Report: German housing shortage deepens, threatening economic growth

Germany’s housing shortage is blocking economic growth, the Hanover-based Pestel Institute said on Monday, with more than 1.2 million residences needed in western parts of the country alone.

The research group said a lack of accommodation is exacerbating issues in the labour market, calling for fundamental political changes towards comprehensive state support for housing construction.

“The stagnation of the housing markets naturally also leads to the stagnation of the labour markets, because people can no longer move to take up jobs in other regions,” said Pestel chief economist Matthias Günther at a trade fair in Munich.

“Solving the housing issue is a prerequisite for economic development,” he added.

The figure of 1.2 million missing residences in western Germany alone is considerably higher than previous estimates.

The institute has factored out all flats that have been vacant for more than a year. “Anything that has been vacant for 12 months or longer is obviously no longer on the market,” explained Günther.

According to the study, the vacancy rate – the proportion of unoccupied or rented flats – is over 5% in many German districts.

One of the causes is that “many older people are afraid of tenants,” Günther argued. He proposed looser protections for renters in order to reassure owners they can evict their tenants when necessary.

In addition, many people live in flats that are far too big for one person alone, the economist said. “2 million single households have more than 100 square metres of living space.”

Appearing at the trade fair in the Bavarian capital, Construction Minister Verena Hubertz on Monday defended the government’s plans for a “construction turbo,” which she said could be approved by the upper house of parliament, the Bundesrat, as early as next week.

“Then we can get started,” said Hubertz. The bill is not a funding programme, but is intended to greatly reduce the extensive bureaucracy involved in construction planning.

Authorization procedures should be reduced to just a few months, instead of several years. “We are turning the tables, we are giving the local authorities a crowbar,” said Hubertz.

She also highlighted an increase in funding, with €23.5 billion ($27.5 billion) for social housing.

“The construction industry has never been able to plan like this before,” said Hubertz.

Nevertheless, the Pestel Institute and major construction companies are sceptical that the “turbo” will provide much-needed impetus.

“I have my doubts,” said Peter Hübner, president of the Construction Industry Association.

Günther believes that subsidized loans make sense – without linking them to environmental or other standards, as has been the case in previous subsidy programmes.

In his view, the slight increase in the number of building permits this year does not mean that the construction crisis has been overcome: “No one has ever lived in a building permit.”