Rents are rising and rising – and the traffic light is lagging far behind its new construction target. Is it time for uncomfortable ideas?
The most important things at a glance
22 euros per square meter? This is now standard in Munich for new rentals. Rental prices are also increasing in many other large cities. And this despite the fact that fewer and fewer people are moving to the big cities and more and more people are moving to the countryside. Finding a new home has become a nightmare in many places.
How can it be ended, how can the housing crisis be stopped? The traffic light focuses on new construction: Up to 400,000 apartments are to be completed per year, including 100,000 social housing. But the balance so far is mixed: in 2022 this goal failed miserably and it will probably not be achieved this year either.
The problem: building is becoming more and more expensive. It was not until the end of January that the largest German housing group, Vonovia, announced that it would stop all new construction projects planned for 2023 due to rising interest rates and inflation. The real estate and construction industry is therefore demanding greater support for new buildings.
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But will that alone be enough? Or is it time for more radical ideas to create affordable housing? An overview of three controversial ideas:
Bring back the charity!
In Austria they still exist, Germany abolished them in 1990: non-profit housing companies. The concept is easy to explain: housing companies undertake to offer their stock as social housing and receive a tax exemption in return. They are also obliged to reinvest the profits in new construction projects. Ever since apartments in big cities have become increasingly expensive and scarce, this idea has been the subject of heated debate again.
The reason for the abolition of the charitable status under the former CDU Chancellor Kohl were primarily financial reasons: the tax exemption was too expensive, according to the government at the time. Lukas Siebenkotten, head of the German Tenants’ Association, sees things completely differently: a non-profit sector would be cheaper for taxpayers in the long run.
Because: Such companies could offer social housing without a time limit. This is not the case in the current system. Municipalities buy so-called occupancy rights for social housing in order to rent them out for a certain period of time, often 30 years. After the deadline, new rights would have to be acquired. This is unattractive for many landlords in the currently tense housing market and the municipalities have to dig deep into their pockets. This is another reason why Germany loses thousands of social housing units every year. A non-profit sector could counteract this problem, according to Siebenkotten.
If the federal government reintroduces a non-profit organization, municipal companies could set up a subsidiary to offer cheaper housing and thus save taxes, explains Siebenkotten. “Of course, that doesn’t immediately solve all the problems on the housing market,” says Siebenkotten. “But it would be an important building block.”
The criticisms: As early as 2016, the employer-friendly Institute of German Business (IW) spoke out vehemently against the reintroduction of non-profit status. The economists see, among other things, a problem in the management of these companies. Because there are no economic incentives, these companies are threatened with poor management.
In addition, economists and the housing industry fear that new problem areas could arise. If a non-profit housing company does not have sufficient funds, there is a risk of poor quality housing – which as a result is only used by people who have no other choice.
Siebenkotten does not see these dangers. “When existing corporations set up subsidiaries, these are ultimately managed by the same people as the parent company,” he says. In addition, today, unlike in the 1970s, the focus is on mixed residential areas and no more social housing estates are being built.
Build more in series!
The return of the record – or not? The Ministry of Construction wants to give new impetus to serial construction in Germany. Means: The houses are no longer built entirely on the construction sites. Instead, parts of the building, so-called modules, arrive prefabricated and are only assembled on site.
