apartments for investors mainly – the new apartments are too expensive for the most of the german citizens / residents.
    But currently – no political party seems to care about providing affordable housing for the majority of its people. The politicians seem to only care about deep pocket investors … they do not think about regular families…

  3. Basic math says that assuming a reasonable 3% yield you need to be able to build a 100 sqr mtr apartment for around 400,000. So with property averaging twice that it will always be a challenge. Of course the other thing is building standards and general inflation means the cost of building has dramatically increased in the last decade.

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For members


Wohngeld: How people in Germany can get help with rising living costs

Many households in Germany could be eligible for increased financial support with their rents and bills from next year. We break down who should apply and how much help they could receive.

Wohngeld: How people in Germany can get help with rising living costs

The cost of living is rising across the board, and nowhere is this being felt more than in the home. For over a year, gas and electricity bills have been soaring and people on low incomes have been left wondering how to make ends meet.

While there is support available for people in this situation, it seems that many households in Germany aren’t aware that they could be eligible to apply for Wohngeld, or housing allowance, to help them with their expenses. What’s more, the amount of money people can get is set to rise at the start of next year.

Here’s what you need to know.

What exactly is Wohngeld?

Wohngeld, or housing allowance, is a form of financial aid for low-income households in Germany. It’s intended to help with the general costs associated with housing, such as monthly rents and utility bills.

Even people who own their own homes are able to get support with their mortgage repayments and building management costs (known as Hausgeld). However, they do have to fulfil certain criteria, like earning under a certain amount per month.

Unlike long-term unemployment benefit, which also includes a stipend for rent and bills, Wohngeld is intended for people who don’t rely on any other form of state support. That could include single parents or people with minimum wage jobs who spend a large proportion of their income on rent.

It means that people on jobseekers’ allowance and students with state loans and grants aren’t able to apply for Wohngeld. 


How much money can people receive?

That depends on a range of factors such as where you live, how high your rent is and how much money you earn this month. However, one thing that’s clear is that Wohngeld is likely to rise significantly at the start of next year.

On Wednesday, cabinet ministers voted through proposals from Housing Minister Klara Geywitz (SPD) to hike the monthly allowance by around €190 on average. That means that instead of receiving €177 per month, the average household on Wohngeld will receive around €370 per month starting in January. 

It’s worth noting that Geywitz’s reforms still need to clear a vote in the Bundestag, but with the governing coalition of the SPD, Greens and FDP behind the move, it’s likely that they will. 

The Housing Ministry has also put together an online tool that can calculate the amount of Wohngeld each household is entitled to. At the moment, this still calculates the allowance based on the current rates – but it will be updated if the reforms are passed by parliament. 

Who’s eligible for Wohngeld?

That depends on a complex calculation based on factors such as income, the number of people in a household, the size and location of the property and how high monthly housing expenses are. There’s no straightforward income threshold that people can refer to, which could explain why thousands of households who could potentially get Wohngeld never apply for it.

The best way to check if you’re currently eligible is to use the government’s Wohngeld calculator tool. But as we mentioned above, this is still based on the current criteria and monthly rates. 

As well as hiking the monthly allowance, Geywitz also wants to expand the criteria so more households are eligible for Wohngeld.

At the moment, around 600,000 households in Germany receive Wohngeld. This could increase by 1.4 million to two million under Geywitz’s plans. From next year, people earning minimum wage and people on low pensions are set to be among those who are able to apply. 

READ ALSO: EXPLAINED: When should I turn on my heating in Germany this year?

Sound good – where do I sign up?

In general, the states and municipalities are responsible for handling Wohngeld applications. That means you should apply at the local Wohngeldamt (housing allowance office), Wohnungsamt (housing office) or Bürgeramt (citizens’ office) in your district or city. 

If you’re unsure where to go, searching for ‘Wohngeld beantragen’ (apply for housing allowance) and the name of your city or area should pull up some search results that can guide you further. 

Apartment blocks in Berlin Marzahn.

Apartment blocks in Berlin Marzahn. Photo: picture alliance / Matthias Balk/dpa | Matthias Balk

Alongside an application form, you’ll likely have to submit a tenancy agreement, ID, information on your residence rights and proof of any income or state support you already receive. Other members of your household may also have to submit similar financial information. 

You should also be registered at the address you’re applying for Wohngeld for. 

READ ALSO: Germany to spend €200 billion to cap soaring energy costs

Are there any other changes to Wohngeld I should know about?

Anyone already on Wohngeld, or who receives it between September and December this year, is also entitled to a special heating allowance to help with winter energy costs. This is also set to be given to students and trainees receiving a BAföG loan or grant.

For students and trainees, the heating allowance is set at €345 per person. Meanwhile, the amount given to Wohngeld recipients will vary on the size of the household.

Single-person households will receive €415, two-person households will get €540 and there will be an additional €100 per person for larger households. 

This is likely to paid out in January.