The housing situation is particularly tight in large cities and university towns due to increased demand for housing and rising rents and purchase prices. The proposed legislation is intended to incentivise investors to become more involved in the construction of affordable new rental housing.
In order to achieve this, on 3 February 2016, the German government presented a draft bill for a new Section 7b of the German Income Tax Act (EStG), which provides for a temporary special depreciation allowance on the acquisition or production costs of new rental flats. The special depreciation can be claimed in particular for the acquisition of new buildings and new condominiums as well as for the construction of new buildings. A further requirement is that the buildings must be used for residential purposes for at least ten years after acquisition or construction.
This is a special depreciation allowance for new buildings in precisely defined areas, limited to three years and with a declining balance.
Special depreciation can only be claimed under the following conditions:
- a building application must be submitted after 31 December 2015 and before 1 January 2019,
- the production or acquisition costs may not exceed €3,000 per square metre of living space and
- the new build must be in an assisted area. This includes regions with rent levels IV to VI in accordance with the Annex to Section 1 (3) of the Housing Benefit Ordinance or areas designated separately by the respective state government.
The assessment basis for the special depreciation is the acquisition or production cost of the subsidised investment, up to a maximum of €2,000/sqm. The maximum depreciation rate is 10% in the first two years of acquisition and 9% in the third year. The subsidy begins in the year of acquisition/production and ends after three years, but no later than 2022.
