Housing sector increases demands for more subsidies to prevent 'total collapse'

The situation in Germany's residential housing construction sector continues to deteriorate, with the number of cancelled projects rising in March. The number of building permits issued also fell, with further damaging consequences for the supply of new housing stock down the line, and a source of further pressure pushing rents upwards. The sector has seen the worst start in the first quarter since 2009.

A summit gathering of an alliance of seven of the country's top real estate organisations met in Berlin this month to assess the depth of the crisis, which they claim has brought the building sector to the point of collapse. The thrust of the meeting was to demand from Bundesbauministerin Klara Geywitz a multi-billion increase in the existing programme of government subsidies to support the industry.

The seven organisations promoting the initiative were the Spitzenverband der Wohnungswirtschaft (GdW), the Bun­des­ver­band Freier Immo­bi­lien- und Woh­nungs­un­ter­nehmen (BFW), tenants association Deutscher Mieterbund (DMB), Indus­trie­ge­werk­schaft Bauen-Agrar-Umwelt (IG Bau), der Bun­des­ver­band Deut­scher Bau­stoff-Fach­handel (BDB), die Deut­sche Gesell­schaft für Mau­er­werks- und Woh­nungsbau (DGfM) und construction federation Zen­tral­ver­band des Bau­ge­werbes (ZDB).

The coalition government's previous annual goal of 400,000 housing units annually, of which 100,000 were to be social housing, has long been written off for 2022, and certainly 2023, as even Minister Geywitz now readily concedes, although she was much slower to do so last year - her full year in office - until very late in the day, and long after it had become obvious to everybody else that the lofty goal was just pie in the sky.

The seven associations claim that about €50bn is needed for the social housing alone, and a further €22bn to build apartments with a basic rent of between €8.50 and €12.50 per sqm/month, all to made available through a series of specially set up funds. 

Despite the already acute shortage of housing, the number of new building permits issued last year fell by 6.9% to 354,000, while the likely number of new units built per annum could fall to as low as 200,000 units, the associations warned. Of the total of about 900,000 units for which planning permission has already been granted, nothing at all has been started on 40% of them. In February of this year, 22,300 units were granted building permits - down 20% on a year ago, according to figures from the Federal Statistics Office.

The summit members offered up a blunt statement. "Without a drastic increase in state subsidies and without a significant reduction in state-imposed requirements and regulations, new residential construction in Germany is quite simply no longer feasible", they warned.

The study which the alliance members commissioned, ("Status and Forecast: This is How Germany Builds - This is How Germany Lives") by the Arbeitsgemeinschaft für zeitgemäßes Wohnen (ARGE) (Working Group for Contemporary Housing), highlighted how the crisis facing the industry will have consequences for the whole economy, apart from those seeking a place to live but also for the three million jobs in the entire value-added chain.

Germany's Ifo Institute reported that in its March survey, 16% of firms had reported the cancellation of orders already firmly placed, up from 14.3% in February and 13.6% in January. Three things - at least - are critical to get the industry moving again, commented Ifo Institute's chief researcher Felix Leiss. the restructuring of the subsidy programme to support new construction; much greater conversion of already-approved units into subsidised affordable or social housing; and maximising the potential in the existing housing stock, for example adding more stories and increasing housing density.

Axel Gedaschko, president of the GdW, said speed was of the essence if companies were not to lose their 'connection' to their whole ability to initiate new projects. "The ever-increasing construction costs make it impossible to create affordable new housing," he added. "It is frightening that the Federal Government still seems not to have recognised the seriousness of the situation."