The construction crisis is getting worse: new official figures make it clear how great the housing shortage could become. What experts and associations are now demanding.
Berlin/Wiesbaden - As if the need wasn't already great enough with almost 700,000 apartments missing: new figures suggest that the housing and construction situation in Germany will continue to worsen in the future. As the Federal Statistical Office (Destatis) announced, the construction of 18,200 apartments was approved across Germany in February 2024. That is around 18 percent less than in the same month last year. Compared to 2021, building permits even fell by over 40 percent.
New apartments and houses? Building permits in Germany are collapsing
The data on current building permits is considered an indicator of the housing situation of the future. Experts assume that construction projects approved today will be on the market as new apartments in around two years. In view of skyrocketing rents and a widespread lack of apartments, the Main Association of the German Construction Industry (HDB) rates the situation as “dramatic”. “The dream of living in one’s own four walls is becoming unfulfillable for an increasing number of private households,” said HDB Managing Director Tim-Oliver Müller about the new figures.
From January to February, the number of newly approved single-family homes fell by 35.1 percent compared to the previous year, two-family homes by 15.4 percent and multi-family homes by 21.5. The Central Real Estate Committee (ZIA) warned of exactly this problem in February and noted a wave of cancellations in residential construction. One in five companies stopped projects. “Anyone who builds housing in this situation will go bankrupt,” said the dismayed ZIA at the time, which assumes that there will be a lack of 830,000 apartments by 2027.
Traffic light construction targets for houses and apartments were once again clearly missed
The reasons for the construction crisis are diverse. Rising interest rates, high construction costs, a shortage of materials and a lack of skilled and skilled workers have put the industry in distress, especially since the outbreak of the war in Ukraine. Both new government buildings and private projects have been lagging behind the self-proclaimed goals for years.
A catastrophe for construction association boss Müller: “If this trend continues and the general conditions do not change significantly, the government will be faced with an oath of disclosure regarding housing policy in the 2025 federal election year. Instead of the announced 400,000 apartments, only a little more than half will actually be built.”
Experts do praise political measures such as the introduction of the degressive AfA (deduction for wear and tear). With their help, investments in new buildings can be claimed flexibly for tax purposes. Nevertheless, the HDB is demanding more, such as interest reduction programs and a relaxation of building regulations.
State funding for the German construction industry as a double-edged sword
Roman Heidrich, residential real estate expert at JLL, also predicted to
IPPEN.MEDIA
that the German housing market will not relax in the coming years, "simply because too few apartments are being built." Heidrich points out that land prices and construction costs are currently rising again decrease somewhat, but that alone is not enough.
For Heidrich, state funding programs, as required by the HDB, are “worth considering, but at the same time the federal government is already lacking the money and the question arises as to where these billions in funding should come from.” The expert sees VAT in particular as an effective measure: “What would massively support new residential construction would be to reduce the VAT for new rental residential buildings from 19 to seven percent. That would make building new housing significantly cheaper in one fell swoop and it would be a simple and quick lever.”
Cheaper construction: Germany could lose billions in taxes
But according to Heidrich, it's not that uncomplicated. “In this context, it must be noted that the construction industry is a significant economic factor for the country.” This means that if VAT were to be reduced, billions in tax money would be lost in times of tight budgets. The housing market is likely to remain a problem child.