Berlin, Dusseldorf In the construction and housing industry, concerns about a reduction in capacity in companies are growing in view of the stagnation in housing construction. “The housing market is at a tipping point,” warns an alliance of organizations and associations in the construction and real estate industries before the start of their housing construction day this Thursday.
There was still enough capacity to build 400,000 new apartments per year. However, building permits have been falling for months, housing projects are being postponed or cancelled. The Munich Ifo Institute reported an increase in cancellations on Thursday. “As a result of the rapidly increasing construction costs and the higher financing interest, many residential construction projects are no longer profitable, are being postponed or canceled altogether,” it said. “New business is literally collapsing.”
A study by the housing and building research institute ARGE, commissioned by the alliance of associations, states that housing construction must be kept “in flow”. Otherwise, a “dramatic reduction in capacity” can be expected in the short term. As a result, there will be a lack of long-term opportunities to build sufficient numbers of apartments.
The construction policy spokesman for the CDU/CSU parliamentary group, Jan-Marco Luczak, explained: “Companies’ order books are empty and there are already the first layoffs.” That is dramatic. “Once people leave, they don’t come back. The capacities of the construction industry will then not be sufficient for many years to even come close to building the 500,000 apartments that are actually required every year.”
The federal government had set itself the goal of providing 400,000 new homes annually within the legislative period. This number will not be reached by far. According to the alliance, there is a risk of a fall to 250,000 completions in 2023 and 200,000 in 2024. In 2021, almost 293,400 apartments were completed. Estimates for 2022 are 280,000 new homes.
The industrial union Bauen-Agrar-Umwelt (IG Bau) warned of a decade-long crisis and job cuts. Union leader Robert Feiger told the newspapers of the Funke media group: “The crash in construction capacity is happening very quickly: the reduction in construction workers is six times faster than the increase in staff.” Central Association of the German Construction Industry (ZDB) to the alliance. At the housing construction day, they primarily recommend three measures to give housing construction more impetus in the short term.
1. Reorganize new building subsidies
The alliance is once again calling for a government social housing construction offensive. In this way, affordable housing construction should be made profitable under the current framework conditions, especially in view of the high financing and construction costs. This requires a special fund of 50 billion euros. This is the only way to build 100,000 social rental apartments per year.
In addition, in view of the drastically increased interest rates, there is also a need for subsidies for affordable rental housing for households that are above the level of social housing but for which living space created by the housing companies without subsidies is currently not affordable. According to the study, this would require an amount of 22 billion euros for this legislative period.
The authors believe that new affordable housing for middle income groups is not feasible with the current new building subsidies. This is considered very ambitious in the industry, the funding conditions are high.
>> Read here: KfW– New construction funding: “The money is far from over”
The strict documentation requirements for a new building should be simplified. “The current funding leads to a further increase in the complexity of specifications and fails in practice due to a lack of capacity for verification,” warns the alliance. “We need clear and simple conditions here quickly.”
2. Focus on approved but unbuilt housing
In order to be able to build new apartments quickly and to maintain the construction capacities, the alliance is calling for the construction backlog of around 900,000 residential units to be reallocated. This means apartments that have been approved but have not yet been completed. According to the study, around 30 percent of the apartments are currently in shell construction, 30 percent in shell construction and 40 percent approved but not yet started.
The alliance is once again calling for a government social housing construction offensive.
(Photo: IMAGO/photothek)
The alliance suggests that these privately financed projects planned with market rents should be converted into subsidized affordable apartments or social housing. This can be achieved through attractive incentives, financial grants, for example for necessary replanning, cheap loans and reduced requirements. “This would be a win-win situation for everyone involved, which would have a signal effect, especially in times when the construction industry is collapsing,” the authors explain.
>> Read here: Associations are demanding a construction offensive from the federal government due to the record housing shortage
Social housing subsidies could develop into a decisive factor here if investors recognized the associated opportunities for the realization of their projects and local authorities approved the necessary adjustments at short notice.
3. Designate building areas, increase building density
On the one hand, the allocation of inexpensive building land is central to the alliance for the construction of new affordable apartments. On the other hand, the existing potential in the existing building would also have to be used. “Therefore, the possibilities of expansion with additions and loft conversions, densification in the district and the conversion of office or commercial properties into affordable living space must be promoted in every respect,” it says.
According to the study, roofing work should be promoted, among other things.
(Photo: dpa)
Model calculations show that simply increasing the building density in conurbations can reduce rents by 20 percent and more per square metre. In addition, this also contributes significantly to a reduction in land use for the construction of new apartments.
>> Read here: Apartments for the elderly: “There is a risk of cold expropriation without funding”
This densification could be achieved, among other things, through tax incentives or through additional funding. The alliance demands that modernization and additions to the existing building as well as demolition and new construction should be treated equally.
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