Ever since the coalition agreement between the Christian Democrat block and the Social Democrats was passed, it was understood that a housing summit would be convened before the end of the year. Having previously been announced for sometime this fall, a date was set recently—21 September.1 Chancellor Angela Merkel will host the housing summit at the Chancellery itself, which suggests that the Grand Coalition does take this agenda item serious and hopes to make some progress in its efforts to address the housing issue.
The coalition agreement, which forms the basis for the housing summit, projects the construction of 1.5 million new flats before the end of the parliamentary term, meaning before the end of 2021. To achieve this goal, an annual total of 375,000 flats would have to be completed in 2018 and subsequent years. But since the numbers suggest that fewer than 375,000 flats will be completed this year, the annual target mark will be even higher during the three years to come. What motivates the scheduling of a housing summit now is the dawning realisation that this is highly improbable unless the current housing and construction policies are revised.
Real Estate Industry Keeps Hoping
The new government has done little in terms of construction policy since taking office, whereas rent policy has figured prominently. The Federal Minister of Justice has already submitted a draft bill to amend the latter. It seeks to tighten the rent control commonly called the “rent freeze” and to reduce the modernisation allocation to tenants from eleven to eight percent in areas with a strained housing market while also proposing to cap the allocation at three euros per square metre over a six-year period. The primary consequence of the resolutions passed by the governing Grand Coalition to date is to make investments in residential accommodation less lucrative.
Numerous industry insiders who will attend the housing summit have put their hopes that the real estate industry will get its turn in this event. As early as 31 August, a preparatory meeting is to be convened at the Federal Ministry of Construction to discuss ways to speed up the construction and approval processes as its central subject, according to Immobilien Zeitung, a real estate trade paper. If the housing summit is to meet with success, it will have to produce results as comprehensive as possible. Aside from the need to simplify licensing processes, issues likely to be discussed will therefore include the release of building land, the reduction of build costs and the promotion of infill densification programs. After all, one of the main reasons for the drop in the number of planning permissions last year was the massive decline in the number of planned infill densification projects, which is a problem particularly acute in Germany’s major cities.2