German Federal Employment Minister Bärbel Bas is proposing a reform to combat social fraud involving substandard housing, specifically targeting 'Schrottimmobilien' where gangs rent out overcrowded apartments at inflated prices to welfare recipients.

The reform includes implementing a 'square meter cap' on rents covered by the Bürgergeld (social welfare), aiming to prevent rent gouging and reduce abuse.

This measure is designed to limit excessive rent claims, especially in overcrowded and dilapidated apartments often exploited by organized gangs, many of whom recruit foreign citizens from countries like Romania and Bulgaria.

Last year, German job centers documented hundreds of organized abuse cases involving these properties, where gangs profit by overcrowding benefit recipients and inflating rent costs, with the state sometimes paying triple the normal rate.

Bas's proposal includes setting a local square meter cap to make illegal rental schemes less attractive to gangs and curb the exploitation of benefit recipients in substandard housing.

The new legislation is expected to be introduced in the coming weeks, with the goal of lowering housing costs and preventing misuse of 'Schrottimmobilien'.

The scheme often involves foreign citizens, mainly from Romania and Bulgaria, who are exploited in dilapidated buildings, with the financial burden falling on the German state.

Public opinion largely supports strict sanctions for benefit recipients who fail to comply with job center rules, with 68% agreeing that benefits should be cut if they skip appointments or refuse work, according to a survey by Insa for 'Bild am Sonntag'.

Additionally, 63% of SPD voters support full sanctions for non-compliant benefit recipients, reflecting broad backing for tougher enforcement measures.

The 'square meter cap' will enable local authorities to limit excessively high rents achieved through fraud, particularly in overcrowded apartments with inflated per-square-meter prices.

Within the coalition, there is some disagreement over the expected savings from the reform; while CDU officials estimate potential savings in the billions, Bas emphasizes that increased employment is the primary way to achieve fiscal benefits.

Overall, the reform aims to reduce the financial burden on the state and improve housing standards by cracking down on organized abuse and rent fraud in the welfare system.