Anyone who has come to Germany as a student looking for a studio or a small apartment on campus has certainly gotten a taste of the housing crisis. In Bonn, for example – a city of only 370,000 inhabitants, but with an internationally renowned university – the person concerned pays an average of 480 euros for a few square meters of student housing, according to research by the student portal Studis Online. In larger cities such as Munich, Hamburg, Frankfurt, Berlin and Cologne the rent exceeds 500 euros per month.

A family with two children looking for an apartment in the center of a big city should invest over 1,500 euros per month. Example: based on data from the German Statistical Office for the second half of 2024, the average rental price in Berlin reaches 18.69 euros per square meter. In other words, the rent for a simple apartment of 90 sq.m. it is close to 1,700 euros. Even more expensive are the rents in Munich at 21.81 euros per sq.m. Prices are slightly lower in smaller urban centers, such as Frankfurt (18.31 euros) and Stuttgart (16.77 euros).

But even those who have the necessary funds do not “disentangle” easily. According to a recent survey by the portal ImmoScout24, which hosts real estate ads, the search for a new home takes more than a year for 54.4% of those interested. Cities such as Hamburg (+31%), Cologne (+20%) and Munich (+18.9%) have recorded particularly increased demand over the last 5 years.

Where are the 400,000 new homes?

“The lack of housing is the biggest social problem that our country is currently facing” said years ago, as the head of the social democratic opposition, the current chancellor Olaf Solz. And of course he was right. To tackle the problem his government had promised to “fast-track” the construction of 400,000 new homes each year, of which 100,000 would be “social housing” with special specifications and extremely low rent. It was one of the main pre-election commitments of Olaf Solz.

The numbers are not random, but result from the estimates of experts. According to estimates by the Cologne-based Institute of German Economics (IW), in order to meet the increased needs in the housing market, 372,000 new homes would have to be built each year in the period 2021-2025 and another 302,800 homes in the period 2026-2030. Unfortunately, however, from the data recently published by the IfO Economic Institute of Munich, it appears that “every year and better…”.

Specifically: In 2022, almost 300,000 new homes were built across the country. Since then, the pace has slowed. In 2026 new homes will not exceed 175,000. “Our forecast has some degree of uncertainty, but we consider it certain that by 2026 we will have fallen below the 200,000 mark and I have no hope that the situation will improve soon,” IfO partner Ludwig Dorfmeister told the German News Agency ( dpa). A clear indication of the downward trend in the sector is the decrease in building permits, which did not exceed 17,800 last May (-44% compared to May 2022).

High cost, lots of red tape

According to Dorfmeister, “the construction industry is suffering the negative consequences of inflation and high interest rates, as is the case throughout Europe. In addition, in Germany the cost of building materials and raw materials has spiraled out of control. In the medium term, however, high interest rates cannot be used as an excuse for the contraction of construction activity.”

The IfO Institute estimates that the cost of construction in 2023 has increased by 36% compared to 2020. A representative of the construction sector points out that, for example, in Bavaria the number of newly built houses has fallen by 14% this year, although the sector’s businesses have invested the record amount of 2.6 billion euros. So, points out the construction lobby, either rents will rise to unimaginable heights to make up for it, or plans to build new homes will not materialize.

The experts’ analyzes do not even take into account any effect of short-term rentals on the market (even in conjunction with the latest census, which indicates that 40,000 “vacant” homes have been declared in Berlin, another 20,000 in Munich and a total of two million throughout Germany ). But let’s face it, that’s another discussion…

The question of why the implementation of the pre-election commitments concerning the housing market is being delayed was received last February by Chancellor Soltz himself. To answer that there are “many reasons”, such as “the psychological problem caused by the rise in interest rates in recent years” and “excessive bureaucracy”. But above all, Olaf Solz throws the ball at the Local Government. “We cannot build more houses if we do not have more buildable land available and this is the responsibility of the municipalities and communities,” the chancellor points out.