Property tax reform - New assessment rates for property tax - Hamburg reform by consensus
After consultations with various stakeholders, the Hamburg Finance Authority proposed new tax rates for property tax (Grundsteuer) on Monday. The rate for residential property (Grundsteuer B) will increase for the first time since 2005 from 540% to 975%. For agricultural and forestry land (Grundsteuer A), a rate of 100% is proposed instead of the previous 225%. A new, particularly high tax rate of 8,000% is proposed for unbuilt, but developable land (Grundsteuer C) to prevent speculation and accelerate the creation of housing.
For the commercial sector, a moderate assessment base of 0.87 has been set. The new values will be fixed factors used to calculate the tax amount.
Taxes depend on location
According to the calculations of the authority, owners of a 100 square meter single-family house with a plot size of 1,000 square meters will have to pay 731 Euro next year if the house is in a good location. If the house is in a normal location, the annual payment would be 646 Euro. For a 100 square meter condominium in a normal location, 353 Euro would be due. Tenants are indirectly affected by the tax as landlords can allocate the costs to rent.
510 million Euro in revenues
The reform demanded by the Federal Constitutional Court will remain revenue-neutral overall and in the residential and commercial sectors, said Finance Senator Andreas Dressel (SPD). Hamburg currently collects 510 million Euro in property tax annually. This amount is expected to remain approximately the same. The new tax rates and the assessment base will be incorporated into the new property tax law, which is scheduled to be passed by the Senate and then by the Assembly in September.
Mixed housing quarters
Dressel acknowledged that the tax rate is not low. However, Hamburg also has a high municipal service level, making the rates reasonable. The law will include numerous reasons for tax exemptions and a hardship provision. For example, a lower tax rate will be levied for subsidized or protected housing. The political goal is to maintain the socially mixed structure of housing quarters. "We want normal earners to be able to live in Grindel," said Dressel. The planned property tax reform will be supported by tenant associations and the housing industry, with a relatively broad consensus.
Association praises Senator
The Federation of Taxpayers praised the Senator for the constructive dialogue but also confirmed its criticism: "Hamburg is a leader in property tax at the federal level." It is regrettable that the Senate has ruled out the possibility of significantly reducing housing costs starting in January 2025.
The managing director of the Association of North German Housing Companies, Andreas Breitner, expressed his conviction: "The Hamburg property tax reform will not lead to social conflicts." Affordable housing will continue to be possible throughout the city. Breitner added: "In principle, and that is the truth, the property tax will increase in very good locations – and in not so good locations, it may decrease."
The Hamburg Chamber of Crafts welcomed the decision to deviate from the federal valuation model for property tax calculations and introduce its own area model. "This means less bureaucracy and more predictability, as a comprehensive recalculation will not be required every seven years – a clear advantage for businesses," said Hjalmar Stemmann, President of the Chamber of Crafts.
CDU fraction demands faster tax notices for property owners
The CDU parliamentary fraction criticized that property tax notices will only be sent out in March 2025. Property owners are facing significant additional burdens in some cases. "Therefore, timely and appropriate information for taxpayers is important," said Thilo Kleibauer, the financial policy spokesperson for the CDU. The AfD fraction also complained about the long wait for the notices. "The AfD clearly advocates for the abolition of both the property and transfer taxes," explained the financial policy spokesperson of the fraction, Thomas Reich.
Finance authority for the new property tax
- Senators from various political parties, including Finance Senator Andreas Dressel (SPD), have discussed the proposed property tax reform with various stakeholders, including Andreas Breitner from the Association of North German Housing Companies.
- The Hamburg Finance Authority proposed a significant increase in the property tax rate for residential property (Grundsteuer B) from 540% to 975%, a change not seen since 2005.
- The Tax Authority also suggested a new, high tax rate of 8,000% for unbuilt, developable land (Grundsteuer C) to prevent speculation and promote housing creation.
- Andreas Dressel, the Finance Senator, emphasized that the property tax reform will remain revenue-neutral, with no significant change in the 510 million Euro annual revenue.
- The Tax Authority's proposed property tax reform has garnered support from tenant associations and the housing industry, demonstrating a broad consensus on the matter.
- Andreas Breitner, the managing director of the Association of North German Housing Companies, praised the Finance Senator for his constructive dialogue but expressed concerns about the potential impact of the new tax rates on property owners in Hamburg.
