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Housing Shortage – Strain Won't Ease Any Time Soon

Around 240,000 apartments were completed across Germany last year. The figure is impressive and quite close to the total of 272,000 units that the BBSR Federal Institute for Research on Building, Urban Affairs and Spatial Development considers necessary to meet the growing housing demand. According to the DMB German Tenant Union, however, it still falls short of the mark. Latest projections suggest that 400,000 apartments would have to be completed in Germany per year in order to cope with the housing shortage.

Trend toward Smaller Households

One main reason why the annual demand for apartments in Germany exceeds expectations is the steep demographic growth. In 2014, the net incoming migration added up to 600,000 people, which is nearly ten times the forecast of 2010. Reasons for the increased flow of immigrants to Germany include the ongoing crises in many parts of the world. Another reason is the societal trend toward single living, which is reflected in a rising number of single-person households and thus an increased demand for flats.

Affordable Housing in Short Supply

The predominant type of apartment currently built straddles a rent bracket of 10.00 to 15.00 euros per square metre – a rent level unaffordable for many tenants. In response to the situation, the DMB German Tenant Union has urged government allowances for flats let at rates between 6.00 and 8.50 euros per square metre. Allowances could take the form of a real estate transfer tax break or a property tax reform. Another way to stimulate housing construction would be to raise the tax allowance on construction costs for developers from two to three or four percent. Moreover, the strings attached to public land sales to developers should be tightened in order to ensure that affordable housing is indeed being developed.

Calls for Speeding up the Approval of Planning Permissions

Real estate industry experts across the board agree that building more homes is the only proven way to combat rising rent rates and tight housing markets. Above all, streamlining the planning permit approval process is the prerequisite for any increase in the number of completions. During the first quarter of 2015, the number of planning permits issued came to a modest total of 28,821 new units – not nearly enough, according to the IVD Federal Investment and Asset Management Association. Experts are calling on municipalities to accelerate the permit procedure for building projects. This would in turn require the relevant authorities to hire extra staff, among other measures.