The Munich Building Land Model SoBoN 2021:
Planning Arrangements for Residential Construction

(This article has been published in the „JUVE Handbuch Wirtschaftskanzleien 2022/2023“ („JUVE Handbook of Commercial Law Firms 2022/2023“) as a co-publishing contribution, reproduced here with the kind permission of the JUVE publishing house.)

The housing shortage prompted the City Council of the City of Munich to pass the SoBoN (Socially Just Land Use = SoBoN) at the beginning of 1994, stipulating that and how the beneficiaries of a development plan procedure (B-plan procedures) should share in the municipal burdens associated with new residential building rights and how to ensure a floor area share of subsidized housing. It was a matter of providing guidance to the administration on uniform enforcement (equal treatment) and ensuring that a building land model with appropriate burden sharing is practiced, taking into account indications from case law.

Since then, every development plan in Munich has been accompanied by an urban development contract (notarized, so-called basic agreement), in which the obligations of the plan beneficiaries and their agreement with the planning result are formulated.

Since 1994, there have been several modifying resolutions on the SoBoN, the last time in 2017. After the 2020 municipal election, guiding principles for an urgent amendment of the SoBoN were included in the coalition agreement between the GREENS and the SPD. In July 2021, the city council adopted them for new B-plan procedures. Old procedures already underway will be completed according to the previous rules.

Key statements

• Munich’s residential land model SoBoN has a 28-year, established tradition – it has been reformed in 2021.
• Anyone who wants to become a plan beneficiary for residential building rights must commit himself in a notarized contract according to the rules of SoBoN 2021. He bears higher burdens than before.
• The city requires commitment to at least four of six components – high percentage of social housing, 40-year commitment period, flat-rate infra-cost structure contribution, exclusion of apportionment for share of residential building rights in favour of / by forming a Condominium owners’ association (WEG).
• The plan beneficiary can set its own bonding rates within a certain range, but must use them to reach 100 points in a predefined scorecard.

The original principles

Based on the law and case law, in particular on so-called domestic models, the following principles have always been practiced in Munich within the framework of the SoBoN:

• Owners or secured purchasers of future residential land are liable to pay benefits.

• The beneficiaries of the plan bear the causal costs of the planning project and provide free-of-charge land transfers for green and traffic areas, pollution control facilities, community facilities (daycare center) and nature conservation compensation.

• They bear the production costs for development and compensatory measures.

• They bear a share of the production costs for the causal social infrastructure (elementary school and daycare places).

• They bear the costs of the process, including any competitions, fees for experts and planners, etc.

• They enter into cost-relevant commitments for a share of subsidized rental housing or also price-subsidized ownership acquisition. For many years, the share of subsidized/price-controlled housing has been 30%, and since SoBoN 2017 it has been 40%, of newly created residential construction (floor area).

The contractual regulations are very detailed, months of negotiations are unavoidable, the detailed solutions are often difficult to work out. As a result, a routine has developed over the decades. As a rule, all parties involved were already aware at the time of land acquisition of what the burdens from the SoBoN would amount to.

Specifications for the SoBoN 2021

From the coalition agreement “With courage, visions and confidence: All of Munich in view” from May 2020 it could be read that significant, additionally burdensome changes are coming. The keywords for this from the coalition agreement: 

• 50% of the building rights areas transferred to the city
• Permanent commitment of subsidized housing, not only as before for 25 years
• This also on private development sites
• Contributions for further infrastructure measures, such as old people’s/nursing facilities, secondary schools, cultural facilities, public transport development costs, obligation to install solar energy systems
• Strengthening of cooperative housing projects
• Allocation of urban land only as heritable building rights
• Increase in the proportion of subsidized housing construction on municipal land from 50% to 60%.

