The German Property Federation (ZIA) has published its spring report, which reveals the extent of the federal republic’s housing shortage. By 2025, the organisation expects a shortage of around 700.000 flats in Germany.

Housing shortage in Germany worst in 20 years

According to Andreas Mattner, President of the German Property Federation, the country is already experiencing a dire housing crisis and that a “very bad awakening” is on the horizon for the federal republic.

The ZIA spring report estimates that “1,4 million people will be looking for a flat in 2024 and won’t be able to find one if we don’t turn things around immediately,” Mattner told SPD minister Klara Geywitz.

The deficit of housing in Germany, which has just recorded the highest population in its history, now amounts to the greatest housing shortage in 20 years. Meanwhile, Geywitz’s SPD recently avowed that the German government would not reach its goal of building 800.000 new houses in 2022 and 2023.

In the last year, a large jump in the price of building materials and a population increase of 1,1 million people as a consequence of people fleeing Putin’s invasion of Ukraine combined with slow government efforts to build more affordable housing, compounding the country’s existing housing deficit.

Property developers are not incentivised in Germany

Expensive building material costs and the drop in property prices across Germany mean that many developers are losing incentives to build for-profit housing. 

Economist Lars Feld, who co-authored the ZIA report, wrote that “many project developers and housing companies lack the incentives to build because, on the one hand, the prospect of falling property prices coupled with rising construction costs and expensive (interim) financing is risky.”

Meanwhile, Feld pointed out that low real wages due to inflation mean that people cannot entertain the unaffordable rental costs set by landlords. During 2022, landlords in Germany were asking for 5,2 percent more rent from tenants than in the previous year, with the national rental cost average without utilities now coming in at 9,10 euros per square metre.

What do the ZIA suggest to remedy the housing crisis?

In response to the current and worsening crisis, Mattner said that the German housing market is in “very real danger” of further collapse.

The ZIA spring report proposes that 10 billion euros in government funding are necessary for a hasty turnaround, with most of the funds going to support construction projects. The ZIA report also floats the idea that certain building standard requirements, such as sound and energy-efficient insulation, should be forgone in order to speed up planning, approval and construction processes.