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HOUSING

EXPLAINED: What is Germany doing to solve its housing crisis?

In light of Germany's growing housing shortage, politicians gathered with industry at a summit on Monday to discuss solutions. Here's how they aim to make housing more affordable and accessible to German residents.

Published: 25 September 2023 13:30 CEST
flats
Newly installed solar panels on an apartment building in Wuppertal, North Rhine-Westphalia. Photo: picture alliance/dpa | Rolf Vennenbernd

Finding somewhere to live in Germany sure isn’t easy at the moment.

Though many experience the problems with the rental market, the real estate market is currently in a crisis too caused by a steep rise in costs of building materials and higher interest rates, which mean that people cannot afford to build houses anymore, and investors don’t want to build.

READ ALSO: How high interest rates are hampering homeowners’ dreams in Germany

New figures from Germany’s Statistical Office show that only 21,000 apartments were approved for construction in June, a drop of 31.5 percent compared to the same period last year, or 9,600 fewer apartments.

Meanwhile the real estate giant Vonovia declared last week that they are delaying the construction of 60,000 apartments due to a lack of investment and increased costs. Germany’s record drop in house prices may mean that investors think the profit margins are not worth investing.

READ ALSO: Why does Germany keep missing its house building target?

Can a housing summit solve the crisis?

So the government has declared a housing construction summit (Wohnungsbaugipfel) for Monday to try and make things easier for this beleaguered sector, inviting 30 different industry groups to meet with Olaf Scholz and construction minister Klara Geywitz, both of the Social Democratics (SPD), in the Chancellor’s office in Berlin.

This comes ahead of state elections in Bavaria and Hesse where the governing “traffic-light” parties of Social Democrats, Greens and Free Democrats aren’t expected to do well.

“The creation of affordable housing is one of the most pressing social issues of our time” is how the public statement stating the key policy points starts, according to public broadcaster ARD’s politics department, who received a copy in advance.

A housing co-op in Saxony

A housing co-op in Saxony. Foreigners say it’s hard to find a secure place to live in Germany. Photo: picture alliance/dpa | Robert Michael

Easier qualification for loans

One of the key measures will be raising the maximum annual income limit for families to qualify for a discounted loan through the state bank KfW from €60,000 to €90,000 for a family of three, Tagesschau reported on Monday.

The maximum amount available to be given as a loan has also been raised by €30,000 to €170,000 at an annual interest rate of just half a percent. This will mean that more families will be able to afford to build or buy their own energy-efficient home.

Due to the high costs of new energy-efficient insulation, under the old standards this financial relief program had only had 245 applicants since it was launched in June, with German construction minister Klara Geywitz telling Tagesschau “we are therefore improving the funding conditions and making the program more attractive.”

Robert Habeck, the climate and economy minister from the Green party, has already declared ahead of the summit that he will delay plans to introduce new requirements for the better EH40 standard of insulation, which would have meant that new builds only use 40 percent of the energy of other buildings.

“The introduction of the Building Energy Act ensures that new buildings will have climate-friendly heating from 2024. That’s why I no longer think it is necessary to quickly introduce the new EH 40 standard” Habeck told Reuters news agency.

“In the amendment to public procurement law planned for 2024, we will therefore ensure that sustainability criteria are implemented in a less bureaucratic, simpler and therefore better way,” he added.

Construction experts had argued that the additional insulation standards would have been expensive without the benefit of saving much energy.

The German government still back reforms at a European level that put “demanding quotas” for renovating and upgrading building stock but will not make this compulsory for individual homes.

More funds for social housing

Germany’s 16 states will be provided with €18 billion to build social housing, and cities such as Munich and Berlin which have extremely high demand for housing should be allowed to reform planning laws to make building affordable housing easier and faster.

The Green Party leader Ricarda Lang has also called for a €30 billion investment program to go directly to the construction industry, which itself has called for a stimulus package of €50 billion.

New ‘climate bonus’

The government also aim to introduce a “climate bonus” to encourage homeowners to swap their gas and oil boilers for new climate-friendly heating systems, as demanded by Chancellor Scholz’ government’s controversial heating law.

Tax breaks for offering affordable housing

Following a suggestion by Kevin Kühnert, the SPD’s General Secretary, the government will introduce a non-profit housing law that will give tax breaks and addition funding to landlords who consistently offer affordable housing. Germany had non-profit housing until 1990 when it was abandoned federally after a corruption scandal.

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READER INSIGHTS

How foreign residents in Germany are winning rent reductions

Rent is often the biggest expense for foreign residents in Germany. Even though there are rent controls in some cities, tenants can still be charged too much. Readers shared how they managed to get a rent reduction.

Published: 2 May 2024 14:57 CEST
How foreign residents in Germany are winning rent reductions

The Local asked readers whether they have tried to reduce their rents in Germany, and to what end. 

Of the readers who responded, nearly half said they had never tried to reduce their rent. Among the other half of respondents, many said they either wanted to reduce their rent or were currently in the process of trying to have it reduced. 

