A drop in the ocean for Leipzig’s budget: the tax on second homes is set to rise from 1 January

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One question remained unanswered after the city announced on 29 July: “From the 2027 financial year onwards, the second-home tax is to be raised from the current 16 per cent to 20 per cent. The senior administration has now set in motion the corresponding amendment to the city’s statutes, which will be submitted to the city council for approval in the autumn.” The question was quite simple: what is the actual point of this? Is it one of the measures the city is using to alleviate its debt problem?

The answer is: yes. Every nook and cranny is being scoured, every possible source of revenue for the city budget is being examined – a budget that has now been running an unrelenting deficit of around 300 million euros a year for three years. This is not the city’s own doing.

Leipzig is certainly not living beyond its means. On the contrary: a whole series of investments now have to be postponed or cut back. The number of administrative staff is being reduced. The administration aims to cut expenditure by 100 million euros a year in order to alleviate the strain on the budget at least a little.

But the spiralling costs are almost exclusively due to statutory obligations imposed by the federal government on local authorities. Across Germany, thousands of local authorities are sliding into debt, whilst in Berlin no effort whatsoever is being made to find a solution to this problem.

A mandate from the City Council

It was the BSW parliamentary group that, during the deliberations on the 2025/2026 budget, tabled the motion to increase the second-home tax in Leipzig. The motion was passed by the city council by a large majority to raise the second-home tax rate, which has been in force since 2017, from 16 per cent to 20 per cent.

At 16 per cent, Leipzig had previously been towards the lower end of the range among cities that levy a second-home tax. Some cities – such as Konstanz – charge as much as 35 per cent. In Berlin, the tax rate stands at 20 per cent. And that is precisely what Leipzig intends to emulate.

As part of the necessary amendment to the municipal by-laws, an electronic application procedure is now also to be introduced. According to the Finance Department, this will also bring the system into line with the amendment to the Tax Code (Section 150(1) AO). As the aim is for this procedure to come into effect by 2026, there is a certain amount of time pressure behind the proposal.

The City of Leipzig has levied a second-home tax since 1 January 2006. This tax applies to all adults who maintain a secondary residence within the city limits of Leipzig as defined by the Federal Registration Act. Since 2017, the tax has amounted to 16 per cent of the annual rental cost per calendar year. This rate is now set to rise to 20 per cent.

The proposal from the Finance Department emphasises that the change has nothing to do with the tight housing market. The administration assumes that the number of flats used as second homes will remain more or less the same.

But of course, it is all about raising a little money for Leipzig’s cash-strapped budget. The Finance Department estimates that, if the amendment to the by-law is approved, it will generate revenue of 2.1 million euros per year.