Study: Tax Bias Against Homeowners in Germany Leaves Owner-Occupiers Up to €87,000 Worse Off
Study finds pronounced tax bias against homeowners in Germany—owner-occupiers lose up to €87,000 over 15 years compared with landlords, IW analysis shows.
A new analysis by the Institut der deutschen Wirtschaft (IW) finds a clear tax bias against owner-occupiers in Germany, with homeowners who live in their property losing substantial fiscal advantages compared with landlords. The report’s model case—buying a €300,000 apartment in a major city—shows owner-occupiers are roughly €87,000 worse off over 15 years than a landlord who rents the same unit, largely because of differential tax treatment.
Owner-Occupiers Lose Tens of Thousands Compared to Landlords
The IW’s city example translates into markedly different returns on invested capital: landlords in the scenario achieve nearly a 9 percent return, while owner-occupiers see about 6 percent. That gap accumulates over time; in metropolitan settings the analysis quantifies the loss at roughly €87,000 across 15 years. Even outside major cities, the study estimates a disadvantage for owner-occupiers in the order of €40,000 to €50,000 for the same purchase price.
Tax Rules Allow Landlords to Offset Costs
The central driver of the difference is tax deductibility. Landlords may subtract depreciation, mortgage interest and many maintenance and operating costs from taxable income, which improves net returns and reduces effective tax burdens. Owner-occupiers receive none of these allowances because their residence does not generate taxable rental income, meaning they forego those fiscal offsets despite bearing the same acquisition and upkeep expenses.
Germany’s Position Against European Peers
The IW compared Germany with six other European countries, including the Netherlands, France and Austria, and found Germany to be a notable outlier. In the other countries examined, tax systems generally favor owner-occupiers through measures such as lower transaction taxes for first-time buyers or comparatively higher taxation of rental income. By contrast, the IW calculates landlords in Germany achieve the highest average returns among the sample — roughly 7 percent — while owner-occupiers post the weakest results.
Low Homeownership Rates Reflect Structural Incentives
The fiscal imbalance appears to be reflected in ownership patterns. Germany’s homeownership rate was just 44 percent in 2022, far below the EU average of about 70 percent, the study notes. Analysts and IW experts argue that this disparity undermines wealth building and private pension provision for many households, since home equity commonly serves both as savings and long-term security for older households.
Expert Recommendation: Targeted Transfer Tax Relief
IW housing expert Michael Voigtländer recommends policy adjustments to rebalance incentives and encourage ownership. He suggested introducing a tax-free allowance or partial exemption in the property transfer tax (Grunderwerbsteuer) for owner-occupiers as a targeted way to lower acquisition costs. Proponents say such a change would make home purchase more affordable and support both asset accumulation and retirement planning for middle-income families.
Potential Market and Fiscal Trade-Offs
Any reform to favor owner-occupiers would carry trade-offs. Reducing transfer taxes or increasing deductions for buyers would shrink public revenues unless offset elsewhere, and could have knock-on effects on housing demand and prices. Policy makers must weigh the social benefits of higher homeownership and private savings against budgetary constraints and the potential to distort markets in favor of buyers over renters.
Despite those trade-offs, the IW analysis frames the issue as a choice about social priorities: whether the state aims to promote homeownership as a route to long-term wealth and retirement security, or to maintain a fiscal framework that effectively rewards property investment for rental income. The study’s numbers give concrete shape to that debate and are likely to sharpen calls for targeted tax relief ahead of upcoming housing-policy discussions.
