Blueprinting, Construction, and Dwelling Strategy

In recent years, Germany has been grappling with a complex housing crisis. High interest rates, government interventions, and economic uncertainty have combined to dampen private investments, increase the cost of new housing, and slow down the expansion of supply and affordability.

A comprehensive overview of current political measures to promote affordable housing and evaluate their effectiveness can be found in the KAS Policy Atlas "Rent | Buy | Live". However, despite these efforts, rents have increased by 8.7% by January 2025 compared to 2020, and housing ancillary costs are also on the rise due to inflation and higher energy prices.

Households particularly affected by these rising costs include single parents, large families, students, and people with a migration background. The situation is particularly severe in major cities and independent cities, where only 79% of the housing demand was covered between 2021 and 2023.

The German cities with the highest construction costs for apartments are primarily Munich, Berlin, and Hamburg. Munich stands as the most expensive city by a large margin, with high square meter prices for both rental and ownership, contributing to slower housing construction progress and price pressure.

Construction activity is decreasing, leading to a further increase in the existing housing shortage in Germany in the coming years. The projected annual housing demand for the years 2026 to 2030 remains above the current construction capacity at 302,000 units.

One of the reasons for this shortage is the lack of building land, especially in urban centers. Building land is scarce due to a lack of brownfield sites and building plots, and residents' fears of noise, traffic, and rising rents. In addition, construction and operation of residential and non-residential buildings account for approximately 38% of national and global greenhouse gas emissions.

Many rural regions also fall short of demand. Inefficient administration and personnel shortages in authorities further slow down the processes.

Inflation, energy prices, and the interest rate turn have driven up personnel, material, and financing costs, exacerbating capacity overload and skilled labor shortages. The strict regulatory requirements and energy standards in housing construction complicate and increase the cost of new housing, with planning and approval procedures often taking several years.

On average, 25% of income is spent on housing, and even 45% for households at risk of poverty. Despite declining property prices, the rental market remains tight, with index rents being 8.7% above the 2020 level in January 2025.

To ensure access to affordable housing for all, a doubling of new construction is needed. However, the stock of social housing is decreasing by about 40,000 units annually.

The population in Germany has increased by approximately 2.8 million since 2011, leading to a tight housing market and rising purchase and rental prices in urban areas. This trend is likely to continue in the coming years, further exacerbating the housing crisis.