Pulling in different directions: Germany's 2026 real estate reforms

Germany's new coalition government has spent its first months in office reshaping the legal framework for real estate. The picture is varied: some initiatives aim to unlock construction and investment, while others introduce additional requirements for residential landlords. For international investors, this means both opportunity and points to watch. This article offers a high-level overview of the most significant developments.

Opening the door to energy and infrastructure investments

The Standortfördergesetz (Location Promotion Act), in force since 10 February 2026, is designed to strengthen Germany's competitiveness as a financial centre. For the real estate sector, its most relevant feature is a set of regulatory changes that make it easier for property funds to invest in renewable energy.

Real estate funds (Immobilien-Sondervermögen) may now invest up to 15% of their value in stakes in infrastructure project companies whose purpose is to build, acquire, operate or hold renewable energy installations. This enables the indirect acquisition of undeveloped land hosting ground-mounted solar (PV) installations. The 15% threshold applies at the time of acquisition. Furthermore, funds can now operate rooftop solar installations with legal certainty even where these generate more electricity than the building consumes, or where tenants do not take the power at all.

These changes are flanked by tax measures. The Act clarifies that active entrepreneurial management is generally not harmful to a fund's qualification as an investment fund, draws clearer lines between asset management and active operation, and extends the existing trade tax exemption to stakes in renewable energy companies. The requirements for qualification as a special investment fund have also been relaxed.

Takeaway: A clear positive. The Act gives funds a more secure framework to participate in Germany's energy transition.

Accelerating housing construction

Two initiatives target the chronic shortage of affordable housing, particularly in cities.

The Wohnungsbauturbo (Housing Construction Booster), in force since 30 October 2025, introduced a flexibility-oriented "experimentation clause" (§ 246e BauGB), valid until the end of 2030. It allows authorities, with municipal consent, to deviate from building law to the extent necessary to enable housing construction, provided this is compatible with public interests and neighbouring concerns. Noise protection requirements have been relaxed, and a deemed-consent mechanism applies if the municipality fails to decide within three months.

The BauGB-Novelle (reform of urban planning law), adopted by the federal cabinet on 26 May 2026, goes further, offering a holistic approach to accelerating, simplifying and digitalising planning procedures. However, it also contains provisions that should give investors pause.

Of particular concern is the strengthening of municipal pre-emption rights. A new rule clarifies that municipalities may exercise pre-emption rights even in share deal structures that, taken as a whole, effectively amount to a sale. This is specified in the new municipal "acquisition right" (§ 28a BauGB-E), which takes effect in the preparatory stage of a share deal. It applies where a property is contributed to a company in exchange for shares. Municipalities may designate areas by statute in which they can require an owner to sell the property to them at market value before such a contribution proceeds. The procedure is complex and only rudimentarily regulated, and the scope of related notification obligations remains unclear. Pre-emption rights in so-called "social preservation areas" (Milieuschutzgebiete) are also strengthened.

Takeaway: The faster planning routes are welcome, but the strengthened pre-emption and acquisition rights create real legal uncertainty for transactions. For this reason, so-called waiver agreements (“Abwendungsvereinbarungen”) could become more important in the future. Under such an agreement, the buyer enters into public-law contract with the municipality in which it waives its right of first refusal or acquisition right. In return, the buyer commits to contributing to the achievement of certain urban planning goals set by the municipality. This allows the buyer and the municipality to avoid entering into a purchase agreement under unclear or unfavorable terms. Note also that the new planning routes depend on municipal consent, so political will at the local level will heavily influence speed and feasibility.

Additional requirements for residential landlords

The "Mietrecht II" reform, adopted as a government draft on 30 April 2026, aims to better protect tenants from high rents by closing gaps in the existing rent control regime (Mietpreisbremse). Key measures include:

• A statutory definition of letting “for temporary use“ (exempt from rent control), now permitted only where the tenant has a specific need and for a maximum of six months, extendable to eight.
• Furnishing surcharges must be disclosed before signing and may not exceed 1% of the furniture's current value. Alternatively, a statutory presumption allows 10% of the net rent as a reasonable surcharge if the flat is fully furnished. Failure to inform the tenant in time means the flat is treated as unfurnished for rent-control purposes for two months after the information is provided.
• Index-linked rents will be capped: where consumer price inflation exceeds 3% in a year, half of the excess is disregarded.
• The tenant protection allowing late payers to retroactively cure a termination by settling arrears is extended (once) to ordinary terminations.

In return, the reform offers some relief for landlords: the simplified-procedure threshold for modernisation-related rent increases rises from €10,000 to €20,000, and the digital right to inspect receipts is extended to commercial leases.

Takeaway: The reform adds a further layer to an already comparatively restrictive regime. While the practical impact on any individual investment may be limited, landlords and investors would be well advised to review existing letting models for compliance and to factor the new rules into their planning.

