halfpoint/Envato
Building permits in Germany fell to their lowest level in almost fifteen years in 2024, confirming that the country’s housing shortfall is likely to deepen over the coming decade, despite patchy signs of recovery. According to the Federal Statistics Agency, Destatis, only 215,900 new residential units were approved last year, down 16.8% from 2023 and less than two-thirds of the figure recorded in 2021. The new government target, based on a fresh housing needs assessment by the BBSR, is 320,000 new homes per year to 2030. The actual pipeline is unlikely to reach that.
In its spring 2025 update, the Federal Institute for Research on Building, Urban Affairs and Spatial Development (BBSR) forecast the need for around 2.56 million new dwellings by 2030 (from 2023). This is lower than the previous political target of 400,000 per year, but still far above current construction volumes. The reasons are familiar: rising borrowing costs, stagnant planning approvals, high construction costs, and faltering political coordination. The situation is especially acute in Germany’s large cities. The BBSR puts annual new demand at 23,000 flats in Berlin, 11,300 in Munich, and 10,200 in Hamburg. It also identifies a further 15,000 annual units required in Cologne, Frankfurt, Stuttgart and Düsseldorf combined.
Meanwhile, the gap between required housing and what is currently being delivered is growing. In 2023, only 294,400 homes were completed. Estimates for 2024 range from 260,000 (Rat der Immobilienweisen) to 265,000 (DIW). For 2025, most industry forecasts point to just 230,000 completions. The Cologne-based IW expects continued undersupply until at least 2030, predicting a requirement of 372,600 units annually from 2021 to 2025, followed by 302,800 units annually from 2026 to 2030.
“We now have to go through a valley of tears,” said Ralph Henger of the IW in March. “We have a huge gap between what needs to be built and what is currently being built and will come onto the market in the next few years.”
The total housing deficit is difficult to calculate precisely. BBSR’s current modelling implies a need for 320,000 homes per year, while IW puts the figure higher. The Rat der Immobilienweisen expects the shortfall to grow from 600,000 in 2024 to 830,000 by 2027. Prof. Dr Thomas Glatte, head of the Real Estate Management programme at Fresenius University of Applied Sciences, confirms the direction of travel: “According to estimates, there will be a shortage of 750,000 homes by 2025. This could rise to 830,000 by 2027.”
Decline in permits issued attributable to 'political mistakes'
Recent optimism around an upturn in building permits, with January 2025 approvals up 6.9% year-on-year, should be seen in context. The monthly figure was 18,000 – still far below the 30,000+ needed to put construction back on track. The 2024 total of 215,900 permits was the third consecutive annual decline. According to the construction industry federation ZDB, this marks a dramatic deterioration from the nearly 380,000 permits granted in 2021.
“Political mistakes have contributed to the drastic decline in the number of building permits issued,” said ZDB managing director Felix Pakleppa. “The unsteady and, in view of stricter energy efficiency standards, inadequate subsidy policy has added to the pressure.”
The construction backlog – dwellings approved but not yet completed – is also sending the wrong signals. At the end of 2023, around 826,800 homes were in this category, almost half of them under construction. But rather than growing, the backlog has now begun to fall. While this might suggest improved throughput, it more likely reflects project cancellations, expiring permits, and developer insolvencies.
“The construction backlog has been growing for years,” noted Hauptverband der deutschen Bauindustrie (HDB) President Peter Hübner, “but this time the decline is not a positive signal. Some projects have simply become uneconomic.” In 2023 alone, 22,700 permits expired unused.
The average time to complete a new residential project has also lengthened, from 19 months in 2018 to 24 months in 2023. Bottlenecks in material supply, higher financing costs and lengthy permitting procedures have further delayed projects.
Strong regional differences in demand
The regional differences in demand are striking. In absolute terms, Berlin, Munich and Hamburg top the list. But in relative terms, the highest need is in southern secondary cities. Landshut leads with 87 new homes required per 10,000 inhabitants per year, followed by Regensburg (83), Kempten (77), and Memmingen (75). At the other end of the scale are shrinking areas in eastern Germany: the Weimarer Land district is forecast to require just five new dwellings per 10,000 people annually.
The reasons behind the continued rise in household formation, despite expected population stagnation after 2028, include ageing and a growing share of single-person households. According to Anna Maria Müther of the BBSR, the number of households is set to increase by 1.3% to 42.6 million by 2030.
Four components shape total housing demand: demographic growth (160,000 units annually), replacement demand due to obsolescence (110,000), backlog from under-building in recent years (60,000), and a vacancy adjustment that lowers net new demand by about 10,000 units.
Affordability will still hold up new construction
Yet only about 215,000 homes were even approved last year. The new coalition government’s exploratory agreement includes potential tax incentives, new social housing subsidies, and interest-reduction schemes. But industry scepticism remains. “This crisis is the result of political failures in recent years,” said Thomas Reimann, president of the Hesse Construction Companies Association.
Even if policy shifts lead to more approvals, affordability remains out of reach. “Even a cooperative that builds on a property that it owns cannot rent new buildings in Berlin for less than €18 or €19 per square metre,” said Christian Gräff of the CDU. Ines Schwerdtner of Die Linke called for direct federal investment of €20 billion annually into municipal housing.
The backlog of approved but unbuilt apartments, once seen as slumbering potential, is shrinking. The need for rapid, coordinated action is no longer in dispute. The questions now are how quickly the pipeline can be rebuilt, and whether the homes delivered will be remotely affordable to those who need them most.