Changes in the land tax system impact on a cooperative
In the heart of southwest Germany, the new property tax reform, effective from January 1, 2025, is set to shake up the real estate landscape in cities like Karlsruhe. The reform aims to increase transparency and fairness in property assessments, but concerns remain about its potential impact on tenants and housing cooperatives.
The Association of Baden-Württemberg Housing and Real Estate Companies (VBW) has expressed a calm outlook on the reform's impact. However, surveys suggest otherwise for row house tenants and cooperatives. For instance, a survey by the publisher of the tax software Wiso revealed an average increase of 81% for multi-family dwellings in the southwest region, with the new property tax burden averaging 107% in Baden-Württemberg, exceeding the national average of 84.5%.
The increased tax burden stems from the new model's closer link between tax liability and current property values, size, location, and land use. For row house tenants, the impact depends on how landlords adjust rent to cover increased property tax expenses. Cooperatives, which typically own multi-unit properties and pass costs to members proportionally, may see higher costs that could translate into increased fees for residents.
To minimise the property tax burden, several measures can be considered. A thorough review and correction of property assessments to ensure accurate and current details is crucial. Utilising available exemptions or reliefs, such as for social housing or cooperative-owned residences, may also offer partial tax relief. Integrating energy efficiency and solar policies could indirectly reduce long-term costs through subsidies and tax credits. Lastly, engaging in local tax policy discussions can influence future reforms towards more equitable property tax rules.
One cooperative feeling the brunt of the reform is the Karlsruhe Garden City Cooperative, Gardenstadt eG. The cooperative's CEO states that the reform will burden them with an additional 200,000 euros per year. The main reason for the increased property tax burden is the land value, which is between 650 and 820 euros per square meter after the revaluation. For a row house with 70 square meters of living space and 280 square meters of land, the property tax burden has increased from 36 euros to 426 euros.
However, Gardenstadt eG is taking proactive steps to minimise the tax burden by having the land value assessments reviewed. Unfortunately, they cannot pass on the higher property tax due to historical agreements with tenants.
VBW President Peter Bresinski acknowledges that the reform may not have the same effect on tenants as on owners of single-family homes. Nevertheless, the lack of a survey among VBW member companies regarding the impact of the property tax reform raises questions about the broader implications for tenants and cooperatives across Baden-Württemberg.
As the property tax reform unfolds, it is essential for tenants, cooperatives, and property owners to stay informed, engage in local discussions, and explore options to mitigate potential increases in property tax liabilities.
Municipalities in Baden-Württemberg are foreseen to gain more finance from the property tax reform, which may affect business operations for housing cooperatives. For instance, the Karlsruhe Garden City Cooperative, Gardenstadt eG, anticipates an additional 200,000 euros per year due to the reform, largely resulting from increased land value assessments.
