Federal Government to Reform Building Subsidies Starting in July

July 10, 2026

Source: E & M powernews

The federal government has reformed the Federal Subsidy Program for Efficient Buildings (BEG). Starting July 21, new subsidy rules will take effect, featuring a more pronounced social grading system and reduced grant amounts.

With the reform of the Federal Funding Program for Energy-Efficient Buildings (BEG), the federal government is adjusting the funding conditions for energy-efficient renovations and heating system replacements. After the Budget Committee of the German Bundestag gave the green light on July 8, the new regulations will take effect as early as July 21, 2026.

According to the Federal Ministry for Economic Affairs and Energy (BMWE), the basic structure of the subsidy program will remain unchanged. At the same time, it will become more socially balanced, cost-effective, and more focused on buildings in particular need of renovation, said Federal Minister of Economic Affairs Katherina Reiche (CDU). “The reform provides clarity and planning certainty for citizens, businesses, and the skilled trades,” said Reiche.

At the same time, the subsidy program will be more strongly focused on households that are particularly dependent on financial support. According to the ministry, the reform is also intended to contribute to sound federal budget management.

New Income-Based Tiered System

At the heart of the changes is a new income-based tiering system for the heating subsidy bonus. Until now, a uniform bonus had been in place. Going forward, households with a taxable income of up to 30,000 euros will receive a 40 percent bonus. For incomes up to 40,000 euros, the previous subsidy will remain in place. Households with an annual income of up to 50,000 euros will be eligible for a bonus of up to 10 percent in the future. For the first time, the federal government is also introducing a family supplement.

At the same time, the maximum eligible investment costs for installing climate-friendly heating systems will be gradually reduced through 2030. According to the federal government, this is expected to yield savings of approximately 2.1 billion euros. While the previously available subsidy of up to 70 percent will generally remain in place, the maximum investment cost subsidy will be gradually reduced for most households. Low-income households will initially benefit from higher subsidies than before.

Focus on Buildings with the Worst Energy Efficiency

In addition, the federal government is directing funding more strongly toward buildings with particularly poor energy efficiency. The so-called Worst-Performing Buildings Bonus will in the future also be granted for additional efficiency measures in residential and non-residential buildings. Furthermore, the federal government is expanding the bonus for serial renovations and integrating it more closely with the WPB bonus.

According to the ministry, there will be no changes to the responsibilities of the funding programs. The Kreditanstalt für Wiederaufbau (KfW) remains responsible for loan-linked funding, while the Federal Office for Economic Affairs and Export Control (BAFA) will continue to process grants for individual measures.

Application Freeze Until July 20

A transition period will be in effect between July 9 and July 20, during which no new funding applications may be prepared. Applicants who already have a valid technical project confirmation or an application confirmation may still submit their applications under the previous funding conditions during this transition period. (See separate article)

Criticism is also coming from the opposition. Katrin Uhlig, a member of the Bundestag from Alliance 90/The Greens, stated that the cuts would lead to fewer investments and jeopardize climate protection. Furthermore, she said, trust has been damaged after it was previously announced that the BEG would receive adequate funding through at least 2029.

Mixed Reaction from the Industry

The reform has met with a mixed response within the industry. The German Renewable Energy Federation (BEE), the umbrella organization for the renewable energy sector based in Berlin, welcomes the retention of the basic subsidy structure as well as the planned bonus for heat pumps manufactured in Europe. However, the association warns that declining subsidy amounts could slow investments in climate-neutral heating systems and favor fossil-fuel-based heating systems.

The Central Association for Sanitation, Heating, and Air Conditioning (ZVSHK) also states that it supports a stronger social focus for the subsidies. The association, however, criticizes the short-notice implementation and sees drawbacks for the planning security of businesses and consumers. In addition, the ZVSHK calls for supplementary measures such as lower electricity prices and less bureaucracy to make the heating transition economically viable.

Author: Susanne Harmsen