"Toxic mixture" - That's why housing construction in Hamburg is halting

It was gloomy pictures that Sönke Struck drew on Thursday in the already foggy sky over Hamburg's Volksparkstadion. Struck is state chairman of the Federal Association of Independent Real Estate and Housing Companies (BFW) for Hamburg, Schleswig-Holstein and Mecklenburg-Western Pomerania and is a housing contractor himself.

On Thursday, the association met for its annual meeting in the Volksparkstadion. One conclusion: the mood among housing construction companies, who mainly build privately financed apartments, has been better in the past.

For the current year, according to Struck, the approximately 230 member companies of the association have announced that they will only start construction for less than half of the usual apartments. In Hamburg, this means that instead of 5578 as in 2022, there should only be 2555 construction starts this year. "When planning new apartments, there is a real crash," said Struck, speaking of a "dramatic decline".

The reason: The companies could not build under the given framework conditions. On the one hand, this is due to external factors such as skyrocketing construction costs and rising interest rates. "On the other hand, there are also political decisions that paralyze housing construction," says Struck. Important subsidies such as those provided by the Kreditanstalt für Wiederaufbau (KfW) were canceled without further ado. “At the same time, the requirements are increasing – for example in terms of climate protection. It's a toxic mix.”

By 2025 at the latest, the public would also notice what the falling numbers in construction starts are causing. Too few new apartments would come onto the market, making the situation even more difficult for those looking for an apartment. "The big end is yet to come," predicted Struck.

There can then no longer be a quick return to the high figures of previous years. In the previous boom year of 2018, the BFW companies had completed 5,632 apartments in Hamburg alone. In 2022, 3,300 apartments were still finished. It usually takes about two years from the start of construction to the completion of the construction projects.

The association therefore called for quick action by politicians on Thursday. Because most of the unrealized projects are still in the drawer, but not yet on the pile of abandoned projects. Only about 20 percent of the companies in the association have already stopped projects altogether.

But the housing construction industry alone will not get out of the misery. An exemplary requirement is the setting up of a loan program with reduced interest rates for potential buyers, as previously provided by KfW. "This measure costs money, but the money would be well spent," said Struck.

But you also have to agree with politicians to build more easily again, said Stefan Wulff, managing partner of the Otto Wulff Group. He spoke, for example, of architectural competitions, which are not always necessary to build high-quality apartments, but in individual cases cost a lot of money, which then makes the apartments more expensive. Colleague Kay Brahmst from Bruhn Immobilien Management brought up the long-standing demand of the associations to streamline the specifications for residential construction.

The association believes that political projects such as increasing the proportion of subsidized housing in every major project from 30 to 50 percent, as the Greens in Hamburg want, are the wrong approach. "That puts us off," said Jan Petersen, commercial director at Aug. Prien. You're thinking about migrating to the surrounding area.

The BFW is also very critical of the granting of land by the city with heritable building rights. "Politicians are going the completely wrong way," said contractor Stefan Wulff. "The heritable building right is simply unattractive."