The German Bundestag’s Budget Committee announced the reform on 8 July 2026; this was followed by a rather bumpy transition phase, and it is now clear that the Federal Government will continue to provide building and heating subsidies under the framework set out in the German Building Modernisation Act (GModG) which came into force on 29 July 2026. Since 21 July 2026, three new versions of the guidelines of the Federal Funding for Efficient Buildings ('BEG') have been in force - residential buildings ('BEG WG'), non-residential buildings ('BEG NWG') and individual measures ('BEG EM'). The BEG will thus retain its basic structure, whilst the Federal Office for Export Control (BAFA) and the German Development Loan Corporation KfW will retain their respective responsibilities. The Federal Ministry for Economic Affairs and Energy calls this new building subsidy scheme more social, efficient and focused. Is that true?
The changes made do indeed result in a new funding approach: targeted support for the worst-performing buildings and low-income households, with a distinct European focus; specifically:
Worst Performing Buildings first:
Funding should be directed where the impact on energy efficiency is greatest — namely, the worst-performing buildings in the existing housing stock. The new WPB-('Worst Performing Buildings') bonus of +5 per cent (individual measures) or +10 per cent (energy-efficient building refurbishment) as of Q1 2027 applies to buildings that fall below defined thresholds. A building is classified as a WPB if, in the case of residential buildings, the energy performance certificate shows Class H or worse; in the case of non-residential buildings, the annual primary energy demand is at least four times that of the respective reference building; or if it is a building constructed in 1957 or earlier that has not undergone any significant energy-efficiency refurbishment. This approach reflects the European rules from the Energy Performance of Buildings Directive (EPBD), which are also part of the GModG.
Social orientation:
The income-based bonus for heating subsidies will be structured in three categories: households with a taxable income of up to EUR 30,000 will in future receive 40 per cent instead of the previous 30 per cent; for incomes between EUR 30,000 and EUR 40,000, the rate remains at 30 per cent; and for incomes between EUR 40,000 and EUR 50,000, a 10 per cent bonus will be granted for the first time. Families with minor children in the household will benefit from a notional reduction in their relevant income of EUR 10,000.
European component:
For the first time, the BEG includes a new bonus for European value added: as of the first quarter of 2027, heat pumps of European origin are to be subsidised with a 15 per cent 'Made in Europe' bonus. The exact details of this bonus are to be finalised in the second half of 2026.
A number of (including systematic) amendments to the BEG are also becoming evident:
Renewable energy standards become mandatory for efficiency house refurbishments: For energy-efficient building refurbishment (both residential and non-residential), meeting Germany's 'EE Class' (Renewable Energy standard) is now a mandatory requirement for government funding. To qualify, buildings must source at least 65 per cent of their energy from renewable sources, unavoidable waste heat, or heat recovery systems. The EE class is therefore part of the eligible categories and no longer triggers any additional bonus. Heating with renewable energy thus becomes an integral part of the system.
Repayment subsidies are decreasing:
In the future, the German building efficiency categories EH 85 EE, EH 70 EE, and EG 70 EE (where 'EH/EG' indicate building efficiency levels and 'EE' stands for Renewable Energy) will no longer receive any repayment subsidies. EH 40 EE and EG 40 EE will receive 10%, while EH/EG 55 EE and historical monuments will receive 5% each. As a result, the overall funding intensity will decrease noticeably.
Serial refurbishment is being strengthened: The 'SerSan' bonus (a 5 per cent or 15 per cent subsidy increase depending on the efficiency category) is being extended to non-residential buildings for the first time. Additionally, it can now be combined with the 'WPB' bonus. Serial refurbishment solutions are thus becoming increasingly important.
Decreasing subsidy rates for multi-family houses: The eligible costs for building envelope refurbishments will be scaled based on the number of residential units (with a cap of EUR 30,000 for the first residential unit, EUR 15,000 for the second to sixth units, and EUR 8,000 from the seventh residential unit onwards). Owners of larger multi-family houses will feel this impact significantly.
Exclusion of funding in district heating expansion areas: Decentralised heating systems, such as heat pumps, will no longer be eligible for funding if the municipality issues a binding commitment to provide a district heating connection within three years. The detailed provisions have yet to be finalised; this rule does not yet apply until a relevant information sheet has been published. This responds to the strong criticism that funding exclusions should be avoided in cases where a district heating connection is planned for the long term but cannot be implemented in the short term.
Further cancellations: The previous 5 per cent efficiency bonus for certain heat pumps, the emission reduction subsidy for biomass heating systems, and the funding for energy-efficient indoor lighting systems in non-residential buildings will be discontinued without replacement. Additionally, the climate speed bonus will decrease gradually every six months and will be completely phased out by August 2028. The 5 per cent iSFP bonus (for tailored individual refurbishment plans) will only be granted for an eligible minimum investment volume of EUR 30,000, and it will be calculated solely on the cost portion exceeding this amount. However, a single iSFP refurbishment measure appears to be sufficient.
In view of the budgetary situation and other energy law reforms, it was foreseeable that building funding would also be affected by cuts. Fortunately, applications that have already been approved are not affected by the changes.
Another positive aspect is that substantial funds continue to be provided for building funding. In particular, the introduction of the WPB bonus and the increased support for serial refurbishments in both residential and non-residential buildings can create strong investment incentives.
However, it is important to see that the necessary transformation of the building stock is backed by reliable government commitment. Hopefully, the ban on decentralised heating systems in areas where district heating is the preferred option will not prove too restrictive. It seems that clarity regarding the proof, responsibility and turnover requirements will only be achieved once a separate BMWE information sheet has been published, which is due to appear in the coming weeks.
In practical terms, this certainly means that the funding framework is becoming more complex, the criteria for awards are becoming more nuanced, and the grounds for exclusion are becoming more fragmented. This makes it all the more important to assess carefully whether your own projects now fall under this new BEG regime. We are ready to support you!