About 18 percent of respondents to our survey said they had successfully reduced their rents in Germany before.

Why do residents want rent reductions?

Germany notoriously has the lowest rate of home ownership in Europe, which has long been attributed to being a country with high real estate prices and relatively low rents.

But this means that a large number of German residents are directly affected by rising rents. Low-income individuals living in urban hubs where rents have been rising rapidly in recent years are particularly vulnerable.

According to Germany’s statistical office (Destatis), 11.8 percent of the population was overburdened by housing costs as of 2022 – meaning these households spent more than 40 percent of their income on housing.

Unsurprisingly, a number of readers cited inflation and cost-of-living increases as the primary reason they wanted to try for a rent reduction.

READ ALSO: How to grow your savings in Germany during high inflation

A couple of readers noted that their current rent prices are making their living costs too high.

Rothe, 29, who lives in Aachen, says she can’t bear her current rent but is stuck in a contract.

Similarly, Lucas, 35, who lives in Horb am Neckar said he wants to reduce his rent to balance his expenses following the recent cost-of-living hikes. He says he’s tried to negotiate with his landlord, who doesn’t care to do so.

While landlords are unlikely to grant a rent reduction based on inflation or cost-of-living increases, there are a few reasons you can legitimately demand a rent reduction in Germany.

Make sure your rent isn’t exceeding the price brake limit

The rent price brake (Mietpreisbremse) isn’t perfect, but it’s arguably Germany’s strongest protection for tenants against rising rents. 

It’s designed to prevent landlords from raising rents to ‘unreasonable’ levels, but with no central agency for enforcement, the burden falls on tenants to demand legal rents.

READ ALSO: German rent brake to be extended until 2029: What you need to know

Andrew, 62, successfully reduced the rent he pays for his flat in Berlin’s Gesundbrunnen area with the rent brake rule. After he realised the “rent was high for the location”,  he contacted his tenant’s association.

He thought that his landlord responded in a reasonable manner: “They thought the condition of the flat justified the higher rent and paid a friendly visit to point out the features,” Andrew said.

“We countered that the features were all quite old and that the previous tenants had been on a lower rate.”

Mieten runter "rents down"

The words “Rents down” are graffitied on the wall of a rental building. About 75% of Berlin rents are set illegally high, a legal expert told The Local. Photo: picture alliance/dpa | Monika Skolimowska

The rent brake prohibits landlords from setting rents more than 10 percent above a local average value, which is recorded in a local rent price index. You can find your local rent price index by searching for the German term “Mietspiegel”, along with the name of your city or region.

Here is one for Berlin, which allows you to calculate your rent index based on your current address and a few factors such as the area of your flat and how old the building is etc.

Andrew recommends joining a tenants’ union and using an online calculator to check if your rent is reasonable. He also says you should be prepared to negotiate and to compromise where necessary.

Gerson, 50, who lives in North Rhine-Westphalia, also found that his current rent was too high for his location. He says he is currently looking for a company that can assist him with the process to demand a rent reduction.

David, 57, in Berlin said he believes his rent is “illegally high” compared to other and he has hired a lawyer to go through the process of trying to get a rent reduction. 

There are also legal service providers that can help with renters’ issues in Germany, and some that even specialise in winning rent reductions with the rent price brake. You can find some of them through an online search. You may want to look for one that will initiate the process at no cost to you. Some will even complete the service with no cost to tenants, applying their fees instead to the landlords at fault in the event that they win a rent reduction.

READ ALSO: Why are Berlin rents soaring by 20 percent when there’s a rent brake?

It’s also worth noting that the rent price brake only applies to rental markets that are considered highly competitive. So it applies to most of Germany’s big cities, but may not apply in suburban or rural regions.

Overcharged by faulty measurements

Rents prices in Germany are usually calculated according to a price per metre of living space. Therefore, in some cases, it may be worth double checking that your living space has been calculated accurately.

One reader, who didn’t wish to be named, told The Local that he had previously reduced his rent for an apartment in Düsseldorf in this way.

“We had a small attic apartment with slanted walls,” the reader said. “The total square metres of the apartment were based on measurement from wall to wall. However, walls had to be straight to a height of at least 1.2 metres before the slanted side can begin [or else] the total square metres start from the point where the vertical height of 1.2 metres is available.”

After he learned about this requirement he measured the apartment, and found that his own rent had been based on a measurement of the floor plan, not the legally defined living space. Then he contacted his tenants’ association, which sent an architect to confirm the measurements.

Initially sceptical, his landlord sent another architect to check the measurements. But when it was confirmed, his rent was lowered accordingly. “Turned out that we had to pay for about 10 square metres less all in all,” the reader said.

This incident was 15 years ago, and these types of regulations can vary from region to region.

His advice to readers is to check up on the local regulations that may apply to your situation. 

In other cases, some renters have been able to negotiate rent reductions for other inconveniences – such as excessive noise, for example.

READ ALSO: How to get a rent reduction for problems in your German flat

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