Status: 02/25/2023 3:22 p.m
It could be a rude awakening for many homeowners when the next property tax notices arrive. In some cases, the annual fee will probably be many times higher because of the new calculation.
Norbert Stalter and his wife live in the south of Freiburg. An upscale residential area, but the house itself is rather simple and unassuming. It was built in 1956, a typical detached house from that time, with wooden paneling in the attic, balcony and awning. However, the property is larger than average: 2500 square meters. This could cost them extremely dearly. As of now, it could very well be that they will have to pay 14,000 euros in property tax annually in the future – instead of the previous 433 euros.
Baden-Württemberg is going its own way
Norbert Stalter is shocked. In 1986 he and his wife bought the house, and they paid it off for a long time. Paying a five-digit amount a year in property tax in the future – he says, they can’t afford that. “When I calculated the number for the first time, I felt very bad. I slept very badly,” says the pensioner.
The reason for Stalter’s sleepless nights: Baden-Württemberg takes a different approach when calculating property tax. Unlike in other federal states, only the size of the property and the so-called standard land value count for the calculation – a value that is based on the residential area and is determined by a panel of experts.
The standard land value in Norbert Stalter’s residential area in Freiburg is 1,050 euros per square meter. A neighbor and tax advisor drew his attention to the fact that this value, in combination with the size of the property, could lead to a huge increase in property tax. If nothing changes in the assessment rate of the city of Freiburg, it will probably be more than 14,000 euros.
Many factors are ignored
The Freiburg tax consultant Helmut Weyer considers the Baden-Württemberg system to be unfair. “Living space, equipment of the house, construction standard and so on – that has so far had a significant influence on the property tax value. That is completely ignored,” he says, taking the example to the extreme: A simple single-family house will cost just as much property tax in Baden-Württemberg in the future like a 30 million euro mansion.
Normal single-family house owners with a garden are the losers of the reform. For owners of apartment buildings, on the other hand, it could even be cheaper than before because several residential units on one property share the tax.
“Incentives for efficient use”
According to the state government, this is exactly what the property tax reform is intended to achieve. Property owners should think about creating new living space. “The land value model chosen in Baden-Württemberg provides incentives for the efficient use of developable areas,” the Ministry of Finance said on request.
Only in the rarest of cases can single-family homeowners with a large piece of land simply put an apartment building in their garden, criticizes the Haus und Grund owners’ association. But he also warns against panicking too quickly.
“Many real estate tax calculators on the Internet give the wrong picture,” says Baden-Württemberg’s state manager Ottmar Wernicke. Because of the so-called assessment rates, which would be recalculated for the property tax reform 2025, the municipalities would have the opportunity to relieve owners – by reducing them.
Raising rates cannot be reduced indefinitely
But it is often not that easy: the assessment rates apply uniformly to all properties and all districts of a municipality. Different assessment rates are not permitted. So the cities have little leeway. “There will be winners. But there are also very heavy losers,” says Eike Möller from the Baden-Württemberg Taxpayers’ Association. As the example of Norbert Stalter in Freiburg shows.
The assessment rate here is currently 600 percent – regardless of whether it is a high-rise property or a single-family home. In order to relieve single-family homes, the cities would have to lower the rate so much that they would hardly have any income in other residential areas. According to experts, there will therefore be no radical reduction.
An example: Even if the city of Freiburg were to lower the current assessment rate from 600 to “only” 400 percent, Stalter would still have to pay around 10,000 euros in property tax per year according to the new calculation model.
Owners should object immediately
The taxpayers’ association doubts the constitutionality of the model in Baden-Württemberg and has already filed a lawsuit as a precautionary measure. He also advises owners to lodge an objection as soon as the so-called property tax assessments are in the mailbox.
They are not yet final tax assessments, but according to the Taxpayers’ Association, owners can only appeal against them. When the final property tax assessment arrives, it will be too late, says Möller.
In any case, Norbert Stalter from Freiburg will immediately object as soon as the first notice from the tax office is in the mailbox. And then hopes that the Federal Constitutional Court will overturn the Baden-Württemberg model. “Right now I’m living in the hope that it just won’t happen,” he says. “You need this hope, otherwise you can’t live with it.”