The federal government wanted to build 400,000 new apartments per year when it came into office in 2021. But this goal is clearly missed. “I do not assume that the number can be reached in 2022 and 2023,” admitted Klara Geywitz, Minister for Housing, Urban Development and Construction, to the news portal web.de.
A recently published statistic shows how big the challenge is. After that, the number of building permits for new apartments is declining. Around 24,300 apartments were approved in November 2022, 16 percent fewer than in the same month of the previous year, the Federal Statistical Office said.
More people, less building material
The population in Germany has continued to grow and is at an all-time high of 84.3 million people. The simultaneous decline in construction activity has led to a record-breaking housing shortage. According to a study by the building research institute ARGE, more than 700,000 apartments are missing. This is the largest housing deficit in more than 20 years.
The reasons for the deficit are obvious. The corona pandemic led to disruptions in global supply chains and, as a result, to massive bottlenecks in building materials. The war in Ukraine aggravated the situation. Both Ukraine and Russia are among the largest producers of structural steel and timber.
At least ten years of housing shortage
Added to this is a lack of new building land, rising interest rates, the well-documented shortage of skilled workers in Germany and finally an influx of hundreds of thousands of refugees from Ukraine and elsewhere, all of whom are now urgently looking for a place to stay in Germany’s cities.
According to the Federal Association of German Housing and Real Estate Companies (GdW), the situation is much worse than Geywitz admits. “We estimate that around 280,000 apartments will be completed in 2022, but only around 240,000 in 2023 and only 214,000 in 2024,” GdW boss Axel Gedaschko wrote to DW on request. Germany is facing a housing shortage for at least the next ten years.
More old people, more singles
In addition to the overlapping crises that are currently exacerbating the situation, there are also demographic factors. The number of single households in Germany is constantly increasing, while at the same time the German population is ageing. Older people are not just staying in their homes longer. In the absence of affordable alternatives, they do not give up their homes, which are suitable for a family, even if the children have moved out and their partner has died.
Gedaschko criticizes that the federal government is far from solving the problem. “The fact is that the federal government has so far done far too little to achieve its own housing target,” he says. “The housing companies need a long-term housing policy with a reliable and adequate financing system.”
Another problem that construction companies face is what David Eberhart of the Berlin-Brandenburg housing association BBU calls a “rapidly growing” pile of regulations.
Building materials are so scarce that operations on construction sites have to be stopped again and again
Often, he said, different agencies would require the company to have different assessments involving conflicting building standards: soundproofing and energy efficiency requirements, for example, sometimes required different insulation. According to Eberhart, it is a “wild thicket” of bureaucracy.
Landlords want to make a profit
Despite the housing shortage, there are also empty buildings in Germany. Mostly where they are not needed. Or because they are too expensive. According to David Eberhart, renting a newly built apartment is only profitable from a monthly square meter price of 13 euros. “Anything below that has to be subsidized.” The current average rent in Germany is 8.30 euros per month and square meter.
The solution could be more social housing. The state subsidizes the construction of apartments, and the owners guarantee to rent these apartments for a small sum for 20 to 25 years. However, social housing has steadily declined in recent decades.
Too high costs
According to the Federal Statistical Office, in 2006 there were still two million of the three million social housing units. Now it’s only a million. The federal government has set itself the goal that 100,000 of the 400,000 apartments to be built each year should be social housing. In fact, according to the German Tenants’ Association, only 20,000 new social housing units were created in 2022.
For experts like Dietmar Walberg, Managing Director of the ARGE Institute, this only allows one conclusion: the government underestimated the extent of the problem. In the end, it’s all about money, he says. “If they want to build 400,000 homes a year, of which 100,000 are supposed to be subsidized, then they have to dig deep into their pockets.”
50 billion euros for housing?
According to Walberg’s calculations, housing costs around €5,000 per square meter to build, and at least €2,000 of that would need to be subsidized to make housing affordable. That’s why Walberg is among those calling on the government to set up a special housing fund worth 50 billion euros. Comparable with the special fund of 100 billion euros that Chancellor Scholz promised the Bundeswehr after the Russian attack on Ukraine.
100 billion euros for the Bundeswehr: Federal Chancellor Olaf Scholz announced this on February 27, 2022 in the Bundestag
Tenant associations agree with this demand. In her opinion, the government could do more to create new social housing. For example, allow commercial real estate as living space or ensure that the requirements for social housing remain in place for longer.
Investors benefit from subsidies
“It’s a big problem in Germany,” Jutta Hartmann, spokeswoman for the German Tenants’ Association, told DW. “Social obligations such as the rental price cap only exist for a certain period of time. And when that is over, the apartment goes on the open market and can be used to make a profit.”
This also means that developers use the state subsidies to create social housing and calculate that they can still make a profit on the property 20 years later. “The whole issue of social housing has been neglected for years,” says Hartmann. “Apparently there was no political interest in changing the laws or making social housing more attractive to investors.”
Climate protection makes construction more expensive
What has changed is the creation of a separate Ministry for Building and Housing in the Scholz government. This is the first time since 1998 that a federal government has dedicated a separate department to the topic. Linked, however, to a big question that is still unanswered: how can the government’s ambitious housing construction targets be reconciled with its equally ambitious climate protection targets?
Geywitz recently announced that it would provide 750 million euros annually for climate-friendly construction. Several housing associations immediately criticized this figure as ridiculously low in a market that required tens of billions of euros to be invested in construction every year.
In the end, the tenants pay
Landlords, meanwhile, have found that insulating older homes can make them big bucks – because they don’t have to pay for it themselves. “From the tenants’ point of view, every climate-friendly renovation of a building automatically means an increase in rent,” says Jutta Hartmann from the German Tenants’ Association. “German tenancy law makes this possible. If a landlord refurbishes his building, he can pass on all the costs to the tenants. That’s not fair when part of the population is essentially shouldering the financial burden of climate-friendly modernization.”
The government has not yet grasped this problem, states Dietmar Walberg from the building research institute ARGE. “The main conflict between the affordability of climate protection and the affordability of living space is pasted over with words: ‘Yes, we have to do all that, yes, we can do it, that’s no problem.’ But it’s a problem, it’s a massive problem, and it’s underestimated.”