German government to create €200bn “protective shield” to ease energy and housing costs
By Sara Seddon Kilbinger, Senior Reporter, REFIRE
Chancellor Scholz unveils raft of measures to tackle country’s housing shortage
Chancellor Olaf Scholz has unveiled a raft of measures to tackle the country’s housing and energy shortage, and reaffirmed the government’s target of building 400,000 new homes per year, a goal that it is still a long way off reaching.
Earlier this month, Scholz presented the housing strategy for the next few years alongside his Minister of Construction, Klara Geywitz. In conjunction with The Affordable Housing Alliance, or Bündnis für bezahlbares Wohnen, they have drafted a 67-page draft paper with 187 individual points, which is intended to go some way towards solving ‘the social question of our time’, according to Scholz.
He reiterated that the goal is to build 400,000 flats in Germany per year, 100,000 of which will be subsidized through social funding: ‘We want to make it clear that we are committed to achieving our stated goals,’ he said. ‘Our goal is to increase the number of domestic housing units to this level,’ he added, noting that he is well aware of the effort it would take to achieve the ambitious housing targets. Scholz said that the conditions for the construction industry had become even more difficult following Russia’s illegal invasion of Ukraine, which is why the German government is putting a ‘protective economic shield’ in place to ensure that energy and housing remain affordable.
The ‘protective shield’ would make up to €200 billion available to cushion the consequences of high prices for consumers and businesses, according to Scholz. The government has already introduced an electricity price brake, and is working intensively on ways to keep gas prices down. The additional sum of almost €100 billion is designed to ease the burden on both the general public and businesses.
The government remains woefully behind target
However, the government remains woefully behind target. Last year, just 293,393 new homes were built in Germany, a y-on-y decline of 4.2%, according to Destatis and IW economist Michael Voigtländer, who doesn’t believe that such a target can be met: ‘We can be happy if we complete 300,000 flats each this year and next year,’ he said, pointing out that in addition to the current complex challenges, structural problems remain such as the friction between the building and economic ministries: ‘Robert Habeck (Minister for Economics) is managing the money,’ he said.
Many members of the public already have to spend half of their income on housing costs. In a bid to tackle the problem, the coalition partners will review the situation once a year in order to ensure that progress continues. To help achieve this, the government has created a dedicated Ministry of Construction and brought representatives from all the necessary trades together around one table in the Alliance for Affordable Housing.
As the Federal Minister for Housing, Urban Development and Building, Klara Geywitz, explained that the 35 alliance partners have worked intensively over the past six months to develop the 187 specific measures for more affordable housing, each of which has been given a specific deadline.
Now, the real question is how quickly any meaningful change can be implemented. Interest rates have risen significantly this year, crippling would-be buyers and developers alike. Since the beginning of the year, interest rates for real estate loans have risen significantly. At the beginning of the year it was still less than 1% for a loan with a ten-year fixed interest rate. Today, it is almost 4%. This not only makes the dream of owning a home more distant for many, but also makes capital investors and institutional investors hesitate.
Added to this is economic uncertainty, and construction costs continue to rise. In the third quarter of 2022, the production costs for new buildings increased by 16.5% compared to the previous year, according to the Federal Statistical Office. This is mainly due to rising material costs, but also due to the shortage of skilled workers and high wage costs. In the field of plumbers and heating engineers alone, only one in five jobs can currently be filled, according to the Competence Centre for Securing Skilled Labour (KOFA).
By 2026, the government will have increased its social housing subsidies to a record €14.5 billion, according to Scholz. The government will also launch a housing programme for young people, as well as a new home ownership programme for young families in early 2023, according to Geywitz, adding that she has committed to an increase in the tax subsidy for residential buildings from 2% to 3% as of 1 July 2023.
New non-profit social housing scheme to be launched
A new subsidized non-profit social housing scheme will also be launched, according to Geywitz. The key to building more housing, according to Scholz, is to use more rapid and cost-effective construction methods, to which end state building codes will also be amended. One of the measures agreed upon is that in the future, once housing type approvals have been granted, they will be valid throughout the country, which is designed to ensure the wider use of serial and modular construction.
The draft paper also acknowledges that the whole construction process, starting with building permits, needs a radical overhaul, by digitalization, reducing bureaucracy, and speeding everything up. The Alliance has agreed on a voluntary commitment by the municipalities to shorten planning and approval periods. Computer-based approaches could facilitate and accelerate planning and construction. The new governmental portal for "Building Information Modelling" can be used free of charge by anyone involved in the construction industry to ensure consistent data sharing.
The alliance partners are also planning to create a so-called "digital town hall door", which will make it possible to submit computer generated planning and project applications to the responsible authorities everywhere. There are also plans to make online building applications possible throughout the country.
Nonetheless, one major hurdle is that the building permit process is too lengthy and inflexible. Another enormous hurdle is the availability of land. ‘Access to building land remains the bottleneck for municipalities,’ said urban planner Elke Pahl-Weber, who taught as a professor at the Technical University of Berlin and has since co-ordinated the government's research work on building and urban issues. She currently works in Hamburg as an inner-city coordinator.
Industry experts say draft paper doesn’t go far enough
However, many in the industry fear that the draft paper doesn’t go far enough. BFW President Dirk Salewski is concerned that the plan is to stick with the EH40 energy standard: ‘In addition to many necessary steps, the Alliance paper contains compromises that are unfortunately steps backwards,’ he said. IVD President Jürgen Michael Schick agrees: ‘We have to look at moving away from pure efficiency thinking and towards a neighbourhood approach,’ he said.
To further promote climate protection and affordable housing, government will provide support for measures that go beyond the statutory energy standards for new buildings. The new funding programme, which is currently being prepared, will provide €100 billion, starting in 2023, according to Scholz.
Increasingly, the life cycle of a building is being taken into account, from the greenhouse emissions that occur during construction through to demolition. ‘Within this life-cycle approach and its goals, the optimal solution should be implemented in a technology-open manner,’ the draft paper says. The Alliance will draft a digital building resource passport before the end of the legislative period and is devoting more attention to the recycling of materials.
The plan is to focus the new ‘climate-friendly construction funding programme’ more closely on the life cycle of buildings, with a view to reducing greenhouse gas emissions, as well as cutting the resources, land, and energy used from the initial construction through to the final demolition. Subsequently, a new digital building resource passport for new buildings will be introduced to encourage the reuse of products used in construction.