How expensive will the dream of home ownership
For many people, the dream of owning their own home is a lifelong goal and an integral part of private wealth accumulation. Hardly any other investment symbolizes security, stability and the realization of personal dreams as much as a home of one’s own. Often, the path to owning a home involves hardships, challenges and personal risk, so it’s no surprise that home ownership is one of the most emotional topics for Germans.
The advantages of owning one’s own property have always been clear, especially for medium-sized businesses. The condominium or one’s own house is considered the owner’s most important provision for old age. Finally not having to pay rent or pay off a loan to have more of your own retirement. This was and is the declared goal of entire generations. Financial stability and independence are considered the most important arguments in the decision to invest in their own property.
But fear is running rampant among property owners. Key words such as climate targets, the EU Energy Efficiency Directive and the highly polarizing Building Energy Act are fueling concerns that expensive investments in the energy refurbishment of one’s own home will mean financial ruin for many property owners in the future.
Whether the dream of owning your own home will still pay off in the future and what the consequences of current legislation will be, also with regard to supposed forced renovations, we take a look below with a special focus on the EU Energy Efficiency Directive.
What is the EU Energy Efficiency Directive
The EU Energy Efficiency Directive (EED) is European Union legislation that aims to reduce energy consumption in Europe and improve energy efficiency. It sets binding targets and measures for member states to reduce energy consumption in various sectors, especially buildings. In practice, the Directive provides for the enforcement of certain requirements and standards for energy efficiency in buildings and requires that Member States adopt appropriate national laws and regulations to achieve these goals. These include, for example, the introduction of energy efficiency certifications for buildings, the promotion of energy-efficient refurbishment measures and the preparation of energy performance certificates.
The overall goal of the EU Energy Efficiency Directive is to reduce energy consumption, cut CO2 emissions and reduce dependence on fossil fuels. By improving energy efficiency in buildings, resources are to be conserved, environmental pollution minimized and energy costs reduced.
The policy affects both public and private buildings, including homes, office buildings, schools, hospitals and other commercial properties. It sets minimum energy efficiency requirements and is designed to encourage energy retrofits to reduce energy consumption and use renewable energy.
The EED, legitimacy for forced redevelopment?
With the introduction of the EU Energy Efficiency Directive in December 2012, the EU Parliament laid the foundation for a large number of climate law and climate policy innovations in Europe. The targets set, which aim to achieve a 55% reduction in greenhouse gases by 2030, come with significant implications for property owners across Europe.
This directive and all amendments based on it are specifically aimed at reducing the energy consumption of buildings and promoting the supposed transition to more environmentally friendly and sustainable energy systems. However, this is not in itself a legitimization to have forced renovations carried out.
Nevertheless, the implementation of the directive is accompanied by new laws and requirements that will make investments in new technologies and construction measures inevitable. These costs, unforeseeable to date for the property owner, can indeed be experienced as coercive, especially because the consequences can be existential.
The consequences of the EED for property owners
Certainly, the EU Energy Efficiency Directive was created with the intention of achieving many positive effects for our planet. But for all the good intentions, it should not be forgotten that these changes come with significant consequences that leave many a citizen just shaking their heads.
- Financial burden for property owners: Implementation of the Energy Efficiency Directive requires extensive investment in building renovations and technologies to achieve energy-saving targets. For property owners, especially owners of older buildings, these costs represent a significant financial burden. The necessary investments will lead to a long payback period and mean financial ruin for many home builders.
- Higher operating costs: Although the Energy Efficiency Directive is expected to lead to cost savings through lower energy consumption in the long term, higher operating costs will nevertheless arise, because after the acquisition of energy-efficient technologies, these must also be refinanced.
- Real Estate Market Impact: EED may result in restrictions on the rental or sale of real estate. Property owners whose buildings do not meet energy efficiency standards could face difficulties renting or selling their properties. Potential tenants or buyers typically prefer energy-efficient buildings with lower operating costs, which will result in lower demand and potentially lower rental income or sales prices.
- Administrative burden: The implementation of the Energy Efficiency Directive requires additional administrative burden for property owners. They need to make sure their buildings are up to code, prepare the necessary documentation, and possibly obtain various permits. This administrative effort can be time consuming and tie up resources.
- Unforeseen problems: Unforeseen problems could arise during remediation activities, causing additional costs and delays. This can lead to unpleasant surprises for many property owners and put an additional strain on their wallets.
How we help you secure your assets
- Tax law advice and tax representation in Germany
- Clarification of the current legal situation on the subject of redevelopment
- Advice on assets in Germany and the EU
- Advice on asset allocation and tax optimisation
- Accounting and asset management
- Holistic organization of an asset management
- Advice on the topic of inheritance in Germany
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Our office in Munich
You will find our office at Fasolt-Strasse 7 in Munich, very close to Schloss Nymphenburg. Our team consists of highly motivated attorneys who are available for all the needs of our clients. In special cases, our law firm cooperates with selected experts to represent your interests in the best possible way.
About the author
Dr. Johannes FialaPhD, MBA, MM
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
»More about Dr. Johannes Fiala
On these pages, Dr. Fiala provides information on current legal and economic topics as well as on current political changes that are of social and/or corporate relevance.
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