Building industry alliance hammers out need for major change

As Germany grapples with an escalating housing crisis, the recent Housing Construction Day in Berlin brought together industry leaders and top politicians to discuss the path forward. The event underscored a pressing need: to innovate and adapt in a sector where construction costs have more than doubled since 2000.

The Berlin event was organised by the "Verbändebündnis Wohnungsbau", an alliance of associations from the housing and property industry along with the tenants' association (Deutscher Mieterbund), the IG Bau trade union, the brick industry and the building materials trade.

The day's discussions were anchored by a strong message from Federal Building Minister Klara Geywitz and Federal Minister for Economic Affairs Robert Habeck, who both highlighted the critical state of housing construction in Germany. Minister Geywitz rejected the idea of a "permanent subsidy" for the construction industry, instead advocating for sweeping regulatory reforms to simplify building processes. She introduced the concept of a "building type E," symbolizing simplicity and experimental approaches in construction, aimed at reducing bureaucratic hurdles and fostering more efficient building practices.

Minister Habeck echoed this sentiment, promising additional funding to support the "Climate-friendly new build" program run by KfW Bank. This move is crucial as the program's popularity has soared, with funds depleting faster than anticipated. In 2024 alone, €762 million was budgeted, yet concerns loom that this will not suffice to cover the year's demand.

Industry calls for affordability and efficiency

Axel Gedaschko, President of the Central Association of the German Housing Industry (GdW), voiced a poignant metaphor, urging the need for "affordable brown bread" (Schwarzbrot) in housing — straightforward, basic housing options that cater to the masses rather than luxury commodities. He also proposed a tantalizing solution: an interest rate program for residential construction capped at one percent to significantly boost construction activity.

This was a key theme occurring repeatedly throughout the day - the need for a new way of building, if any form of turnaround is to occur. Dietmar Walberg, head of the construction research institute ARGE, called for "everyone - and above all the state - to tighten the screws on construction standards". Many standards, specifications and requirements are "simply excessive", he said. "Many things are built to high-end standards because otherwise there is no funding. Other things are built because they supposedly offer the optimum in terms of ecology or living comfort."

He called for a "new sense of proportion", citing for example, high levels of sound insulation that simply "do not make sense". He appealed to the industry: "We have to build differently. Otherwise we won't be building at all any more."

According to ARGE, construction costs per square metre in residential construction have increased by a factor of 2.5 since the turn of the millennium. The price drivers include building technology, from heating and ventilation to sanitary and electrical engineering. However, building materials are also becoming increasingly expensive. For example, prices for cement recently rose by almost 42%, for lime and burnt gypsum by almost 40%, and for fresh concrete by almost 30%.

The Verbändebündnis Wohnungsbau, the coalition including various associations from the housing sector, highlighted the collaborative spirit needed to tackle these challenges. They emphasized the importance of affordable housing and the potential benefits of streamlined standards that could lower costs and expedite construction processes.

One in seven euros created by the industry

The discussions also touched on the broader economic implications of the housing shortage. A study by the German Institute for Economic Research (DIW Econ) presented at the event revealed that housing construction accounts for one in seven euros of total gross value added in Germany and is similarly critical for job creation and tax revenue. The potential economic downturn from a stalling construction sector could be severe, with tax revenue shortfalls projected at nearly five billion euros for 2024 if the current trends continue.

Despite the current challenges, there are signs of optimism. Minister Geywitz noted early indications that housing construction might be picking up, thanks to falling inflation and dropping interest rates. However, industry leaders like GdW President Gedaschko remain cautious, suggesting that significant improvements are yet to be seen on the horizon.

The event concluded with a robust call to action from various stakeholders, urging the federal government to ease construction standards and increase funding. The consensus was clear: without substantial intervention, the ripple effects of the housing shortage could exacerbate social inequalities and stifle economic growth.

As Germany faces a critical juncture in its housing and construction sectors, the insights from the Housing Construction Day underscore the urgent need for strategic, concerted action. The discussions revealed a complex tapestry of challenges but also pathways that could lead to substantial improvements in the industry. For Germany, building differently isn't just an option; it's becoming an imperative to ensure economic stability and social equity.