Business groups from construction and real estate, together with academics, have warned the German government that rising building costs are deepening the country’s housing crisis. They say high prices are making new homes unaffordable for average earners and will limit the impact of recent planning reforms.
Dietmar Walberg, head of the Kiel-based building research institute Arge, said new living space now costs on average €4,630 per square metre in major cities, rising to about €5,400 when land is included. “That is too expensive for average earners,” he said.
In late 2025 the government introduced faster planning and approval rules intended to speed construction. The so-called “Bau-Turbo,” added as paragraph §246e to the German Building Code and passed in October, lets municipalities approve new residential construction, change-of-use and renovation projects that deviate from the code. Planning applications are automatically approved after two months unless a municipality vetoes them. Building permits rose 10% in 2025 compared with the previous year.
Despite the reforms, industry bodies and research institutes warn the short-term effects will be limited. The real estate association GdW expects completions to fall to about 200,000 apartments this year, while many experts say at least 300,000 units — and the Federal Institute for Research on Building, Urban Affairs and Spatial Development (BBSR) roughly 320,000 — are needed annually to close the gap through 2030. Matthias Günther of the Pestel Institute dismissed the new law as largely symbolic, saying it “will not achieve anything in the short term.”
Public funding is being directed to social housing, climate-friendly construction, conversions of commercial space to residential use, and measures to support homeownership for young families. The coalition government has boosted the Construction Ministry’s 2026 budget to €7.6 billion. Industry groups argue the focus should be on funding straightforward, low-cost housing and simplifying construction methods.
The government has also proposed a reform of building standards that would introduce a “building type E” (E for einfach, meaning simple). Unveiled in November and awaiting cabinet approval, the concept would strip out costly extras and maintenance-heavy technologies and avoid expensive features such as underground parking. Advocates, including Walberg, see simpler designs as essential to cutting construction costs.
Tim-Oliver Müller, managing director of the Federal Association of the German Construction Industry (HDB), said the sector is facing a “melange of crises”: the war in Ukraine, higher energy costs, rising prices for concrete and steel, inflation and a jump in interest rates from below 1% to around 3–4%. He described the new law as expanding possibilities — for example allowing extensions or land-use changes that had been blocked.
Stakeholders also point to fragmented rules across Germany’s 16 states and thousands of municipalities, which add complexity and expense by regulating details from roof shape to socket counts. Environmental groups caution that looser planning could erode green spaces that help cool cities and buffer heatwaves. Stefan Petzold of NABU stressed the importance of preserving urban greenery.
Demographics will continue to drive housing demand: an aging population and smaller household sizes mean the total number of households is expected to rise even if overall population growth slows, according to Arnt von Bodelschwingh of research institute RegioKontext. Bernard Faller of the Federal Association for Housing and Urban Development (VHW) said strong tenant protections benefit existing renters but do little for those who need to move: “The problem remains the same: there are too few homes to meet demand.”