Why Germany's housing shortage will be a big problem for the next government

Anne Haferkorn and Georg Stein are urgently looking for a cheap apartment. They also have two children and work from home, so they urgently need an apartment with at least four rooms in Speyer (Rheinland-Pfalz) or the surrounding area. They could afford around 1,600 euros per month for total rent.

"We've placed applications in nursing homes and kindergartens, we've distributed them and spoken to people on the street or in cafes, we've placed advertisements in newspapers. The competition is simply too great," says Georg Stein, who has yet to receive any response to his request for a larger apartment.

Big problems with the lack of apartments

Rents in Germany have been rising sharply for years. According to research institute Empirica, a 60-square-meter apartment of a basic standard in Berlin cost an average of 650 euros in 2024, excluding additional utility costs.

Other cities like Frankfurt am Main or Stuttgart are even more expensive, with rent averaging 790 to 800 euros.

 But Munich is, according to the latest data, the most expensive with an average cost of around 1,150 euros for this area. Even with good and secure jobs, many people are rejected when looking for an apartment.

"People with professions like police officers, nurses, but also single parents with children, as well as those with foreign surnames, are often overlooked. They are particularly badly off, but the whole of society is affected, not just those with lower incomes," says Lukas Siebenkotten from the German Tenants' Association.

The problem has been known for a long time. In the fight against high rents, the incumbent government aimed to boost housing construction. The plan was to build 400,000 apartments a year, of which 100,000 would be subsidized. However, according to expert estimates, only a little more than half of them will be built by 2024.

Construction in crisis

According to Siebenkotten, no one should spend more than a third of their net household income on housing. In reality, millions of people spend more than 40 percent, and hundreds of thousands even more than 50 percent, he says.

The construction industry is in deep crisis. Uncertainty among potential buyers is felt everywhere. Lars Diehl is a project manager at Krieger + Schramm Frankfurt RheinMain GmbH & Co. KG.

He says many buyers justify their wait to buy a home by hoping for a drop in interest rates or a reduction in construction costs.

He himself fears that construction will cost even more in the future. Many workers, he says, have left the construction industry because of the crisis. If more work is done in construction, then there would be a shortage of workers.

“We absolutely need skilled workers from abroad to fill those gaps. But these people also need housing, which complicates the situation even more,” Diehl says. Due to the poor economic situation, he says, far fewer single- and double-family homes are being built than they were a few years ago.

The situation for tenants could worsen

Economist Matthias Günther from the Pestel Institute assumes that this will make the situation even worse for tenants: “While previously a private family could finance a family home with 1,100 to 1,200 euros, today it needs 1,700 to 1,800 euros, which is hardly affordable for many families.” This is also a big problem for the apartment rental market.

First of all, there is a lack of social housing. According to Günther, in 1987 there were around four million social housing units in West Germany alone. Today, there are only 1.1 million, which is less than five percent of rental housing. This means that there is no longer any influence on lowering prices, he says.

Critics complain that landlords often raise rents. If in some cities the price of accommodation is twelve euros per square meter or more, then a person with a lower income cannot afford these prices, which poses a very big problem.

Possible solutions

There are possible solutions, such as the one in Reutlingen in Baden-Württemberg. Mayor Thomas Keck is struggling with the housing shortage there. He is committed to balancing construction and profits for the housing that can be built, as well as state aid.

A residential complex with a total of 76 apartments was recently built in Reutlingen. The average rent for the apartments subsidized by public money is 8.88 euros per square meter.

Higher taxes for the super rich?

This is the first step, but in the future all actors will need to take measures to combat the housing shortage.

"The public sector, real estate companies, businesses, institutions, churches, unions: only if everyone comes together can we perhaps succeed in rebuilding a larger number of social housing units, as we once had in Germany in the 1970s and 1980s," said Keck.

New apartment construction also requires special financing measures, such as increasing inheritance taxes and increasing taxes on the super-rich.

 But construction requires a long-term strategy, because the situation cannot improve quickly. This will be a huge task for the next government, which must take swift and immediate steps to improve the situation./dw