"Housing market faces imminent burden once more"
Germany faces mounting pressure in its housing market, with the newly appointed Minister of Housing, Verena Hubertz, aiming to accelerate housing construction. In an interview with ntv.de, economist Michael Voigtländer from the Institute of the German Economy outlined the challenges and opportunities facing the government's housing policy.
In Voigtländer's assessment, the housing market has been under immense strain for years, with construction falling short of the required levels even during boom periods. Interest rate hikes in 2022 further exacerbated the issue, resulting in a decline in new housing completions to 250,000 in 2021, down from the required 350,000 to 370,000. The expert predicts that this year's completions will drop to 230,000 and next year to around 200,000, adding to the market's pressure. Annual increases in new contract rents hover around five percent, and many potential tenants struggle to find suitable rental properties.
Despite consistent emphasis on housing construction by previous governments, the issue remains unresolved. Voigtländer emphasizes that success depends on coordinated action from federal, state, and local governments. The coalition agreement contains measures that offer hope, such as reduced standards and streamlined approvals. However, the success of these initiatives hinges on the Minister of Housing's ability to rally support from her counterparts at the state and municipal levels.
One of Hubertz's key initiatives is the so-called "Bauturbo," aimed at speeding up the planning procedure for new housing construction. Voigtländer believes this could have some positive impact but warned against focusing solely on temporary accommodations, as originally intended with the "Bauturbo." He also highlighted the challenges faced by many municipalities, such as struggling to provide adequate infrastructure and resist becoming bedroom communities for nearby cities.
Efforts to improve the housing market in the short term include implementing existing building permits, promoting the efficient use of energy in new constructions, and providing financial incentives for developers. The government has also extended rent control regulations and enhanced tenant protections to safeguard renters from excessive rent increases while driving demand for new housing.
Voigtländer expresses caution about the prospect of substantially easing the housing market in major cities like Berlin, Hamburg, and Munich within the next four years. He believes the pressure will continue to mount, but efforts could bear fruit in outlying areas and other regions. Voigtländer encourages adjusting expectations about the affordability of major cities, acknowledging that this is a widespread issue in metropolitan areas globally. Ultimately, he sees the potential for a turning point in housing construction within four years.
Vocational training can play a significant role in addressing the skilled labor shortage that may arise from increased vocational training in the EC countries, as Germany faces challenges in its housing market and requires additional manpower in the construction industry for accelerated housing construction. This could be an opportunity for finance institutions to invest in educational programs to prepare the workforce for the demands of the housing industry, contributing to the growth of the real-estate sector and alleviating the pressure on the housing market.
Moreover, collaborating with local governments and stakeholders can facilitate the implementation of innovative housing solutions, such as the "Bauturbo" initiative, as it aims to expedite the planning procedure for new housing construction. This, in turn, could stimulate investment in the housing market and help meet the demand for more housing units.
Finally, expanding vocational training programs in fields like architecture and urban planning can help equip the workforce with the necessary skills to create innovative housing solutions, address the issues of infrastructure and urban development faced by many municipalities, and meet the needs of various demographics in different regions, thereby contributing to the growth of the housing market and alleviating its pressures in the long term.
