Coming soon - The Building Land Mobilization Act

Housing is scarce. Building land is rare. Money is gone. The regulations for urban land use planning are cumbersome. What now?

In the coalition agreement of 12 March 2018, the coalition parties had already given initial thought to answering the above question, in particular deciding to support the municipalities in obtaining building land and securing affordable housing, and subsequently set up a building land commission to deal with the issue in greater detail. This commission of experts then presented its recommendations on 2 July 2019, which became the basis of the draft bill of 9 June 2020 amending the Building Code (BauGB) and the Building Usage Ordinance (BauNVO) - with the aim of "mobilizing" building land. The industry associations had until 3 July 2020 to comment on the draft.

In the following, a brief overview of the main proposed amendments will be given:
 

I. Simplified granting of building permits

One of the aims of the legislator is to simplify the granting of building permits. To this end, the draft bill essentially provides for three possibilities:

• Firstly, and until the end of 31 December 2024, the possible exemption from the stipulations of a development plan in favour of housing construction in areas with a tight housing market (§ 31 BauGB-RefE).
• Secondly, within the so-called unplanned inner area for the modification of a residential building or the change of use of a building for residential purposes, the possibility of derogation from the requirement of integration into the surrounding area if the establishment of a development plan is not necessary (§ 34 BauGB-RefE).
• Thirdly, in the so-called outdoor area, facilitations in the granting of permits for the conversion of formerly agriculturally used buildings into residential buildings (§ 35 BauGB-RefE).

The possibility of more comprehensive exemptions from the stipulations of the development plan is largely welcomed by the industry associations, in particular the Central Real Estate Committee (ZIA), mainly because it is known that an exemption can be granted more quickly than a plan amendment procedure can be carried out.

However, the representatives of the real estate industry's interests suggest that exemptions from the provisions of the development plan should also be granted more generously in order to strengthen central supply areas (retail trade). This is claimed to be particularly important in view of the effects of the COVID-19 Pandemic.
 

II. Extended right of first refusal for municipalities

If a private person (or company) sells a plot of land to another private person (or company) and if the land is located in a certain area - e.g. within the scope of a development plan or in a so-called redevelopment area - the municipality can, under certain conditions, assert a right of first refusal pursuant to § 24 BauGB and thereby, instead of the buyer, conclude a purchase agreement with the seller on essentially the same conditions that had previously been negotiated between the seller and buyer.

In implementation of the coalition agreement, the draft bill contains several provisions to strengthen the aforementioned municipal right of first refusal, namely

• The clarification that the coverage of a housing need in the municipality as well as the interior development are among the reasons for the public good which may justify the exercise of the right of first refusal (§ 24 BauGB-RefE). 
• The introduction of an additional right of first refusal for the municipality for planned and unplanned plots of land in the so-called inner area if these plots of land constitute an urban development or plant-related grievance in that they have considerable negative effects on the social and urban development environment, in particular due to their structural condition or their improper use (§ 24 BauGB-RefE). This refers to the properties colloquially referred to as " junk real estate". 
• The introduction of the possibility of enacting a pre-emptive right statute for unused land in areas with a tight housing market (§ 25 BauGB-RefE). 
• Furthermore, the extension of the period for exercising a municipal right of first refusal from two to three months (§ 28 BauGB-RefE).

However, in order to prevent the municipality from exercising its right of first refusal solely for the purpose of stockpiling land, the municipality that bases the exercise of a right of first refusal on the intended internal development should demonstrate in a comprehensible manner that a plot of land is actually eligible for internal development. To this end, it should, for example, present an urban development concept within the meaning of the new § 176a BauGB-RefE.

Not surprisingly, the strengthening of the municipalities' right of first refusal is rejected by the industry associations. In the opinion of representatives of practice, this would hinder new investments. There would even be doubts about the constitutionality of some of the aforementioned draft regulations, because they contain too vague wording and in particular justify an encroachment on the freedom of ownership.
 

III. Prohibition of Conversion

In order to create condominium ownership, a property can be divided into co-ownership shares by the owner according to § 8 WEG. In most cases, no approval is required for this so far.

According to § 250 BauGB-RefE, however, the division into condominium shares in the case of already existing residential buildings in areas with a tight housing market will in future require a permit, which should only be granted under strict conditions - e.g. in favour of co-heirs of a property belonging to an estate. The regulation is not applicable to new buildings. As a milder means of refusing a permit, the draft provides for the granting of a permit subject to conditions.

The objective of the regulation is to prevent the displacement of existing tenants by converting existing rental apartments into condominiums.

In cities such as Berlin, the aforementioned prohibition of conversion is already known in connection with locally applicable so-called conservation statutes. Instead of a locally limited validity due to corresponding statutes, the legislator's intention is that the conversion ban should now apparently apply nationwide in areas with a tight housing market, whereby the approval requirements in § 250 BauGB-RefE differ from those in § 172 BauGB.

The relationship between § 172 BauGB in conjunction with existing preservation statutes and § 250 BauGB-RefE is currently still legally unclear.
 

