Housing construction in Germany is still in crisis, and the alarm calls from the construction and real estate industry are becoming more and more dramatic. The current decline in new construction could hit the entire economy hard, it was said on Thursday at the “Housing Construction Day” of a coalition of associations. Completions continued to decline and the need, especially for affordable rental apartments, increased dramatically.
“Under the current conditions, our companies are forced to stop new construction because it is no longer affordable – neither for the builders nor for the future tenants,” said the President of the Federal Association of German Housing and Real Estate Companies (GdW), Axel Gedaschko. At the same time, demand remains high – “the dramatic situation on the housing markets will continue to worsen in the coming years”.
According to the real estate industry, there is now a shortage of 800,000 apartments in Germany. That’s 100,000 more than last year. The alliance is demanding “immediate special funding” of 23 billion euros from the federal and state governments, including 15 billion euros for 100,000 new social housing units and eight billion euros for the construction of 60,000 affordable apartments.
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From the perspective of Lukas Siebenkotten, President of the German Tenants’ Association, no progress has been made in “affordable housing”. “Of the apartments that have been completed in recent years, many are only for those citizens who have a lot of money,” he said.
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Rents have increased by almost a double-digit percentage compared to the previous year. One in three of the 21 million renter households pays more than 30 percent of their income for their apartment. Having to spend more than a third of your monthly budget on rent is considered financial overload and a risk factor for poverty. “It is obviously the case that the funds made available by the state for new construction are not yet sufficient.” But affordable housing is just as important as defense or climate protection.
Federal Construction Minister Klara Geywitz (SPD) addressed the demands from the industry at the Housing Construction Day, but primarily referred to ongoing reform projects and once again rejected further subsidies: “We will not be able to subsidize everything that is built,” said Geywitz.
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This is not affordable for the state, given the sheer scale of the construction. “There will not be a permanent subsidy in all areas,” said Geywitz. The federal government is currently promoting low-interest loans for “climate-friendly new buildings” through a KfW program.
The federal government and the states are providing a record sum for social housing construction, and the latter have recently reported a significant increase in the construction of price-controlled apartments. The government is working on simplifications in building regulations, including building type E, which allows the contracting parties to deviate from technical standards.
The model building regulations will be changed and the building code will be supplemented with rules that make roof extensions and noise regulations easier. She expects new noise rules to be presented to the cabinet by the summer break, which will allow residential areas to move closer to commercial areas.
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There is also a “pact for planning and acceleration” with the states, with relaxations in regulations for car parking spaces, for example. However, many things are difficult to implement quickly at all levels. “Every regulation has an official who protects it,” said the minister.
However, all of this is taking too long for the industry. According to the head of IG Bauen-Agrar-Umwelt Robert Feiger, the associations are expecting a decline in total investment in housing construction of almost 5.5 percent this year. Building technology is the main price driver for construction costs.
The associations are therefore calling for standards to be lowered so that construction can be easier, cheaper and faster. Orders collapsed and capacity in the construction industry began to be reduced. “The industry is experiencing a historic crash; some manufacturers went on short-time work as early as autumn,” said Katharina Metzger, President of the Federal Association of German Building Materials Trade.
Robert Habeck caused a brief stir
According to DIW Econ, a subsidiary of the German Institute for Economic Research (DIW), one in seven euros of gross value added in the economy as a whole has to do directly or indirectly with housing construction. Around one in seven jobs and 17 percent of tax revenue are related to this industry.
“This makes the industry almost as important from an economic perspective as the entire automotive industry,” said study leader Matthias Gornig. He predicted a decline in tax revenues of five billion euros this year, “solely because housing construction is collapsing.”
Federal Economics Minister Robert Habeck (Greens) also commented on the allegations and descriptions of the miserable situation and caused a brief stir when he said: “The political background music” was “that it was basically planned that way”.
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He was referring to the interest rate hike by the European Central Bank (ECB), which was aimed at combating increased inflation caused by war and crisis. “That is the point of higher interest rates, that the economy cools down.” The main cause of the drop in orders and vacant lots was these suddenly increased interest rates.
However, he is confident that projects that have been left behind will now be resumed. “But we have to hold on a little longer, that’s the honest answer,” said Habeck.
Further data was presented by the Working Group for Contemporary Building ARGE, a housing construction institute in the state of Schleswig-Holstein. Study leader Dietmar Walberg warned of the growing gap between construction activity and immigration. “Due to the massive slump in the construction of new apartments, the housing sector is strategically not adequately prepared for demographic and migration-related population developments or for the transformation of the residential building stock,” he said.
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However, the continued high construction costs, which are driven by high technical standards, are also a problem. From 2020 to 2023, manufacturing and construction costs increased by over 42 percent. A solution could be a new “standard E”, which makes compromises in certain technical equipment or material use.
Thinner false ceilings, for example, are possible without the quality suffering. A normal apartment in a new building currently costs 4,079 euros per square meter. The ARGE calculated that a simpler standard could reduce these costs by 1,112 euros.