Germany’s KfW stops making loans for refugee shelters amid migrant crisis, switches to low income housing

Development bank has provided €1.4bn in aid to refugee camps in the Middle East

German development bank KfW says it’s terminated its interest-free loan programme to temporarily house refugees and will now switch to providing loans for the sake of affordable housing for all people with low-incomes.

Amid a huge influx of refugees into Germany, the KfW said last October that it would provide city and municipal governments with ten-year, interest-free loans to finance the construction of asylum shelters. The loan programme started with €1bn, but due to the sheer number of migrants entering the country, was expanded to €1.5bn last month. The KfW says that with the €1.5bn, the local governments will be able to house up to 150,000 people.

The programme has been discontinued. Instead, “we’re planning on providing €2bn in finance for the sake of building affordable housing around Germany,” said Ingrid Hengster, the KfW Executive in charge of domestic funding, at a news conference in Frankfurt on Wednesday (February 3).

“Even before the refugees arrived, there was a great need for affordable housing in Germany, especially in metropolitan areas. The refugees crisis has greatly exacerbated that need,” Hengster said. Since last September an estimated 1.1m refugees, many of whom are from war-torn Syria, have come to Germany seeking asylum.KfW will lend the €2bn to regional development banks, including NRW.Bank of North Rhine Westphalia, which has become known internationally for its green bond issuance. These regional banks will then fund social housing projects. The bank has also provided a total of €1.4bn in aid to refugee camps in such places as Syria, Jordan, Lebanon and Iraq. The money has been used to finance infrastructure.

Hengster did not disclose the interest the KfW will charge on the social housing loans. Asked how the bank could afford giving interest-free loans to the municipal governments, Capital Markets Executive Günter Bräunig said it wasn’t too difficult given the KfW’s credit rating. Triple ‘A’-rated bonds like those from the bank currently offer investors interest rates below zero.

The KfW, owned by the federal government, ranked among the world’s biggest green financiers again last year, providing just under €30bn in finance for environmentally- and climate-friendly projects. Key among these projects is Germany’s Energiewende, or the government’s ambitious plan to move to an economy powered by renewable energy.

In 2013 and 2014 alone, the KfW provided €11.4bn in loans for the Energiewende, the bulk of which went to finance on- and offshore wind parks and some to solar. As a result, 44% of the renewable capacity installed during the two years was due to the KfW loans