The third stage of Germany’s new heating law has been introduced, meaning all homeowners can apply for government subsidies to cover the costs of installing environmentally-friendly heating systems. Here’s what the change means for homeowners and tenants.

Eco-friendly heating subsidy applications open for all German homeowners

People who own a house or flat in Germany can now apply for government subsidies to replace their oil and gas heating systems with environmentally friendly heating pumps.

The first stage of Germany’s controversial heating law (Heizungsgesetz) was introduced on January 1, 2024, but the government has staggered the dates from which eligible homeowners can apply for the subsidy.

Applications are now open for all eligible groups. This means that private individuals who live in the single-family house they own, apartment building owners who own one or more housing units, Home Owners’ Associations (WEG), companies, municipalities and buy-to-let owners can all apply for the subsidy.

People who own certain kinds of houses - e.g. newly built homes or homes in new settlements - may be obliged to change their oil and gas heating system to a heat pump. To be certain of whether you are obliged to install the new system and if you are eligible to have the transition subsidised, you can contact the Kreditanstalt für Wiederaufbau (KfW).

According to the new law, functioning energy systems that use fossil fuels can still be repaired and used. Only once the system is defunct will homeowners be obliged to replace it with a system running on 65 percent renewables.

How much do the Heizungsgesetz subsidies cover?

Homeowners from the eligible groups can receive subsidies which cover between 30 and 70 percent of the costs of installing a heat pump system.

The percentage of cost covered will depend on the applicants’ income, how urgent it is to install the new system, and how big of a job it is. Anyone who would like to apply for the subsidy can do so via the KfW.

If you live in the property you own and have a household income of up to 40.000 euros before tax, you can expect 30 percent of the installation costs to be subsidised. 

If you make the transition before 2028, it is also possible to receive a speed bonus (Geschwindigkeitsbonus) which will cover another 20 percent of costs.

Government subsidies will cover another 5 percent of your costs if you install a heat pump which uses water, wastewater or soil as a heat source.

What does the new heating law mean for renters?

Germany is the EU country with the highest percentage of renters, so what does the new law mean for the 53 percent of residents who are tenants rather than homeowners?

If you would like your landlord to move from an oil and gas system to a heat pump, you can suggest the transition, but they are not obliged to install the pump system unless you live in a new building, a newly developed area or an old building where the existing oil and gas system no longer functions.

If one of the three above criteria applies to your rented house, then the landlord is responsible for making the change, applying for the subsidy, and paying the remaining costs, not the tenant.

Landlords who receive the subsidy can pass on to tenants a maximum of 10 percent of the portion of the installation costs that were not covered by the subsidy.

Additionally, if they want to increase the monthly rent after the new system has been installed, these increases will be limited to a maximum of 50 cents per square metre and further limitations will be set if this rent increase amounts to 30 percent of the total household income.

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