“1.4 million people will no longer be able to find a home in 2024”

With growing desperation, the construction and real estate industry is warning of a new housing shortage in Germany. "1.4 million people will be looking for an apartment in 2024 and won't be able to find any more," warned the president of the industry umbrella organization, the Central Real Estate Committee (ZIA) on Tuesday, "if we don't change course immediately."

Persistent immigration and declining construction activity, according to Mattner, caused a shortage of supply and persistently high demand. But with more and more new rules, especially when it comes to climate protection, the legislator is making construction more and more complicated.

In addition, there is a lack of financial support, which is doubly problematic against the background of higher interest rates. The construction industry had already warned last year that there was a risk of a dramatic decline in residential construction. In 2022, around 280,000 apartments were completed, while there may be around 245,000 in the current year.

When the so-called spring report of the real estate industry was handed over to Federal Building Minister Klara Geywitz (SPD), the ZIA called, among other things, for new construction subsidies of ten billion euros a year. However, as in the past few weeks, the minister rejected this: "There is no connection between the amount of money that is made available and the completion of the construction," said Geywitz.

This time, however, she received support from an unexpected quarter. The economist Lars Feld, Professor of Economic Policy at the University of Freiburg, who is one of the authors of the spring report, agrees: "Additional subsidies will hardly increase new construction," said Feld.

Because the high interest rates – Feld is expecting short-term building interest rates of five to six percent this year – are a fundamental limiting factor, as are limited capacities and high material costs in construction. "Rather, investors could be tempted to take the subsidies and increase profits," says the economist.

From March 1, the federal government will be promoting the construction of particularly energy-efficient houses with 750 million euros per year via low-interest loans from the KfW. In addition, 14.5 billion euros are available for the construction of social housing by 2026.

In 2021, on the other hand, the federal government had supported new construction in the lower efficiency classes without fixed prices with amounts in the double-digit billions. "Social rents for 6.20 euros cannot be produced profitably," says Geywitz, "that's why we have massively increased the subsidy here."

However, the real estate industry sees the problem not only in a lack of funding. Accelerated planning and approval procedures, designation of building land, densification and national building regulations that promote serial construction are also necessary.

The Federal Minister sees herself on the right track here. Changes are planned, for example, in the Regional Planning Act, in the Building Code and in construction planning. This year, says Geywitz, a digital building application should be possible nationwide. Next year, it should then be possible for the authorities to continue processing this in a purely digital manner - a task that the federal states and municipalities have to carry out.

And here, too, Geywitz received support from the economist Feld, who is more known for his liberal positions: "If it's about the building application, about quick processing, then you have to contact the federal states and municipalities," Feld said in the direction of the industry representatives.

However, when it comes to building itself, Geywitz also sees the industry as having an obligation. For a few weeks now, the minister has repeatedly pointed out that productivity in the construction sector has hardly increased over the past 20 years.

“Imagine you go to a car dealership, want to buy a car and first think together with the dealer what it should look like, what technology should be in it – it shouldn’t come as a surprise that a car like that then becomes particularly expensive. But that's still the way we build. In ten years we will no longer be able to afford that,” said the minister.

On the other hand, home builders should not hope that there could be at least temporary relief from the ever stricter climate protection regulations. "If we fall back to older standards now, we're not doing ourselves any favours," said Minister Geywitz. There is no way around the decarbonization of the energy supply in the building sector.

In addition, home ownership will not be promoted again until June. Families with one child are to receive low-interest loans from KfW up to an income limit of EUR 60,000; the income limit increases by EUR 10,000 for each additional child. The maximum loan amount should be 240,000 euros. The KfW funding program is to be called “Home ownership for families (WEF)”.

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