Housing crunch escalates - Administration aims to prompt building expansion. - Intensified housing scarcity - authorities propose accelerated construction efforts
Germany Faces Housing Crisis as New Apartment Construction Plummets
The newly-elected German federal government finds itself in the midst of a significant challenge: a steep decline in new apartment construction. According to the Federal Statistical Office, only 251,900 new apartments were completed in 2024 – a nearly 14 percent decrease from the previous year and the lowest number since 2015.
This prolonged construction slump is due to increased interest rates and construction costs, leading many developers to abandon their plans and investors to hold back. Experts estimate that Germany is in need of hundreds of thousands more apartments. Federal Chancellor Friedrich Merz (CDU) recently stated that the shortage could be as high as 500,000 apartments and more.
The number of newly built single and two-family homes, typically constructed by private individuals, decreased particularly sharply. Statisticians reported the first clear decline in newly built apartments, with the number fluctuating around 294,000 annually from 2021 to 2023.
New Construction Minister Verena Hubertz (SPD) has vowed to boost residential construction, announcing a "housing construction turbo" within the first 100 days of her term. Measures she plans to implement include streamlining approval procedures, improving tax incentives, promoting modern construction methods, and designating more building land.
"Excavators must roll again, and we must build, build, build," says Hubertz, emphasizing the need for affordable housing. The previous government missed its target of 400,000 new apartments per year, with the number rising from a low of 159,000 in 2009 to 306,400 in 2020. As the construction slump exacerbates the housing shortage in cities, experts predict additional increases in rents and real estate prices.
Building permits fell almost 17 percent to 215,300 in 2024, their lowest level since 2010. This resulted in a decrease in the number of approved but unfinished apartments, currently standing at 759,700. This "construction backlog" must be addressed, according to Hubertz.
Construction processes have become lengthy, with an average of 26 months from approval to completion in Germany – six months longer than in 2020. Last year, 29,000 building permits for apartments expired due to the expiration of their multi-year validity.
The real estate association ZIA has demanded simpler building standards, while the ICB union urges speed: "The construction turbo must start now, not tomorrow and certainly not the day after."
The construction industry is only slowly showing signs of improvement, according to Peter Hübner, President of the main association of the German construction industry (HDB). Despite this, new business with real estate loans increased significantly in 2024. "The positive trend has continued at the beginning of 2025 and could be an initial, cautious sign that the low point in residential construction has been reached," says Hübner.
At least: In March, the construction industry received strong momentum from several large projects for roads and railway lines. Compared to February, the price-adjusted value of new orders in civil engineering increased by 34.3 percent – the strongest increase since reunification.
Enrichment Data:- Minister Hubertz’s "construction turbo" includes proposals to centralize and simplify planning and permitting procedures, fast-track projects, and streamline infrastructure planning.- The government plans to use digital technologies, consolidate stakeholder engagement, and offer tax incentives and deductions to stimulate investment in residential construction.- The coalition also seeks to promote modular and serial construction, reduce technical norms to essential safety standards, and expand available land for residential development. These measures, if implemented effectively, could help address the housing shortage and accelerate construction.
The newly-elected German federal government, in an attempt to alleviate the housing crisis due to a steep decline in new apartment construction, is planning to implement measures such as streamlining approval procedures, improving tax incentives, promoting modern construction methods, and designating more building land as part of New Construction Minister Verena Hubertz's "housing construction turbo."
Experts suggest that the German construction industry could benefit from simpler building standards and speedier project completion for residential construction, as prolonged construction times and increased costs have led to a deficit estimated to be as high as 500,000 apartments (Federal Chancellor Friedrich Merz, CDU). Additionally, the industry could be stimulated through the use of digital technologies, consolidation of stakeholder engagement, and offering tax incentives and deductions. These commercal, personal-finance, and industry-related strategies are vital in addressing the housing crisis and motivating investment in residential development while fostering business growth.
