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German Real Estate Industry Calls for Housing Summit

The “diesel summit” that was recently convened at the German Chancellery should be followed up by a “housing summit” – or so the IVD German Real Estate Federation suggested in the German daily Bild  a few days ago. According to the IVD, housing industry stakeholders, real estate experts and tenant representatives ought to meet at the Chancellery and hammer out a new housing policy strategy together with Angela Merkel, the Christian Democrat head of government. The background to the idea is most notably the housing shortage that plagues large swathes of Germany and that has driven up residential property rents and prices in many cities.

To be sure, there are plenty of reasons for organising such a summit. The housing policy measures that the federal government and the state governments passed in recent years were strongly motivated by regulatory efforts. Rent hikes, for instance, are to be curbed through measures such as the so-called “rent freeze” or the modernisation ban in historic district protection areas. The unintended effect that many regulations of this sort tend to have, however, is that investments in the construction of new or the improvement of existing properties are hampered, and that the housing shortages are exacerbated as a result.

For one thing, the number of planning permissions for new flats that were issued during the first five months of this year declined by a conspicuous 7.6 percent year on year, and did so despite the enormous demand on the housing market. This development stands in stark contrast to the stated goal both of the body politic and the housing industry to get housing construction up to speed. So the same trend is probably also what fuels the demand that the Chancellor herself should address the housing policy issue.

Homeowner Subsidies Ought to Be Reviewed as well

But housing construction is probably not the only topic to be discussed at a possible real estate summit, as the homeownership situation in Germany calls for attention, too. After all, Germany’s homeownership rate of just 45 percent ranks at the very bottom of the list of EU member states. Considering the significance of homeownership especially as a pension plan component, this is a rather alarming state of affairs.

Nonetheless, the government has for the longest time neglected the issue of homeowner subsidies, and arguably ignored it since the expiration of the homeownership subsidy more than a decade ago. If nothing else, though, there is a very real chance that not just tenants but homeowners, too, or prospective home buyer will soon move centre stage for policymakers. In the run-up to the upcoming general election, Christian Democrats and Liberals, and even the Social Democrats propose sponsorship options to encourage homeownership in their campaign programs.