As election looms, Germany’s rent crisis and housing shortage are left unaddressed

BRUSSELS, Feb 20 — When an apartment comes up for rent in Germany’s big cities, hundreds of prospective tenants often queue down the street to view it, but the acute shortage of affordable housing is getting scant attention ahead of Sunday’s snap general election.

“Housing is one of the main problems for people, but nobody talks about it, nobody takes it seriously,” Andreas Ibel, president of Build Europe, an association representing housing developers, told the Thomson Reuters Foundation.

Migration and the sluggish economy top the list of voters’ concerns, but analysts say housing policy fails to break through as returns on investment take time to register, making the issue a tough one to campaign on in a short election cycle.

A single rental listing in Berlin can generate 300 viewing requests per day, and this is driving inequalities across the country as the less well-off struggle to compete in the crowded market.

Rising rents are likely to lead to more support for far-right parties like AfD, which is currently polling second, among low-income tenants, according to researchers at Oxford, Mannheim and Zurich Universities.

A growing number of people are spending 40 per cent of their income on housing, the threshold for a household to be considered overburdened by rent payments, according to the OECD.

Higher rents and a shortage of housing, especially social housing, are driving the crisis, but other pressures, such as rising numbers of holiday lets as well as refugee arrivals, have added to the squeeze in major cities.

“Developments such as AirBnB, or the recent influx of asylum seekers and migrants have only worsened the situation, but they are not the key cause,” explained Christian Danne, an economist at the Berlin-based German Institute for Economic Research (DiW).

Rental nation, housing crunch

Germany is a nation of tenants with more than 50 per cent renting their homes, compared to an EU average of around 30 per cent in 2023. This high level has contributed in part to the housing crunch due to rent price caps.

While limiting rent increases can help some tenants, they also worsen housing shortages as people rarely move, fewer flats are put on the rental market, while landlords exploit loopholes charging higher prices for furnished flats, which are exempt from caps, pricing many out of city living, say analysts.

From 2010 to 2022, asking rents surged by 50 per cent nationally and by up to 70 per cent in large cities, while existing rents grew by 20 per cent. Poorer households, especially single parents, are suffering most according to a 2024 DIW report.

“It’s not just an issue for low-income households. Even middle-income families, as soon as a place comes on the market, they rent it without viewing it,” Danne told the Thomson Reuters Foundation.

This problem is most stark in Berlin, where social housing was sold off in 2004 to plug budgets, allowing private investors to develop luxury apartments that offered a higher yield.

Second-tier cities like Hamburg, or Cologne are also experiencing extraordinary growth in asking rents according to Immoscout24, an online real estate platform in Germany.

Plans to extend a 10-year-old rent price cap, due to expire at the end of 2025, were derailed by the snap election.

The ruling coalition parties, the Social Democrats (SPD) and the Greens, have pledged to continue the cap, while the opposition conservatives (CDU), who are expected to come first in Sunday’s election, want to scrap it.

Analysts and real estate developers agree that extending the price cap would not ease the housing crunch, especially for low-income households. DiW study authors are calling for targeted support for low-income renters and the expansion of social housing.

Social housing experts say Germany could look to neighbouring Austria as an example, citing the country’s commitment to social housing as a basic right. More than half of Vienna’s residents live in subsidised housing.

Building blocked

Germany needs between 600,000 and 800,000 more homes to deal with demand, a figure that is set to rise as the pace of construction stalls, and pledges to build hundreds of thousands of new homes fall short.

The outgoing government vowed to build 400,000 new homes a year when it came to power in 2021, a quarter of which were to be state-subsidised, but only around 200,000 new homes were built during the last year, compared to 293,000 in 2021.

Paralysis in the construction sector is down to high raw material costs, a lack of land, few government incentives and excessive regulations, according to developers.

“One of the biggest problems we are facing is trying to have a gold standard house, which nobody can pay for,” said Ibel, explaining that this model includes strict requirements for energy efficiency.

Policy makers should explore reducing red tape and offering incentives, such as tax breaks for companies building affordable homes, developers say.

But if politicians do not make building affordable houses a priority, the situation will only get worse, driving a wedge between the most vulnerable — low-income families and asylum seekers — who are often competing housing in the same residential zones.

“Instead of building houses, we’ll build walls to keep people out,” Sorcha Edwards, general secretary of Housing Europe, a network of European social housing providers, told the Thomson Reuters Foundation. “We’re just going to be causing more tensions and divisions.” — Reuters