REFIRE participated in a useful discussion this week on a time-honoured subject that always has a particular resonance in Germany – namely, what measures can be taken to increase the leve of home ownership in a country that has long been a European laggard. Next to Switzerland, Germany has the lowest rate of home ownership in Europe – and currently falling.
The public and politicians are becoming uncomfortably aware that the low level of ownership represents a ticking time bomb for Germany’s ageing population, with widespread poverty threatening millions as they struggle to pay rising residential rents in their old age, along with a failure of the traditional pension scheme to provide.
The discussion, “Wohn-Radar zum Eigentum in Deutschland” was organized by the Immobilienverband Deutschland IVD e.V. in Berlin acting as the “Verbändebündnis Wohneigentum” (‘Home Ownership Association’) and presented research carried out by the Pestel Institute, a private research group focusing on regional and urban housing policy. The Home Ownership Assocation, founded in 2016, represents five different industry associations: Die Bundesarchitektenkammer (BAK), der Bundesverband Deutscher Baustoff-Fachhandel (BDB), die Deutsche Gesellschaft für Mauerwerks- und Wohnungsbau (DGfM), der Immobilienverband Deutschland IVD, and the Verband Privater Bauherren (VPB).
Among the findings:In two-thirds of renting households in Germany, the rent burden amounts to more than 30% of household income, compared to only one in ten owner-occupiers with a cost burden of more than 30%.
The long-term housing costs of owners are significantly lower than those of tenants, despite the fact that on average they have much larger apartments. At the same time, tenant households have an average of 42% less financial assets than owner households, which is due to the different savings behaviour for identical incomes.
Matthias Günther, the head of the Pestel Institute, said: "Our research shows that old-age poverty is primarily tenant poverty. It is all the more dramatic in that the home ownership rate has been falling for years. At the same time, there is considerable potential for home ownership and thus for prevention. But without political will and state support, it will not be possible to get 7.2 million tenant households with this potential actually into home ownership."
Using data from Germany’s micro-census in 2018, Günther pointed out that only 44% of Germans owned their own homes in 2018, 1.3% less than in 2010, with the home ownership rate among the 25 to 40-year olds having fallen by fully five percentage points since 2002.
At the same time, there are around 4.1 million tenant households in this age cohort in particular that are potentially in a position to acquire residential property. Even among the baby boomer generation of the now 40-60 year-olds, 3.1 million households would have realistic chances of becoming homeowners.
Against the background of these results, the Home Ownership Association, which includes five associations from the construction and real estate industry, is calling on the federal government to promote the acquisition of home ownership through direct measures and to boost the supply of home ownership through new construction and the activation of existing housing stock.
Among the concrete measures proposed are, firstly
- Equity guarantees for home ownership
- Loan programmes for threshold households
- Security fund for home ownership based on the Dutch model
- No second land transfer tax for small residential property
The measures should be targeted at so-called nest-builder households, as well as empty-nest household with low to medium incomes. A guarantee programme should be set up to supplement equity capital. ‘Small residential property’ would mean 60-70 sqm for a 2-person household, with long-term fixed interest rates of 20-30 years and stable interest rates of 1.5%. The Dutch model helps to mitigate the risk of foreclosure if the borrower gets into difficulties and misses payments, with the fund taking over the loan from the bank until the borrow gets back on his feet. The real estate transfer tax (currently up to 6.5% in many federal German states should be abolished for owner-occupiers.
The study also recommends tapping into lessons from the so-called Vienna Model for developing an active land policy. This involves cities and municipalities generously designating farmland in their land use plans, buying it, developing it into building land and then making it available to property developers and builders under certain conditions. These procedures need to be speeded up, along with looking at further potential for building on the roofs of residential and other buildings, and the re-purposing of non-residential buildings.
REFIRE: It’s clear that these issues won’t be resolved overnight, but the looming problems are so glaringly obvious that we support all forums for more frank and open debate on these critical aspects of housing policy. For such a wealthy country, it’s shocking that Germany’s pensioner population is so exposed to looming poverty, which compares very unfavourably with many of Germany’s allegedly poorer, southern neighbours.
