Housing: associations are sounding the alarm: new housing construction is on the verge of collapse

The major housing associations see new construction in Germany on the brink of collapse.

Housing: associations are sounding the alarm: new housing construction is on the verge of collapse

The major housing associations see new construction in Germany on the brink of collapse. No dampener and no descent either - there was talk of a crash at the housing construction day on Thursday in Berlin. The seven leading organizations and associations in the construction and real estate industry made a clear request to the federal and state governments: the state must significantly increase its subsidies for housing construction. Construction Minister Klara Geywitz (SPD) can promise little - but she still expects a positive development.

According to the associations, around 50 billion euros would be needed by 2025 to be able to build 100,000 social housing units per year. In their coalition agreement, the traffic light parties had anchored the construction of 400,000 apartments, 100,000 of which were social housing. Similar to the Bundeswehr, the money should also be made available to the construction industry as a special fund, the associations demanded. Geywitz emphasized that it was ultimately a matter of debt - and that the state's debt options were limited.

The Federal Minister for Building has already admitted that the new building target of 2023 will not be met. Despite the acute housing shortage, building permits fell last year by 6.9 percent to 354,400. The associations warned that there was even a risk of a fall to just around 200,000 new apartments by 2024.

They also called for a change in dealing with the backlog of apartments that have already been approved. The construction of around 900,000 units has already been approved in Germany - for around 40 percent of them, however, the shell construction has not even started. Here the associations want to be helped with attractive incentives such as financial subsidies or reduced requirements. Otherwise there is a risk that many apartments would not be built at all, they warned. In addition, an increase in existing living space or supermarkets and lower standards in construction must be considered. A "business as usual" policy will lead to a reduction in construction capacities.

Ifo: Wave of cancellations in residential construction continues

The new residential building is in an absolutely exceptional situation, said Dietmar Walberg from the ARGE Building Research Institute (Kiel). For people who urgently need an apartment, there seems to be no improvement in sight. The associations warned that a slump in housing construction would not only have fatal consequences for the population, but also for the economy. "Residential construction is a strong driver of the domestic economy - especially during the crisis." More than three million jobs depended on the entire value chain.

According to the Ifo Institute, cancellations in residential construction have recently increased. An increasing number of construction companies are reporting withdrawn orders, the Munich economic researchers reported. In March, in the monthly Ifo survey in the construction industry, 16 percent of companies stated that their customers had taken back orders that had already been placed. In February this share was 14.3 percent, in January it was 13.6 percent.

The reasons for the staggering housing construction are also the increased costs, the associations emphasized. "The ever-increasing construction costs make it impossible to create affordable new construction. It is frightening that the federal government has apparently still not recognized the seriousness of the situation," said Axel Gedaschko, President of the Federal Association of German Housing and Real Estate Companies GdW. "We need immediate, short-term measures that will take effect quickly so that our companies can once again be put in a position to set up new construction projects."

Minister Geywitz sees a variety of reasons for the problems in housing construction. "Of course, the Russian war of aggression in Ukraine confronted us with massive increases in energy costs, and construction and financing costs have risen sharply as a result of general inflation, while real incomes have fallen at the same time," she said.

For private builders, there is also the psychological uncertainty and investors are holding back. But she sees a light at the end of the tunnel: "A good two-thirds of companies in residential construction still rate their order backlog as large or appropriate, despite all the difficulties," said Geywitz. In addition, individual federal states have significantly increased their investments in social housing and the subsidies for climate-friendly new buildings are being used well.