KfW neighborhood promotion restarted

15.12.2025

Source: E & M powernews

Municipalities can once again receive funding for the climate-friendly conversion of their neighborhoods. The federal government is relaunching the "Energy-efficient urban refurbishment" program (KfW 432).

After a two-year hiatus, the Federal Ministry of Construction, in cooperation with the Kreditanstalt für Wiederaufbau (KfW), has relaunched the "Energy-efficient urban refurbishment" funding program, the ministry announced. Local authorities can once again apply for grants for neighborhood concepts and refurbishment management.

This funding program was launched in 2011. To date, 1,800 neighborhoods have been funded with a total of 185 million euros. The program was stopped at the end of 2023 because the Federal Constitutional Court declared the federal budget for 2021 null and void, which led to a freeze in funding by the Ministry of Finance at the time. Now there is money for the program again.

The programme promotes concepts for energy-efficient renovations and for the decarbonization of the energy supply in the neighbourhood as well as renovation management to support the implementation of these concepts.

The Ministry and KfW see the newly launched KfW funding program "KfW 432" as an integrative funding program, which is why it has been modified in some respects. Among other things, it is intended to provide meaningful support for municipal heat planning (KWP) in future.

However, the existence of completed heat planning is not a prerequisite for funding, so funding for energy-efficient urban refurbishment can also be applied for if there is not yet a CHP. Certain measures are also not eligible for funding via the KfW 432 program, including pure sectoral feasibility studies, for example for heating networks. This is because such studies are covered by the Federal Promotion of Efficient Heating Networks (BEW).

Under the program, local authorities receive grants of up to 75 percent of eligible expenditure. In budget emergencies, a new feature is that up to 90 percent funding is now possible. The maximum amount per neighborhood concept is 200,000 euros.

Neighborhood approach in the building sector

With the new edition, the German government is building on the neighborhood approach anchored in the coalition agreement. In addition to reducing CO2 emissions, the program also takes into account other requirements for urban development. These include urban planning, monument preservation, housing and social aspects.

Measures for climate adaptation, the development of urban greenery or the use of digital applications can also be part of the funded concepts. The program is thus aimed at the integrated development of neighbourhoods and not exclusively at individual measures on buildings.

The Federal Building Ministry sees energy-efficient urban refurbishment as a building block for the implementation of municipal heat planning. Neighborhood concepts can serve as a basis for systematically evaluating heat supply options and implementing them step by step.

In a press release, Federal Building Minister Verena Hubertz emphasizes the role of municipalities, municipal companies, public utilities and the housing industry. Various solutions are being developed locally to reduce energy consumption and increase the use of renewable energies.

A total of 75 million euros is available for the program in 2025 and - subject to the approval of the 2026 budget - in each case.

Further information can be found on the KfW website at www.kfw.de/432.

The KfW development bank has also produced a fact sheet on "Energy-efficient urban refurbishment" (KfW 432) and also published it on its website.

Author: Heidi Roider