German States Criticise the 2027 Housing Benefit Reform That Halves the Heating Allowance

Germany's upper house issued a critical statement on the Wohngeld reform on 25 September, objecting to a halved heating allowance and a saving of €738m in 2027.

The Bundesrat, the chamber that represents Germany's sixteen states, adopted a critical statement on the federal government's Wohngeld reform at its 1068th plenary session on 25 September 2026. The bill would suspend the annual uprating of the housing benefit and roughly halve its heating component, and the government expects it to cut housing benefit spending by €738m for the federal budget and €738m again for the states in 2027.

The chamber did not reject the bill, and it could not have passed it either. This was the first reading, in which the states comment before the Bundestag takes over. The statement now goes to the federal government, which may respond to it, and the bill then moves to the lower house. Only after the Bundestag has passed a law does it return to the Bundesrat for consent.

What the reform would change

The heating component is the part of Wohngeld intended to cover heating costs, and it is where most of the saving comes from. Under the government's draft it falls to €48 a month for a one-person household, half the current €96, then €62 for two people, €74 for three, €86 for four and €98 for five. A separate carbon-price component of €14.40 a month for a single-person household is left untouched.

The second change is quieter but compounds over time. Wohngeld is normally uprated in line with rents and incomes; the draft suspends that adjustment for 2027 while new rent levels take effect on 1 January 2027. A benefit that stops tracking rents loses value every year the rents keep moving.

Why the states pushed back

The objection recorded in the statement is specific: the states criticise the suspension of the uprating and the reduction of the heating component, and they warn that savings on housing benefit could end up as higher costs for municipalities in the social security systems that sit behind it. Households with low incomes would be weakened, and more of them would fall back on basic income support and social assistance.

The numbers behind that concern are large. The Bundesrat committees, according to published figures reported by Stuttgarter Zeitung and by German business press, put the number of households that would lose their Wohngeld entitlement outright at more than 380,000. The lead committee on urban development and housing had recommended rejecting the bill as disproportionate in social and housing-policy terms; that recommendation did not carry, and a critical statement was adopted instead.

The committees also tabled a counter-proposal on the heating component: €60 a month for a single-person household instead of €48, which with the carbon component would come to €74.40. The plenary statement published on 25 September does not name that figure, so what the states formally asked for on the amount is not yet on the public record; the decision document had not been published when this was written.

What it means for the German rental market

Wohngeld is a demand-side subsidy paid to tenants, not a cap on rents, so cutting it does not directly change what landlords can charge. It changes who can afford to pay it. Removing entitlement from a six-figure number of households in a market where our own snapshot of 22 September 2026 puts the national average asking rent at $10.40 per square metre a month, against an average asking price of $3,066 per square metre, concentrates the effect at the bottom of the market, where the gap between rent and income is tightest.

Those same figures put German asking prices 1.4% higher than a year earlier and the market's bubble-risk score at 51, in the moderate band. This is not a market under price stress; it is one where affordability pressure sits in the rental segment rather than in valuations. Round-trip transaction costs run to 12.3% of the purchase price, among the highest in western Europe, and rental income for a non-resident landlord is taxed at an effective 24.35%.

Nothing is settled. The bill is at the start of its parliamentary passage, the intended start date is 1 January 2027, and the Bundestag can still change the heating component, the uprating suspension or both.

Sources: Bundesrat, 1068th plenary session, item 60, Wohngeldgesetz reform, Drucksache 474/26, 25 September 2026 https://www.bundesrat.de/DE/plenum/bundesrat-kompakt/26/1068/60.html; Bundesrat committee recommendations on Drucksache 474/26, 11 September 2026 https://dserver.bundestag.de/brd/2026/0474-1-26.pdf; Stuttgarter Zeitung, Diese Kuerzungen drohen beim Wohngeld, 24 September 2026 https://www.stuttgarter-zeitung.de/wirtschaft/bundesrat-stimmt-ueber-gesetzesentwurf-ab-diese-kuerzungen-drohen-beim-wohngeld-79499930.html

Market data: Germany