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An aerial view of social housing in Berlin
Germany is grappling with a critical shortage of social housing, a situation exacerbated by various socio-economic pressures and demographic shifts. As the country struggles to provide affordable housing to its lower-income citizens, a complex debate has unfolded involving government entities, private investors, and social organizations.
A pivotal document in understanding the current crisis is the Pestel Institute's recent study, which starkly highlights the gap in social housing supply. The report estimates that Germany is short of more than 910,000 social housing units, a deficit that is particularly severe in states like Baden-Württemberg, Bavaria, Berlin, and Lower Saxony. The study argues for a doubling of the current social housing stock to two million units by 2030 to return to the levels seen in 2007.
The Role of the ‘Social Housing’ Alliance
In response to this pressing need, the 'Social Housing' alliance, comprising tenant associations, trade unions, and industry groups, has been vocally advocating for substantial changes in housing policy. This coalition has called for the implementation of a special fund amounting to €50 billion to bolster social housing construction, aiming to meet the government's target of 100,000 new units annually—a figure significantly higher than the recent average of 24,000 units.
Rents for social housing in Germany are regulated by the federal states, which also determine the duration of rent controls on newly-built social housing. After a specified period, these units often transition to market-rate rentals, reducing the stock of affordable housing. To counteract this, the 'Social Housing' alliance has proposed reducing the VAT on the construction of new social housing from 19% to 7%, to lower the construction costs and encourage more development.
Annual loss of over 41,000 social housing units
Lukas Siebenkotten, President of the German Tenants' Association (DMB), emphasised the urgency of the situation, highlighting the core of the problem - the annual loss of over 41,000 social housing units due to expiring price controls. “Even in 2023, the decline in urgently needed social housing could not be halted, despite billions in federal funding and major promises in the coalition agreement,” he said, in response to the figures published on May 22, 2024.
Politicians have not yet addressed this annual leakage, he stressed, adding - “By 2035, there will even be more than half a million." Siebenkotten’s statement underlines a critical oversight in housing policy, with potential long-term impacts on the availability of affordable housing.
Echoing this sentiment, Felix von Saucken, Head of Residential at Colliers, pointed out the cultural and economic significance of social housing in Germany. He stressed that effective funding conditions are essential for the viability of social housing projects, highlighting that "nobody will build social housing if they don't earn money from it."
Private sector and public housing companies
The current investment climate poses significant challenges for social landlords, who often struggle to finance new constructions due to high costs. This has led to a stark contrast with private investors, who are more flexible but less inclined to invest in non-profitable sectors. Axel Gedaschko, President of the German Housing Industry (GdW), advocates for a large-scale interest subsidy program to make social housing construction feasible for more developers. According to Gedaschko, such a program would not only support the construction of nearly 70,000 additional apartments annually but would also pay for itself through increased tax revenues.
The crisis in social housing in Germany requires a multi-faceted approach that includes increased public investment, regulatory adjustments, and active participation from the private sector. By providing financial incentives and adjusting VAT rates, the government can make social housing projects more appealing to a range of investors. It's also going to be critical to maintain a dialogue among all stakeholders, from housing companies to private developers and tenant associations, if Germany is to develop sustainable solutions that address both immediate needs and long-term housing security.
Looking ahead, the integration of robust funding models, regulatory support, and innovative building technologies will be key to revitalising its social housing sector and ensuring that it remains a cornerstone of the country’s social infrastructure.
