According to the Aengevelt Residential Investment Index (AWI), little momentum growth is expected. Aengevelt: Framework conditions lead to a decreasing renovation rate for residential buildings.
DIP partner Aengevelt sees the federal government’s climate protection targets for the building sector at great risk because the renovation rate for residential buildings has been falling steadily for years. The real estate company attributes the decline in renovation activities to several legal regulations that continue to make it much more difficult for building owners to carry out renovation measures. Aengevelt therefore recommends in particular the approval of a “renovation light” analogous to building type E in new buildings in order to promptly increase the stalled renovation dynamics in the interest of climate protection.
According to the German government, the building sector is responsible for 36 percent of greenhouse gas emissions. The Federal Climate Protection Act stipulates that these emissions are to be reduced by 65 percent by 2030 compared to 1990 and that the building sector is to be climate-neutral by 2045. However, these goals, which form the national implementation of the European Union’s “Green Deal”, can only be achieved at all if the housing stock is immediately and sustainably renovated to make it more energy-efficient at a rapid pace.
However, according to surveys by the Federal Association for Energy-Efficient Building Envelopes, the share of buildings renovated within a year in the total building stock in 2025 was only 0.67 percent, which corresponds to 260,000 residential units. The previous renovation rates that have fallen short of the target are falling year after year – in 2022, the rate was still 0.88 percent. However, in order to achieve the climate targets in the building sector, a rate of at least two percent would be required, i.e. a tripling. For non-residential buildings, the renovation rate in 2025 was 0.92 percent, which is also below demand and also represents a decrease compared to the previous year.
The comprehensive winter survey on the Aengevelt Residential Investment Index (AWI) that has just been carried out shows that (too) little momentum is to be expected. Only 24% of the apartment owners surveyed forecast an increase in investments in the modernization and repair of existing apartments. With regard to purely energy-efficient renovations, the proportion that expects an increase is slightly higher at 34%, but remains clearly in the minority. Instead of accelerating the pace of renovation in order to achieve the ambitious climate targets, exactly the opposite is happening: the renovation rate is falling and falling. Aengevelt attributes the decline in restructuring momentum to several reasons:
- Section 48 of the Building Energy Act stipulates that when exterior components are renewed, very high insulation standards must be observed, which are not only (too) expensive, but often also associated with problems with the building geometry. Due to the “guillotine effect” of the (too) high requirements, renovations are not carried out at all, even if the owners were willing to carry out “light” insulation, which can reach up to 80% of the legal standards.
- The amendment to the Building Energy Act of 2023, initiated by the voted out “traffic light”, which became known as the “Heating Act”, has led to massive uncertainty among broad circles in the spectrum of building owners. However, as is well known, relevant renovation investments are only made if the framework conditions are adequate and reliable in the long term.
- The discussion about a renovation obligation at EU level has also contributed to the uncertainty, making many owners hesitant to make investments that could prove wrong in the near future.
- In addition, the conversion to more climate-friendly district heating is inhibited by a lack of local availability, predominantly overpriced connection costs and, as a result, too much dependence on the supplier.
- The tax regulations on maintenance costs that are still in force mean that buyers of existing properties often refrain from carrying out a comprehensive renovation because they cannot immediately claim the costs for tax purposes, but can only depreciate them over a holding period of 50 years that is far too long if they exceed the threshold of 15 percent of the acquisition costs within 3 years of purchase.
- The tightening of Section 559 of the German Civil Code has led to many owners refraining from modernisation measures because the rent can only be increased by 8 percent of the costs, with additional restrictions and capping limits.
- Even today, the majority of building owners are pensioners, including many very old people. Owners are often overwhelmed with the planning, implementation and financing of renovation investments and no longer expect to live to see the amortization of their investment. This problem will even worsen in the course of the well-known negative demographic development.
Dr. Wulff Aengevelt, Managing Partner of Aengevelt Immobilien: “All federal governments in recent years, regardless of the political colour theory, have not focused on promoting new construction in line with demand, which has particularly great effects on climate protection beyond the necessary replacement of existing buildings and would also remedy the housing shortage. Instead, it is hoped that individual building owners will bear the costs of climate protection by renovating their properties. However, these hopes have proven to be deceptive, as politicians have at the same time repeatedly worsened the framework conditions for renovation investments.”
As a remedy that is overdue, Aengevelt recommends with top priority that the Building Energy Act be amended in a timely manner in such a way that, analogous to building type E, a much more cost-effective “renovation light” is made possible in new buildings. An exception clause for energy-related measures in the tax regulation of the maintenance costs related to the acquisition would also contribute to increasing the chronically too low renovation rate by leaps and bounds, as would the withdrawal of the restrictions on renovation-dependent rent increase options.
