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In brief: how our concept works (German)

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The property sector is responsible for a third of Germany’s CO2 emissions. This makes extensive energy-related refurbishment the key lever to achieve the goal of a virtually climate-neutral housing stock by 2050. At present, however, only 1% of all buildings in Germany undergo energy-related modernization each year. The refurbishment rate would need to rise to 2.5% for Germany to meet its climate protection pledge.

However, this also requires citizens to get on board. In addition to the noise, dirt and restricted use involved in refurbishment itself, a charge known as the “modernization levy” usually results in rent rises, too. Many people therefore reject the measures out of fear that they will no longer be able to afford their homes.

Our proposal

The modernization levy of up to 8% of the costs should be partly covered by the Energy and Climate Fund (Energie- und Klimafonds, EKF). This special fund was set up by the federal government to support measures including climate protection.

Background

From 2021, emissions trading with pollution rights will be introduced for transport and property in Germany, in addition to existing schemes for the energy sector and energy-intensive industries as part of European emissions trading. This means that in the building sector, any business selling fuels such as heating oil, liquefied gas or natural gas must acquire certificates as pollution rights – in exchange for the CO2 emissions caused by the consumption of these substances. The costs involved are passed on to the consumer.

Compelling benefits

This CO2 pricing generates additional income for the Energy and Climate Fund. We believe these resources should be put back into the property sector – by having the EKF fund part of the apportionable refurbishment costs that tenants would otherwise need to cover themselves. In the first year, the EKF should cover the entire modernization levy of 8%. Over a period of 15 years, this support would taper off in a linear fashion, ensuring that tenants would only slowly begin to contribute to climate costs. At the same time, residents would benefit from lower energy consumption and improved quality of life from day one. We are also proposing the same level of support for owner-occupied property. 

We are convinced that this socially responsible concept will increase uptake of building refurbishment among tenants and owner-occupiers. In turn, this will give a major boost to energy-related refurbishment in Germany. Last but not least, this wave of refurbishments will generate additional orders for trades across the country worth up to EUR 22 billion. Ultimately, tenants and owner-occupiers will enjoy lower bills and better quality of life, and Germany will have more energy-efficient housing stock in the long term. 

In short, this benefits everyone involved – and Germany can make its pledged contribution to climate protection.

You will find more information on this concept in our policy document.

Public opinion poll on climate protection

In June 2020, market research institute Kantar TNS carried out a representative public opinion poll on climate protection on behalf of Deutsche Wohnen. The key findings are that Germans really care about climate protection, and a majority are also in favour of energy-related building refurbishment to protect the climate. However, the costs – for tenants and landlords alike – have been the biggest hurdle so far, and funding is seen as the shared responsibility of tenants, landlords and the state. Nevertheless, there is also a lack of awareness that housing stock plays a key role in achieving climate goals: only 2% of respondents were aware that this is responsible for around one third of the country’s CO2 emissions.

FAQ – We answer your questions

Germany set up a funding scheme to drive the energy transformation and climate protection back in 2011, in the form of the Energy and Climate Fund (Energie- und Klimafonds, EKF). This special fund is aimed at backing the federal government’s energy and climate policy measures. This “funding pot” mostly comes from federal government income from trading greenhouse gas emissions rights. 

Emissions trading will also be in place for transport and heating/property in Germany starting in 2021. Every company that brings heating and other fuels onto the market must stock up on pollution rights, known as CO2 certificates. The costs are passed on to the consumer through their utility bill. Income from the certificates sold goes to the EKF, not the government budget. This pot of funding can therefore be used to finance measures to reduce energy consumption.

According to the federal government, all additional income from CO2 pricing should be returned to citizens. Supposedly, the easiest way to do this would be simply to give money straight to citizens, such as through a citizen’s dividend. But that wouldn’t help the climate. Instead, the money should go to refurbishment measures that offer effective climate protection. Replacing heating systems and installing additional external insulation, for instance, make a huge contribution to reducing a building’s heat loss. Depending on the building type, this can help reduce end energy consumption by up to 58%. This reduces utility bills, which will also benefit citizens – tenants and owner-occupiers alike – in the long run.

Yes. In 2018, the EKF’s income was around EUR 2.56 billion. It also has reserves of around EUR 6 billion. Its annual income will also rise significantly from 2021, thanks to the introduction of CO2 pricing in transport and heating/property.
This contrasts with an annual maximum modernization levy of approximately EUR 2.37 billion for rental properties. For owner-occupied buildings, an estimated maximum EUR 1.93 billion is required each year. 

If low-uptake or expensive EKF subsidy programmes were phased out, this would free up around another EUR 3.2 billion – on top of the reserves and EKF’s regular annual income. Overall, that would be more than enough to cover investment in socially responsible energy-related refurbishment. There would still, of course, be enough financial wiggle room for other climate and energy policy measures.

The support is what is known as a “supply-side” subsidy. This means that support is available for the refurbishment of a house or apartment irrespective of who lives in it. Every tenant whose home receives an energy upgrade can therefore expect to get help with the modernization levy. Owner-occupiers benefit from similar support.

It is important to note that in the first year following refurbishment, the EKF covers the funding entirely. In the years that follow, residents will gradually begin to contribute to the modernization levy. However, they will also save money thanks to lower energy costs. 

To provide extra support for lower-income households in particular, Deutsche Wohnen will also uphold its tenant promise: going forward, no tenant will need to spend more than 30% of their net household income on warm rent following modernization.

Deutsche Wohnen is taking responsibility for climate protection. We need to act today, not tomorrow. The proposal isn’t about Deutsche Wohnen – it’s Deutsche Wohnen’s proposal for the entire industry. All user groups must be brought on board. That means it isn’t just a landlords’ proposal, either. It’s a proposal for tenants, owner-occupiers and investors alike.

The scheme does not involve any financial perks for landlords – including Deutsche Wohnen – in comparison with the current regulatory set-up. It won’t in the future, either. Deutsche Wohnen’s proposed programme isn’t designed to make it better off than other players on the residential property market. The programme’s aim is to help boost tenants’ acceptance of energy-related modernization with an improved process and combining affordable housing with climate protection. After all, only when we take socially responsible climate protection in existing housing stock and prevent users from being overwhelmed can we ensure acceptance of modernization and help Germany meet its climate goals on time.