“We have to keep the wheel turning”

As in most large cities, affordable living space is scarce in Hamburg. For this reason, the red-green Senate set itself the goal years ago of approving 3,000 social housing units per year and, through purchases and the extension of social ties, up to 5,000 additional or secured social housing units per year.

Hamburg clearly missed this target last year. The number of permits for the construction of subsidized housing has fallen to its lowest level in ten years. 1884 new apartments with rent and occupancy restrictions were approved in 2022 - 935 fewer than in the previous year, said Senator for Urban Development Karen Pein (SPD) on Tuesday.

"We cannot be satisfied with that." Around 12,000 households have an urgent need to get affordable housing without being able to make them an offer.

If you add modernizations and the purchase of rent controls or commitment extensions, you get subsidies for a total of 3,742 apartments, according to Pein. However, even that is not enough. That is why the Senate decided on Tuesday to increase the funding for social housing.

They will be increased by twelve percent – ​​primarily to cushion increased construction costs. In addition, builders should be guaranteed a very low and fixed interest rate over the entire commitment period of 30 years, said Pein.

Social housing in Hamburg is subsidized by the state-owned investment and development bank IFB. Its CEO, Ralf Sommer, believes that the funding amounts, which have been increased again, but above all with the fixed interest rate of one percent, make an interesting offer to the construction industry.

Perhaps even one or the other builder who has been active on the free housing market so far will consider entering into social housing. A return of four to five percent can be expected for investors, said Senator Pein.

When it comes to increasing the funding, she is concerned with more than just more social housing. Due to the changed market conditions, in which the new construction of privately financed apartments is also coming to a standstill, a dent in the construction industry is to be feared. For a city like Hamburg, which still needs new apartments, it is also about “keeping the wheel turning”. If the industry reduces capacity, it will be difficult to build it up again in the coming years.

The city wants to invest 740 million euros through the IFB in 2023 in social housing and in the modernization of existing social housing. In the coming year it should be almost 780 million euros. For comparison: In 2022, the city invested around 444 million euros in the area.

The director of the Association of North German Housing Companies (VNW), Andreas Breitner, welcomed the Senate's decision and spoke of a "strong boost in the promotion of social housing".

He is certain "that the board members and managing directors of housing companies geared towards the common good will now calculate very carefully and check to what extent construction projects are feasible in view of this funding background." It is clear, however, that significantly higher energy requirements for the construction of residential buildings also lead to cost increases led. These could not intercept social landlords with the rents.

In addition, the federal funding does not meet the current needs, said Breitner: "With the decision to provide only 750 million euros for the whole of Germany for new construction funding, but to reserve around 14 billion euros for energy-related renovation, the federal government has dealt a heavy blow to new building.”

The planned increase in funding by the Senate will not be enough "to counteract inflation and the explosion in construction costs," said Anke Frieling, spokeswoman for urban development for the CDU parliamentary group. Hamburg's housing industry is "urgently waiting for the promised streamlining of building regulations and long-term, reliable funding for new construction, too, in order to be able to create affordable living space in Hamburg."

The announced increase in funding by twelve percent is "absolutely positive", said Manja Biel, General Manager of the Hamburg Schleswig-Holstein Construction Industry Association. "However, I think the statement that the cost increases in residential construction will be fully absorbed is bold."

The increase in prices for new residential buildings in November 2022 compared to November 2021 was around 17 percent. "As before, this is largely due to the increased building material prices, which in turn are fueled by the high energy prices."