Looking over the fence

The paradigm shift towards urban land acquisition drew attention to building land models in other cities such as Ulm, Münster, Frankfurt, Hamburg. In view of the price situation on the land market in Munich, it became clear that there are narrow limits to this approach in Munich. The long lead time before residential building rights can become legally effective in municipal hands had to be taken into account, as well as maintaining the economic incentive for entrepreneurs to get involved in long-standing B-plan procedures, to avoid a procedure-related increase in the price of completed apartments, and to bring as many residential building rights as possible through the procedure. The idea of limiting the WEG condominium share to 10% was dropped after some time. The considered compulsory sale of plan areas to the city at a certain reduced price before the start of the development plan procedure also did not prevail.

The long-standing social commitment and the heritable building right principle in the allocation of municipal land shares were taken up and deepened, based on rulings of the Federal Court of Justice of 08.02.19 (V ZR 176/17), of 16.03.18 (5 ZR 306/16) and of 26.06.15 (V ZR 144/14). Ultimately, it became clear that adopting a model from another city was out of the question.

The SoBoN 2021

The new procedural principles for the SoBoN 2021 break away from the previous practice of a uniform default. The plan beneficiary can now choose within a range, taking into account its own goals, its calculation, but must make a binding declaration to the city. On the website muenchen.de/infos/social-fair-land-use.html, the principles and, in further submenus, the procedural specifications can be viewed in detail. The central element for the selection are six components (so-called building blocks), which the plan beneficiary must weight in order to receive points according to a fixed catalog. 100 points must be reached by weighting, otherwise there is no development plan.

The 4+2 components („building blocks“)

The six components are:

• the percentage of the newly created residential building right for subsidized/priced housing construction with 5 points for 40% to 50 points for 65%
• the agreement of a WEG-partitioning prohibition with 5 points for 50-55% of the total residential-floor space (floor space = GF) up to 50 points for 100% – in each case including subsidized housing construction
• the obligation under the law of obligations to a commitment period for the subsidized housing of 40 years with 10 points
• a flat-rate social infrastructure cost contribution per permitted square meter of floor area housing with five points for 100 euros to 35 points for 250 euros
• the percentage sale of the newly created residential building right-GF to the city from 5 points for 5% to 50 points for 50% of the total residential GF
• the percentage sale of the newly created residential building right-GF to cooperatives from 5 points for 10% to 15 points for 30% of the total residential-GF

In addition, there are the previously usual burdens (see above).

The 100-point principle with its choices builds on the city’s idea of a so-called basic model, which manages without selling land with residential building right to the city with 

• 40 points for 60% of the total residential building right-GF as a quota for subsidized housing construction and price-controlled rental housing construction
• 30 points for WEG subdivision prohibition for 80% of the residential building right GF (including subsidized housing construction)
• 20 points for 175.00 EUR infrastructure cost contribution
• 10 points for 40 years commitment period

Who decides for an individual model solution must consider that he must select from these four basic components in any case, with the two sales additional components to city/cooperative he can fill only still missing points up to 100 points. 

The city hopes that plan beneficiaries will decide to sell GF land shares to the city of Munich. Purchase prices are low, 375 euros/m² GF for subsidized rental housing, 675 euros/m² GF in the municipal subsidy program Munich Model Rent, 1,200 euros/m² GF in price-controlled rental housing. Also, a sale is only possible for a minimum area of 2,500 m² GF under building law.

How the new model will be received by potential plan beneficiaries, by investors, by existing homeowners, by resellers, by the market, is an open question. It is also an open question whether housing will ultimately become more expensive, or whether land for development will become less expensive.

What remains unchanged is the practice that at the end of the planning process, the adequacy of the required services is determined by valuation on the part of the city. The initial value of the planned area is compared with its final value; the difference is the increase in value due to planning, of which at least one third is to remain with the plan beneficiaries after the total services to be rendered have been deducted in terms of value.

In the urban development contract, appropriate safeguards, securities, deadlines, in short everything that has always been customary, must continue to be agreed. First of all, the beneficiary of the plan must declare the so-called basic consent, i.e. his agreement with the SoBoN 2021, and in the subsequent, notarized basic agreement after the content of the planning process has been solidified, the details are specified. Only then can the resolution on the development plan be passed.