IV. Simplified preparation of development plans

According to many state building regulations, the construction of certain building projects, especially for residential use, is possible without a permit if it corresponds to the stipulations of the development plan applicable to the building project and the development is secured. By drawing up development plans, lengthy individual approval procedures can therefore be avoided. However, especially in the recent past, the preparation of a development plan has proven to be a complicated and particularly lengthy matter. In order to remedy this, at least slightly, the draft bill contains the following simplifications:

• Pursuant to § 13b BauGB-RefE, the possibility already granted to the municipality in the 2017 amendment to draw up zoning plans with a floor area of < 10,000 m², by which the permissibility of residential uses on areas in the so-called outer area close to the so-called inner area in an accelerated procedure is to be extended until 31 December 2022. 
• Furthermore, according to § 9 para. 2d BauGB-RefE, a possibility is to be created for municipalities to be able to stipulate in a so-called sectoral development plan that only residential buildings may be erected in the area of application which fulfil the structural requirements for funding by means of social housing promotion or where a project developer has undertaken in an urban development contract to comply with the funding conditions of social housing promotion, in particular the rent indexation, and that compliance with this obligation is ensured in a suitable manner. The scheme is to be limited until the end of 31 December 2024.

The introduction of a sectoral development plan as a new planning instrument is viewed rather critically by the sector associations because it may further delay rather than accelerate planning. In some cases, it is also described as simply "superfluous" in view of the means available under current law. Instead, the industry associations call for better staffing and technical equipment of the municipalities in order to speed up housing construction.

On the other hand, the extension of the period of validity of § 13b BauGB is viewed positively by the sector associations. This would enable a more rapid preparation of plans.
 

V. Compensation payments/ compensation money

According to § 1a (3) BauGB, the municipality that wishes to draw up a new development plan must provide compensation for the resulting encroachment on nature, in particular by establishing so-called compensation areas. Up to now the municipality has been able to solve this task by means of representations in the land use plan and determinations in the development plan. However, it can also conclude urban development contracts and provide for the alternative of providing compensation also on areas provided by the municipality.

The intended amendment to the BauGB is intended to add a further possibility of compensation. In the case of unavoidable or otherwise not compensatable interventions in nature and the landscape, which are provided for in a development plan, it should now be possible to pay compensation. The details are regulated in § 135d BauGB-RefE.

§ 135d BauGB-RefE provides that the compensation payment is to be collected by the municipality from the project developer or owner and is to be levied as a public burden on the property on which the intervention in nature is threatened. The obligation to pay the compensation money is to arise as soon as the property in question may be used for construction or commercial purposes.

The introduction of the possibility to pay compensation is largely welcomed by the industry associations, because it simplifies many procedures for drawing up development plans and allows a more targeted use of the amount to be paid.
 

VI. New area category

According to § 34 BauGB, a project in the so-called inner area is permissible if it fits into the character of the immediate surroundings in terms of the type and extent of the structural use, the construction method and the land area to be built over, and if the development is secured. If the character of the immediate surroundings corresponds to one of the area categories designated in the BauNVO, the project's admissibility is assessed only on the basis of whether it would be generally permissible under the BauNVO in this area category. The admissibility of a construction project may therefore depend crucially on which of the territorial categories specified in the BauNVO the construction project is to be assigned to.

With regard to the BauNVO, the draft bill therefore provides for the following amendments in particular:

• The new area category "Village residential areas" is to be included in the BauNVO. According to § 5a BauNVO-RefE, village residential areas should serve "to provide housing, accommodation for agricultural and forestry part-time businesses, accommodation for commercial enterprises that do not significantly interfere with the area, as well as to supply the inhabitants of the area with handicraft businesses".
• In village residential areas, a higher number of floor areas should be permitted than in pure or general residential areas.
• Also, the information on the degree of building use should only serve as "orientation values".

The purpose of the introduction of the new area category should be to enable a consensual coexistence of housing (new and existing buildings), agricultural enterprises (in secondary and main occupation) and commercial use in strongly changing rural areas.

The introduction of a new area category is viewed sceptically in practice. This is due in particular to the fact that new area categories often create a certain legal uncertainty with regard to their scope - this was recently demonstrated with the introduction of the "urban area" - and could thus also delay the drawing up of new development plans.
 

VI. Conclusion

It remains to be seen whether the regulations presented will actually be incorporated into the new law in this way and which changes will be introduced in the course of the further legislative procedure.

Although the draft bill shows welcome approaches to flexibilisation which are supported by the interest groups, it also emphasises instruments of state influence, of which it is questionable whether they actually serve to increase building activity or to create new housing - at least in the past they were at least partly used to implement political wishful thinking instead of contributing to the creation of new housing. Thus, the draft law is at least in part also an expression of the legislator's attempts not to bring about the housing shortage in certain conurbations by "unleashing market forces" and a corresponding correction on the supply side, but to rely on the instrument of (increasing) state regulation. Experience with such regulatory measures certainly justifies doubts about their suitability - time will tell.

All in all, it must be said that the planned changes to the law are unlikely to be enough. Accompanying measures, such as significantly better staffing and technical equipment of the municipalities, the further development of digital competence and ensuring efficient administrative processes are certainly just as necessary as the development of modern (road) transport concepts, a streamlining and simplification of the legal regulations on building planning law and finally, if necessary, approaches to a different resolution of unavoidable conflicts of objectives in the interest of accelerating the creation of new housing. The intended changes in the law should therefore only be the beginning. We will report on further developments.

Market participants who would be directly affected by the planned regulations should consider including the planned new regulations in their planning, bringing forward and postponing measures and/or making timely adjustments to operational processes or business models.