Decline in Housing Construction Sparks Urgent Reforms

Germany Faces Housing Construction Challenges

Germany is experiencing a significant decline in housing construction, with only 251,900 new dwellings completed in 2024, marking a 14.4% decrease from the previous year. The government's annual target of 400,000 new homes remains unmet, prompting calls for immediate action from construction and housing associations. The dip is most pronounced in single-family homes, which saw a 22.1% reduction. The construction of new multi-family buildings also decreased by 13.4%. Federal Construction Minister Verena Hubertz attributes the downturn to unfavorable conditions, such as complex approval procedures, high building costs, and unclear funding regulations. The construction industry is hampered by rising material prices and high interest rates, exacerbated by the ongoing conflict in Ukraine. To address these challenges, Hubertz proposes a 'housing construction turbo,' aiming to simplify approval processes and promote modular and serial construction. The government plans to introduce tax incentives and streamline building regulations to encourage new projects. Additionally, Hubertz has promised to continue supporting social housing, with an investment of 3.5 billion euros allocated for this year. Industry leaders are urging the government to enhance private demand by providing guarantees to supplement or replace equity. They advocate for a reduction in property transfer taxes for families and a unified, simplified approach to construction subsidies. They emphasize the need for immediate, effective measures to reverse the negative trend in housing development, calling for a clear legal framework to facilitate construction and improve housing availability.