Business associations from the construction and real estate sectors, together with academics, have warned the German government of a deepening housing crisis as building costs soar.
“Germany is building far too expensively,” said Dietmar Walberg, head of the Kiel-based building research institute Arge, in Berlin. In major cities, the average price per square metre of newly constructed living space is €4,630 and rises to about €5,400 when land costs are included. “That is too expensive for average earners,” Walberg said.
New legislation introduced in late 2025 aimed to speed up planning and approval. That year saw a 10% increase in building permits compared with the previous year. Despite this, the real estate association GdW expects completions to fall to just 200,000 apartments in the current year, while at least 300,000 new units are needed annually to meet demand. The coalition government (CDU/CSU and SPD) has increased the Construction Ministry’s 2026 budget to €7.6 billion.
When she took office, Construction and Housing Minister Verena Hubertz presented a plan to address the shortage of affordable housing. She proposed giving local authorities a tool to bypass complex planning rules — the so-called “Bau-Turbo” (construction turbo), introduced as paragraph § 246e in the German Building Code. Passed in October, the law allows municipalities to approve construction, change-of-use and renovation projects that deviate from the Building Code when they concern new residential buildings. Planning applications are now automatically approved after two months unless a municipality vetoes them.
But critics say the measure will have limited short-term impact. Matthias Günther of the Pestel Institute called the new legislation “a lot of hot air” that “will not achieve anything in the short term.” The Federal Institute for Research on Building, Urban Affairs and Spatial Development (BBSR) estimates Germany needs roughly 320,000 new homes annually until 2030.
Public funding is being directed to building social housing, supporting climate-friendly construction, converting commercial areas to residential use, and promoting homeownership for young families. Industry voices argue the government must prioritise funding for “basic standard housing construction” and simplify building methods.
The government has proposed a reform of building standards, including a new “building type E” (E for einfach, meaning simple). Presented in November, it awaits cabinet approval. The design would omit expensive extras and maintenance-heavy technologies, and avoid costly features like underground parking. Dietmar Walberg and others see simpler construction as key to lowering costs.
Tim-Oliver Müller, managing director of the Federal Association of the German Construction Industry (HDB), says a “melange of crises” has hit the sector: Russia’s full-scale invasion of Ukraine, higher energy prices, rising costs for materials such as concrete and steel, inflation, and a hike in interest rates from below 1% to between 3% and 4%. Müller described the new law as “purely a creation of possibilities,” allowing, for example, building extensions or land-use changes that were previously impossible.
Building regulations differ across Germany’s 16 states and among municipalities, producing a growing patchwork of rules that govern everything from the number of electric sockets to roof shape and colour. That fragmentation adds complexity and cost to construction projects.
Environmentalists warn that easing planning rules risks losing green space, which helps buffer heatwaves and provides active cooling. Stefan Petzold of the nature conservation association NABU told public broadcaster ARD that green spaces are essential for cooling.
The severe shortage of housing is a major reason rents have soared in Germany’s big cities, said Bernard Faller of the Federal Association for Housing and Urban Development (VHW). More than half of Germany’s population rents their homes — the highest share in the EU. While Germany has strong tenant-protection laws, Faller said these protect existing tenants and can disadvantage those who need to move, especially young people and large families. “The problem remains the same: there are too few homes to meet demand,” he said.
Demographic change will not reduce housing demand. Germany’s aging society includes a rising number of smaller households, which means the total number of households will keep increasing even if the population stagnates. Arnt von Bodelschwingh of the research institute RegioKontext said smaller household sizes will drive continued demand for housing in the coming years.
Edited by: Rina Goldenberg
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