Germany’s Federal Fiscal Court (BFH) is hearing several cases concerning the new property tax for the first time, a day that will send an important signal to millions of house and flat owners. The reform, which promised greater fairness, is once again under scrutiny. For the non-profit German Homeowners Association, the hearing is a wake-up call for policymakers: the existing valuation models create new inequalities while the burden on many households is rising noticeably.
Property-tax form
Association President Peter Wegner warns: “Three out of four owners are already paying more property tax today than before the reform. This is neither socially balanced nor politically sustainable.” The association’s advisory work reveals a clear imbalance: “People are stunned. Many want to vent their anger; others are seriously worried about how they will afford the higher amounts in future.”
The association criticises the levying of tax on the basis of highly simplified standard values. “Standardised classifications based solely on standard land values and flat-rate rents do not reflect reality and create incomprehensible injustices in many places,” says Wegner. This increases not only bureaucracy, but also the loss of trust. “The new property tax had an acceptance problem from the outset, and it has a fairness problem. The legislation must return to the political level and be corrected.”
Reform under stress: what is being heard in Munich
In three cases (II R 25/24, II R 31/24, II R 3/25), the BFH is examining whether the valuation rules (Sections 218 et seq. of the Valuation Act) under the so-called federal model are constitutional. Eleven federal states use this model, which is based on flat-rate standard land values, standardised net rents excluding service charges and typifications.
The specific question is whether millions of properties may be valued using flat-rate calculations, or whether this violates the equality principle in Germany’s Basic Law. Several fiscal courts have expressed constitutional doubts and referred the issue to the BFH.
Possible scenarios range from confirmation of the model to a referral to the Federal Constitutional Court. The questions under consideration affect millions of tax assessments.
What a decision could mean
- Confirmation of the valuation rules: if the Federal Fiscal Court considers the federal model lawful, property-tax value assessments and property-tax assessment notices already issued would generally remain in force. Objections based exclusively on the model’s constitutionality would then have no prospect of success. Only individual valuation errors, such as incorrect area information, standard land value or use, could still be asserted.
- Partial objection or referral to the Federal Constitutional Court: the BFH could consider certain valuation rules constitutionally doubtful and refer the proceedings to the Federal Constitutional Court (BVerfG) for review (Section 80(1) of the Federal Constitutional Court Act). Current objection proceedings would then be suspended until the court in Karlsruhe has ruled. Only then would it become clear whether individual calculation parameters, such as rent-level tiers, typifications, standard land value or methodology, need to be changed or adjusted retrospectively. This would create a transitional period of considerable legal uncertainty, but would not automatically cancel existing assessments.
- Unconstitutionality of the model (following a decision by the Federal Constitutional Court): if the BVerfG were to declare the valuation model or parts of it unconstitutional, the legislature would have to amend it. As in 2018, the court would probably set a transitional period during which the existing law could continue to be applied in order to safeguard local authorities’ tax revenue. Revaluations could take place only after new rules came into force. Retrospective application to property-tax assessments already issued would be conceivable only in narrowly defined exceptional cases, such as proceedings that remain open or provisional assessments. Local authorities would then have to adjust their multiplier rates to offset losses or sudden increases in revenue.
An unbalanced reform: a federal tax maze
The new property tax has applied throughout Germany since 1 January 2025, but it is far from uniform. Every federal state may depart from the federal model. The result is a patchwork of 16 systems. The goal was greater fairness; what is more apparent is complexity and uncertainty.
North Rhine-Westphalia: between aspiration and uncertainty
North Rhine-Westphalia, where the federal model is used, is particularly heavily affected by the reform. Even before the reform, property tax in Germany’s most populous state was at a record national level. Since the reform, people in North Rhine-Westphalia have had to contend with even greater distortions. “In NRW, the fairness deficit in the property-tax reform has a double and triple impact,” says Jan Koch, Managing Director of the German Homeowners Association in North Rhine-Westphalia.
In thousands of cases, the new rules have reportedly produced valuation errors that are at times absurd. “In addition, the reform has made property tax in NRW more expensive for housing and cheaper for businesses,” Koch explains. According to him, however, reduced multiplier rates for residential properties that could mitigate this effect have been introduced by only just over a quarter of NRW’s cities.
The German Homeowners Association in North Rhine-Westphalia is therefore calling for reduced multiplier rates for residential property and split rates to distribute the burden more fairly. NRW is also pressing for transparency about the bases of valuation – so that owners can understand why their property tax is rising while their neighbours receive relief.
Thuringia: political reverse gear
Thuringia has responded to the dissatisfaction of many owners by reducing the base tax rate for residential property by 26%. The rate is now 0.23‰ instead of 0.31‰, while commercial property is taxed more heavily. The aim is to relieve the burden on housing, correct misguided incentives and restore trust. As a result, around 750,000 new notices must be sent, an enormous undertaking that is stretching even the Ministry of Finance to its limits. “This reform embodies a spirit of shared responsibility,” says Thuringia’s Finance Minister Katja Wolf.
Hamburg: balancing through mathematics
Hamburg has taken a very different approach. The city-state is relying on a substantial increase in multiplier rates, but is attempting to distinguish between different uses of property. Multiplier rate B rises from 540% to 975%, and property tax C for undeveloped land rises as high as 8,000%. At the same time, Hamburg is introducing differentiated base tax rates: 0.70 for residential areas and 0.87 for commercial property. Officially, this is intended to be revenue-neutral; in practice, it means higher charges for many owners, particularly in central locations.
Nevertheless, Dr Herlind Gundelach, Hamburg State Chair of the German Homeowners Association, reports: “Protests against the new property tax have remained limited in Hamburg, especially as our Finance Senator has repeatedly and emphatically confirmed his earlier statement that if additional revenue arises compared with the previous rules, he will return it to taxpayers.[…].”
Whether in NRW, Thuringia or Hamburg, policymakers and administrations everywhere are trying to bring the consequences of the reform under control. Yet every correction at state level reinforces the structural problem: instead of uniform fairness, there is a patchwork of tax systems. “Ultimately, the amount of property tax is determined by where a person lives, not by the type of home,” says German Homeowners Association President Peter Wegner.
Revenue neutrality – a fairy tale with consequences
The reform was intended to rebalance individual burdens and keep total revenue stable. Yet analyses by CORRECTIV & Finanztip show that around 80% of local authorities in Hesse exceed the recommended multiplier rates, as do around 20% in Saxony. The German Homeowners Association criticises this: “Property tax must remain affordable. A higher burden must not be the objective.”
These cases are not a peripheral issue: they will determine the future of Germany’s property-tax system. If the court confirms the federal model, everything will remain as it is, with complexity continuing to increase. If the model is overturned, a large-scale recalculation will be required, creating risks for local-authority budgets and opportunities for homeowners. A judgment is expected on 10 December 2025.