Business associations from the construction and real estate sectors, as well as academics, are warning the German government of a growing crisis in the housing market as building costs spiral out of control.
“Germany is building very expensively,” said Dietmar Wallberg, head of the Kiel-based building research institute. ArgeThursday in Berlin.
In major cities, the average price per square meter of newly constructed living space is €4,630 ($5,350) and even €5,400 including land costs.
“It’s too expensive for average earners,” Walberg said.
New legislation was introduced in late 2025 in an effort to speed up the planning and approval processes. In 2025, 10% more building permits were issued than the previous year. However, real estate association GDW expects completions to decline to just 200,000 apartments this year, while at least 300,000 new units are needed per year to meet demand.
The coalition government of the centre-right bloc of Christian Democrats and the Christian Social Union (CDU/CSU) and the centre-left Social Democrats (SPD) has increased the construction ministry’s budget to €7.6 billion for 2026.
Germany’s ‘construction turbo’ fails to take off
When she came to office last year, Works and Housing Minister Verena Hubertz introduced a plan to help ease the shortage of affordable housing. In a country where it can take longer to get approval for a development project than to actually build it, Hubert said she wanted to give local officials a “crowbar” to circumvent labyrinthine urban planning laws. That crowbar, called “Bau-Turbo” (construction turbo), is a new paragraph (§ 246e) in the German building code.
The law was passed in October, allowing municipalities to approve construction, change-of-use and renovation projects that deviate from building code provisions if those projects are for the construction of new residential buildings. Planning applications are now automatically approved after two months unless vetoed by the municipality.
Matthias Günther, head of the Pestel Institute, which researches areas such as the economy and housing for the public and private sectors, told DW that the new law is “a lot of hot air” that “will achieve nothing in the short term.”
According to the Federal Institute for Research on Building, Urban Affairs and Spatial Development (BBSR), Germany will need about 320,000 new homes every year until 2030.
Public funds are being invested in the creation of social housing – subsidized apartments for low-income families, projects for climate-friendly construction, converting commercial areas into residential areas and promoting home ownership for young families.
Schemes for simple construction of residential buildings
The new law was intended to speed up planning and approval processes. Now, industry associations are again insisting that the government should focus its funding policy on “basic standard housing construction”.
According to Walberg, the key lies in simple construction.
The German government is planning to reform building standards. “Building Type E”, in which E stands for simple, was presented in November but is still awaiting Cabinet approval. This type of building aims to avoid expensive additional facilities and maintenance-intensive technology as well as underground parking garages.
Tim-Oliver Müller, managing director of the Federal Association of the German Construction Industry (HDB), said “a series of crises” have hit Germany’s construction industry. They list Russia’s full-scale invasion of Ukraine, rising energy prices, increased costs of materials like concrete and steel, inflation and a jump in interest rates from below 1% to between 3% and 4%.
“The new law is a whole new creation of possibilities, for example, with regard to building expansion or changing the designation of land from commercial to residential, something that was not possible before,” Müller told DW.
Building regulations vary between Germany’s 16 states and municipalities, resulting in an ever-increasing array of rules governing everything from the number of electrical sockets per room to the shape and color of roofs.
environmental concerns
Environmentalists have expressed concerns about the easing of planning rules as they fear that green space will be created by new development projects being launched with less time for local residents to object.
“Only with green spaces can we buffer [heatwaves]. Because these green spaces provide active cooling,” says Stefan Petzold of the Nature Conservation Association. Naboo told German public broadcaster ARD.
Bernard Faller of the Federal Association for Housing and Urban Development (VHW) says that one of the main reasons for rising rents in large German cities is the extreme shortage of housing. More than half of Germany’s population lives in rental housing, the highest share in the European Union.
While Germany has some of the strongest tenant protection laws in the world, Faller said these laws protect existing tenants and work against those who want to move or want to move, especially against young people and large families.
“The problem remains the same: There are too few homes to meet demand,” he told DW.
Germany’s demographic change
Despite Germany’s demographic changes, due to an aging society, demand for housing is unlikely to decline.
“We have increasingly smaller homes. This means that their number will continue to grow in the coming years, even with a stable population,” said Arnt von Bodelwickel of the Berlin-based research institute. regional context Said in Berlin on Thursday.
Edited by: Reena Goldenberg
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