After months of political wrangling, Germany’s governing coalition reached a compromise on Wednesday on how heating costs should be shared between tenants and landlords.
At the heart of the deal is tenant protection: if landlords continue to install oil or gas‑based heating systems, they will no longer be able to pass all future costs on to renters.
Instead, under a reworked version of the country’s controversial Building Modernisation Law (Gebäudemodernisierungsgesetz), landlords will be required to share the financial risks that come with fossil fuels, including CO2 charges, gas network fees and the use of biogenic fuels.
The agreement follows a long and often bitter debate over the previous "Heating Law" introduced under former economy minister Robert Habeck, and particularly its requirement that new heating systems run on at least 65 percent renewable energy.
With the compromise in place, the coalition says the path is clear for the cabinet to approve the reform in mid‑May, after which it will go to the Bundestag. The government expects the law to be passed this year.
What the new rules mean for tenants
For tenants, the central change is that they will no longer bear the full cost consequences of a landlord’s decision to install an oil or gas heating system.
Renters have little or no say in what type of heating system is used in their building, even though they ultimately pay the ongoing energy bills.
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Under the agreement, cost risks linked to fossil‑fuel heating will now be split between tenants and landlords. This includes costs arising from the CO2 price, gas network fees and biogas or similar climate‑friendly fuels added under future quotas.
According to Matthias Miersch, parliamentary group leader of the centre-left Social Democrats (SPD), these cost risks will effectively be "consistently halved".
Justice Minister Stefanie Hubig (SPD) described the deal as “a good compromise – sustainable and fair”, arguing that it is unacceptable for tenants to shoulder the economic consequences of heating decisions they did not make.
Importantly for tenants, the regulation is intended to apply not only to future rental agreements but also to existing tenancies once a heating system is replaced. The government’s stated goal is to ensure that climate protection does not become a "cost trap" for people who rent their homes.
What the new rules mean for landlords
One of the coalition’s most significant decisions is to scrap the so‑called 65‑percent rule, which required newly installed heating systems to be powered mainly by renewable energy. Instead, landlords will again be allowed to install new oil and gas heating systems.
But from January 2029 these systems must increasingly run on climate‑friendly fuels such as biomethane or synthetic fuels, under a planned four‑step "bio‑staircase" extending to 2040.
For existing systems, a green gas quota will be introduced from 2028.
In return, landlords who choose fossil‑fuel heating will be obliged to share the ongoing costs of their decision. From 2028 onwards, CO₂ costs and gas network fees will be split equally between landlords and tenants, alongside parts of the biofuel costs in the early stages of the bio‑staircase.
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Jens Spahn, parliamentary leader of the Christian Democrats (CDU), framed this as restoring "freedom in the basement", while still achieving a fair balance between those who decide on heating systems and those who pay monthly bills.
CSU politician Alexander Hoffmann also pushed for hardship clauses to ensure that landlords of low‑rent, unmodernised buildings are not disproportionately burdened.
At the same time, landlords continue to benefit from state subsidies for replacing heating systems, which the coalition has said will remain in place.
How we got here – and how the deal has been received
The compromise marks a major shift from the Heating Act developed under the previous traffic‑light coalition, which environmental groups say was already weakened by various exemptions and long transition periods.
Critics now warn that allowing new gas systems and relying on biogenic fuels could lock tenants into higher long‑term costs as CO2 prices and network fees rise.
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Environmental organisations have also argued that the reform slows progress toward Germany’s climate targets by extending dependence on fossil fuels.
On the other side, landlord associations have voiced fierce opposition. Haus & Grund president Kai Warnecke told Reuters that the agreement was a political failure, arguing that landlords were being made to pay for state‑driven CO2 pricing and rising energy infrastructure costs.
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