In light of the housing shortage, the conversion of vacant office and commercial properties is increasingly coming into focus for policymakers. With the new funding program “Commercial to Residential (GzW),” the Federal Government is, for the first time, specifically allocating resources to promote such conversions. For this purpose, approximately EUR 360 million from the special fund “Infrastructure and Climate Neutrality” has been earmarked starting in 2026. It is hoped that the program can commence in the summer of 2026.
The program primarily provides for subsidized loans to owners of suitable commercial and other non-residential buildings that can be repurposed to create new residential space. Rent caps are not envisaged within the framework of the program. The funding concept is currently being developed. The objectives are:
- Elimination of vacancies to revitalize city centers
- Creation of residential space in central locations
- Promotion of a “conversion culture” and climate protection by reusing already bound “grey energy”
Overall, the budget for residential construction in 2026 has been raised to a record level of EUR 7.6 billion.
With this financial package, the Federal Government is building on the legislative initiative known as the “Construction Accelerator” (“Bauturbo”). This initiative particularly includes expedited approval procedures with binding deadlines, expanded exemption possibilities pursuant to Section 31 of the Federal Building Code (BauGB), as well as adjustments to the Technical Instructions on Noise Abatement (TA Lärm) to mitigate conflicts between commercial and residential uses. This will facilitate both the construction of new residential space and the conversion of commercial properties into residential use.
However, it remains to be seen whether these measures will actually lead to a noticeable relief in the housing market in practice. At a public hearing on 10 September 2025, experts from the construction and real estate sectors assessed the approaches of the “Construction Accelerator” positively, but also criticized, among other things, that key causes such as high construction costs, material shortages, and a lack of skilled labor are not being addressed.
It remains to be seen whether the Federal Government will also tackle these remaining structural problems—such as through further development of Building Type E—decisively during the remainder of the legislative period. As long as cost and capacity issues persist, careful project-specific examination of legal and economic optimization possibilities remains essential. In this way, it is possible to realize viable conversion projects even under the current challenging conditions. The new “Commercial to Residential” funding program at least offers an additional opportunity for this purpose.
