Real estate crisis: Why hundreds of thousands of social housing units are missing

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Protest against high rents in Berlin (archive photo): Social housing in short supply

Photo: K.M.Krause / snapshot / IMAGO

Tenants' associations, construction unions, social and industry associations are sounding the alarm. Since the last appeal of the alliance last year, the conditions on the housing market have deteriorated noticeably, especially for less well-off households. The already dramatic shortage of social housing in Germany has increased significantly, the stakeholders explained, referring to the continuation of the study by the Pestel Institute in Hanover.

The statistics show that social housing is becoming a rare commodity in Germany. By 2010, the number had fallen from almost four million in the old Federal Republic of Germany to around 1.66 million. And at the end of 2022, according to the federal government, there were only around 1.088 million apartments with rent control.

According to calculations by the German Economic Institute, around 2035,40 social housing units will be removed from the stock every year by 000. Just to maintain the current level, 519,000 new ones would have to be built by then – more than 40,000 every year.

Goals not even close to being achieved

Rents for social housing are regulated by the state. Only people who have been identified by the authorities as having a special need due to a low income are allowed to live there. After a certain period of time, the social bond for such an apartment ends, and it can be offered on the free rental market. This affects thousands of apartments every year. However, since hardly any new apartments of this type have been built in recent years, the number is currently so low. Janina Bessenich, Federal Director of Caritas Disabled Assistance and Psychiatry, renewed her call for a special fund of 50 billion euros from the federal government.

Due to the enormous demand, especially in the cities, the SPD, the Greens and the FDP had stipulated in their coalition agreement the construction of 400,000 new apartments per year – 100,000 of which would be social housing. A goal that the government did not even come close to achieving yet.

For the past year, this could be explained by the consequences of the Ukraine war. Increased interest rates and drastic price increases for building materials and energy are seen as the main obstacles. Recently, there was also a lack of skilled workers to be able to meet the demand in construction. However, the jumble of building regulations and the excessively long deadlines for issuing building permits by the authorities are also often cited as causes.

Demand hard to quantify

Of course, these problems apply to residential construction as a whole, but they are most prevalent in the simple segment, where the return on investment is the lowest. Potential builders are particularly likely to fall into the red here.

However, it is difficult to quantify precisely how great the demand for social housing actually is. The goal set by the traffic light coalition is a quantity determined according to political aspects, explains Philipp Deschermeier, who researches housing policy and real estate economics at the German Economic Institute. "The apartments that are lacking in North Rhine-Westphalia may be too many elsewhere," he says. In the face of emergencies elsewhere, the economist proposes an increase in housing benefit as an alternative.

But this is exactly what the "Social Housing" alliance considers to be the wrong approach. The chairman of the Industrial Union for Construction, Agriculture and Environment, Robert Feiger, even accuses the state of downright "mismanagement" in this respect. They prefer to pay rents – often far too high – to landlords instead of investing heavily in the construction of social housing," he said. As a result, government social spending skyrocketed. The winners are the landlords, who are able to push through ever higher rents on the market.

In Bavaria, Baden-Württemberg, Hesse and Hamburg, the state is even forced to pay a rent that is higher than the local comparable rents. The background: In the case of recipients of citizens' benefits, the state usually covers the costs of accommodation. And if you have a small income, you can apply for a subsidy for housing: housing benefit.