(de-news.net) – The housing situation in Germany is getting worse as attempts to increase the supply of affordable living space are hampered by growing rents, building expenses, and financial limitations. While Housing Minister Verena Hubertz (SPD) points to improving building permit figures, industry representatives warn of declining housing completions. Proposals to convert abandoned commercial premises, identify underused flats, and modify housing subsidies show opposing approaches to growing supply and protecting tenants, while Government ambitions for a Federal Housing Company encounter constitutional obstacles.

As policymakers, researchers and business representatives debate responses to Germany’s persistent housing shortage, the sector is presenting mixed signals. Ahead of a housing summit in Berlin organized by the German Tenants’ Association and the German Trade Union Confederation, Construction Minister Verena Hubertz said residential construction was showing initial signs of stabilization. She pointed to 14 consecutive months of rising building permit numbers, attributing the improving trend in part to federal legislation adopted last year that aims to accelerate construction by easing certain administrative requirements. However, she acknowledged that further measures would be necessary to improve conditions in the housing market.

Asking rents accelerate despite signs of construction recovery

The reported improvement in construction approvals has not eased pressure on rental housing. According to the Kiel Institute for the World Economy, asking rents increased by 1.2 percent in the third quarter compared with the previous quarter, marking the strongest quarterly rise since early 2025. On an annual basis, rents increased by 3.7 percent. Existing apartments accounted for much of the growth, while rental prices for newly built properties rose more slowly. Researchers suggested that high prices may be limiting demand for new apartments, which remain on the market longer than comparable existing units in major cities.

The German construction industry has warned that residential building activity could decline further as rising costs weaken the profitability of new projects. Olaf Demuth, president of the German Construction Industry Federation, said higher expenses, particularly for energy, were making construction increasingly difficult to justify financially. He expected the number of completed homes this year to fall below the approximately 206,000 recorded in 2025.

Demuth called for broader access to low-interest loans and government guarantees for households, families, investors and developers, arguing that financing constraints must be addressed to reverse the downturn. In his assessment, targeted public support could mobilize substantial private capital while helping restore construction activity. A stronger residential building sector would also generate wider economic benefits, he maintained, making housing investment relevant beyond the immediate question of residential supply.

Proposed company faces constitutional obstacles

The Federal Government’s plan to establish a national housing company has prompted questions about its legal basis and political feasibility. According to an assessment by the Bundestag’s Scientific Services, a federally controlled organization responsible for planning, commissioning or directly undertaking housing projects would probably require an amendment to Germany’s constitution. Housing policy is primarily a responsibility of the states, and creating a private-law corporation would not, by itself, remove the Federal Government’s constitutional limitations. Any constitutional amendment would require two-thirds majorities in both the Bundestag and the Bundesrat. These requirements present a significant legislative hurdle for the proposal, which seeks to expand the Federal Government’s role in housing development despite the existing division of responsibilities between federal and state authorities.

Despite the legal uncertainties, Hubertz and Finance Minister Lars Klingbeil, both members of the SPD, intend to establish the company in 2027. They plan to present a detailed concept later this year. Hubertz has described the proposed organization as a lean, market-oriented entity rather than another government bureaucracy or a state-owned construction company. The Federal Government would hold 51 percent of the company, with the remaining 49 percent available to external partners, including private businesses and municipal or state-owned housing companies. By combining cooperation with established market participants and large-scale procurement, the government aims to use its strong credit rating to secure favorable financing conditions and support additional residential investment.

Left Party backs public housing provision and vacancy measures

The Left Party supports establishing a Federal Housing Company but argues that its activities should prioritize social objectives and nonprofit housing provision rather than private financial returns. Its representatives have also called for amendments to federal law that would enable municipalities to identify vacant apartments more effectively using electricity-meter data.

A legal assessment commissioned by the party concluded that anonymized consumption data may already be used without the same data-protection restrictions applicable to personal information. However, legislation would be needed before such data could be used to identify specific properties and hold individual landlords accountable. Supporters argue that a clearer legal framework could help municipalities address vacant housing at a time of growing pressure on residential supply.

Regional rental figures reveal uneven market pressures

Recent rental data further illustrate the scale and geographic variation of Germany’s housing challenges. Hamburg recorded annual rent growth of 6.7 percent, while Berlin and Düsseldorf experienced the largest quarterly increases among the country’s major cities. The Kiel Institute also found that rents for existing apartments had been rising more rapidly than those for new developments, indicating that affordability pressures extend beyond newly constructed housing.

These differences reflect changing conditions across urban rental markets, where the cost of new housing may limit demand for newly built units even as households continue to face higher rents for existing properties. The figures reinforce the distinction between increasing construction approvals and the availability of housing that households can afford.

Commercial conversions offer an alternative to new construction

The Federal Government is also pursuing ways to expand housing supply through the conversion of existing buildings. Hubertz reported that the Commercial-to-Residential funding program had received more than 700 applications during its first three months, representing over 120 million euros in requested funding. The initiative is intended to turn underused commercial properties into residential space, potentially revitalizing urban centers while reducing reliance on new construction alone. Hubertz has cited the substantial volume of vacant commercial real estate as an opportunity to create housing in areas where existing buildings are no longer fully used.

Looking ahead, the minister plans to organize housing support programs around two principal areas: renovation of existing buildings and new residential construction. Expanding opportunities for families to purchase homes is also expected to become a central objective of the revised framework.

Dispute over property socialization adds to policy divisions

Debate over the socialization of large residential property portfolios, particularly in Berlin, has added another point of contention to housing policy discussions. Hubertz opposes such measures, arguing that they could undermine investor confidence and generate costs running into billions of euros without directly increasing the number of available homes. The Minister maintains that policy should focus on expanding construction while balancing tenant protections with incentives for private investment. The issue is expected to remain contentious in coalition negotiations, as left-wing parties continue to advocate stronger public intervention in the housing market.

Germany’s housing debate therefore encompasses several competing approaches: accelerating construction approvals, improving access to financing, expanding public-sector involvement, converting vacant commercial space and regulating existing residential assets. The central challenge remains how to increase the supply of affordable housing while addressing rising costs and navigating the legal and political constraints governing federal housing policy.