Greater flexibility on heating – with a caveat

The Gebäudemodernisierungsgesetz (Building Modernisation Act), adopted as a government draft on 13 May 2026, reverses much of the controversial 2024 “Heating Act“ while implementing the EU's Energy Performance of Buildings Directive (EPBD).

The previous blanket requirement that new heating systems run on at least 65% renewable energy, and the obligation to replace functioning old systems by 2044, are abolished. New gas and oil heating systems remain permissible, provided they use an increasing share of CO2-neutral fuels (biomethane, bio-oil, biogenic LPG or hydrogen): at least 10% from 2029, 15% from 2030, 30% from 2035 and 60% from 2040. Where a residential landlord installs such a system, they will bear half of the resulting CO2 costs, grid fees and additional fuel costs (the latter only up to a 30% fuel share).

On the EPBD side, all new non-residential buildings from 2028 and all new residential buildings from 2030 must be built as zero-emission buildings, with renovation requirements for existing non-residential stock and obligations for solar installations and EV charging infrastructure. The Act is expected to enter into force by the end of September 2026, with EPBD implementation phased in until 2030.

Takeaway: Broadly positive - more planning certainty and greater flexibility in choosing heating technology. But residential landlords must factor in the new cost-allocation rules. One open question: whether abolishing the replacement obligation is compatible with the EPBD, which requires member states to ensure fossil-fuel boilers are phased out of the stock by 2040.

Energy efficiency: A further layer of compliance

A further layer of regulatory change is arriving from Brussels. The federal government's draft law implementing the EU Energy Efficiency Directive (Energieeffizienzrichtlinie, Directive (EU) 2023/1791), published on 20 June 2026, extends well into the real estate sector. Implementation is overdue: The EU's deadline was October 2025 and the bill is being fast-tracked.

The most direct transactional impact concerns public authorities (öffentliche Auftraggeber within the meaning of § 98 GWB) acquiring or leasing existing buildings above procurement thresholds: these must now meet the nearly-zero energy building standard (Niedrigstenergiegebäudeniveau). For vendors and developers targeting public-sector counterparts, this creates a new energy performance threshold for due diligence and transaction structuring.

Beyond individual transactions, the bill tightens energy audit obligations (Energieaudits) for large consumers, with the trigger shifting from company size to annual consumption above 2.77 GWh. For investment decisions above €100 million, the "energy efficiency first" principle (Grundsatz der Energieeffizienz an erster Stelle) becomes a statutory requirement. Data centre operators face the most demanding regime: registration with the Federal Energy Efficiency Office (Bundesstelle für Energieeffizienz, BfEE), mandatory reportin of power usage effectiveness, waste heat obligations and a requirement to source 50% of electricity from renewables already from 1 January 2024, rising to 100% by 2030.

Takeaway: For real estate investors, the key watch points are energy performance obligations on public-sector transactions, the new audit regime for large portfolios, and, for those active in the data centre sector, a demanding new efficiency and renewable energy framework with direct implications for asset values, operating costs and green financing eligibility.

The wild card: Berlin's expropriation debate

Finally, investors in residential real estate cannot ignore developments in Berlin. Following the successful 2021 “Deutsche Wohnen & Co. enteignen“ referendum, several draft laws on the socialisation of large housing companies (those with more than 3,000 flats) have emerged.

In September 2025, the initiative published its own draft, which would transfer ownership of flats exceeding a 3,000-unit threshold to a new public-law institution, extinguish existing mortgages, and pay compensation roughly 40-60% below market value. The compensation won’t be paid in cash, but via promissory notes repaid over 100 years at 3.5% interest. A new referendum is expected in 2027 to vote on the draft.

Separately, on 13 March 2026, Berlin's parliament passed a framework socialisation law setting out constitutional requirements (largely echoing Article 15 of the German constitution) for any future expropriation law. It enters into force only on 28 March 2028, to allow for prior constitutional review.

It is to be noted that in its newly published “Programme for Growth and Employment” the governing coalition states that in order not to jeopardise private residential construction, federal legislation will provide that the nationalisation of privately owned residential housing portfolios through state-level socialisation laws will no longer be possible. The relevance of the issue has thus been recognised. It remains to be observed, how this will be implemented in accordance with the constitution.

Takeaway: The most significant source of uncertainty. Political will to implement the referendum is currently weak, but the September 2026 state election could change that. The debate alone has unsettled investors and the banks financing them. It is positive that the federal government is willing to address the issue. However, the constitutionality of any law in either direction will likely be decided by the Federal Constitutional Court.

Conclusion

Germany's 2026 reforms send varied signals. The government is genuinely trying to promote growth - unlocking renewable energy investment for funds, accelerating housing construction, and offering more flexibility on heating. At the same time, additional rent-control requirements, strengthened municipal pre-emption and acquisition rights, and the ongoing expropriation debate in Berlin call for careful attention. Layered on top of all this is a tightening EU-driven efficiency agenda. For international investors, the message is clear: opportunities are real, but navigating an increasingly complex, politically charged and sustainability-driven regulatory environment has never been more important.