German Cabinet Approves Draft to Reduce Housing Benefit Expenditure

The German federal cabinet has approved a draft bill that aims to make significant reductions to the country's housing benefit program, known as Wohngeld. The initiative, introduced by Building Minister Verena Hubertz, seeks to curb government spending by adjusting eligibility and payment structures for the benefit.

Under the proposed legislation, the government plans to save approximately 1.5 billion euros in 2027, with annual savings expected to rise to 2 billion euros from 2028 onwards. The draft will now proceed to the Bundestag for further discussion and potential amendments. If enacted, the changes are scheduled to take effect on January 1, 2027.

Key Measures in the Draft Bill

The proposed reforms will affect all current and future recipients of housing benefits. Existing benefit decisions will remain valid until their expiration, after which the new regulations will apply when recipients renew their applications, typically every twelve months.

• Suspension of Benefit Adjustment: The current mechanism that adjusts housing benefits to reflect inflation and changes in rental prices will be temporarily halted. This means that payments will not increase, even if living costs rise.
• Reduction of Heating Cost Component: The bill aims to halve the portion of the benefit allocated for heating expenses, directly impacting the amount recipients receive to cover energy costs.
• Modification of the Eligibility Formula: The criteria used to determine eligibility for housing benefits will be tightened, resulting in fewer households qualifying for assistance. Those at the higher end of the income threshold, who currently receive smaller monthly amounts (around 50 to 60 euros), are expected to lose eligibility entirely.

These changes will mean that those who continue to receive housing benefits will generally see lower payments. Individuals with very low incomes may instead need to apply for social security benefits under the basic income support system.

Financial Implications and Redistribution

While the adjustments are designed to reduce federal expenditure, officials acknowledge that shifting some recipients from the housing benefit system to basic income support will increase costs for social welfare budgets at both the federal and municipal levels. The Ministry estimates that, after accounting for this redistribution, net government savings will be around 1.16 billion euros in 2027, increasing to approximately 1.5 billion euros per year from 2028.

According to data from the Federal Statistical Office, the federal government and the states jointly disbursed around 4.7 billion euros in housing benefits to more than 1.2 million households in 2024. The distribution of recipients is diverse: 44 percent are families, while 52 percent are pensioners or retirees.

Background and Context

The planned reductions follow an expansion of the housing benefit program in early 2023, known as the Wohngeld-Plus Act, which broadened the pool of eligible recipients. The current financial pressures have prompted the government to revisit the scope and scale of this support, aiming to balance social assistance with fiscal responsibility.

The legislative process is expected to involve further debate in the Bundestag, where lawmakers may propose amendments or adjustments before any final law is passed and implemented.