Renovation offensive decided? What owners and educational institutions can expect from the new coalition

Accounting for around 30% of German CO₂ emissions, the building sector is a key area of action for the energy transition. The new coalition agreement now provides concrete levers to accelerate refurbishments - especially energy-related ones - and make them more attractive.

Tax relief for energy-efficient refurbishments - especially in the event of inheritance

Owners are to receive targeted relief from the tax authorities in order to implement necessary refurbishments to existing properties more quickly. Particularly interesting: the federal government is providing a tax incentive for inherited properties.

"The costs of energy-efficient refurbishment of inherited properties will be tax-deductible in future."
(Coalition agreement 2025, line 757)

This measure addresses a reality faced by many property owners: according to the Federal Statistical Office, over 400,000 residential properties change hands through inheritance every year. However, the new owners often lack the liquidity for extensive refurbishments, as LBS Research made clear in a study in January 2024. However, the currently valid GEG requires energy-efficient refurbishment within 2 years due to changes of ownership through inheritance.

It also says:

"Tax measures are being improved to promote home ownership for families ("home ownership start-up aid"), to promote new construction and to renovate existing housing."
(line 736)

According to some experts' projections, construction prices could rise by between 28% and 55% by 2034. The political tenor is therefore clear: those who invest should receive tax breaks - a long overdue boost in view of rising construction costs and stagnating refurbishment rates.

Less bureaucracy: funding programs simplified, milieu protection relaxed

A central promise of the coalition agreement is the reduction of bureaucratic hurdles in the implementation of refurbishments. Two measures stand out in particular:

KfW's promotional programs are being restructured:

"KfW's promotional programmes will be merged and simplified into two central programs: one for new construction and one for modernization."
(lines 738-739)

This consolidation provides clarity, reduces complexity in the application process and makes the funding conditions more predictable - a decisive lever for increasing the rate of energy-efficient refurbishment from the current level of less than 1% per year towards the required 2-3%.

More flexibility in neighborhood conservation areas:

"In milieu protection areas, projects to create low barriers and energy-efficient refurbishment are made possible in a socially acceptable manner."
(lines 733-734)

In many cities, strict neighborhood protection statutes prevent sensible and urgently needed energy-efficient refurbishments for fear of displacement. The new regulation creates more scope for owners to modernize without sacrificing the social protection concept.

Schools, universities & co.: billions for educational buildings

Another focus is on the refurbishment of public education infrastructure - an area with an enormous need for investment. According to the KfW Municipal Panel 2024, the refurbishment backlog at schools and universities amounts to over 45 billion euros.

The government is responding to this with targeted investment initiatives:

"We are launching an investment program to support the refurbishment and maintenance of schools and the creation of new capacities."
(lines 2348-2349)

For universities and university hospitals, they go even further:

"We are launching a fast-track construction initiative by the federal and state governments for the modernization, energy-efficient refurbishment and digital upgrading of universities and university hospitals [...]."
(lines 2463-2465)

These programs create reliability for local authorities and providers that have been caught between investment obligations and budget freezes for years. They combine energy goals with digital requirements - a necessary step for modern, future-proof learning spaces.

Conclusion: A pragmatic impulse - with real opportunities for many

The Coalition Agreement 2025 gives the building sector new impetus with a signal effect:

• Tax incentives make it easier for owners to take the step towards refurbishment
• Funding logic is simplified, procedures streamlined
• Public educational institutions benefit from targeted refurbishment programs

The new coalition agreement sends out clear signals for more energy-efficient refurbishments in the building sector. With the forthcoming translation of the EU Buildings Directive into German law, the focus is particularly on the 60% of German residential buildings that are rated lower than energy efficiency class "D". Purpose Green is available as an experienced partner to support owners and public institutions in implementing these ambitious targets.

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Photo by Maxime Lebrun on Unsplash