Taking stock of Housing Strategy Promoting investment, ensuring affordability

More new housing was constructed in 2020, the first year of the coronavirus pandemic, than was the case in the past 20 years. That was the conclusion drawn two-and-a-half years after the launch of the Federal Government’s Housing Strategy. The goal of building 1.5 million new homes in the current legislative period is within reach, Federal Chancellor Angela Merkel said on Tuesday at the digital conference to take stock of progress made on the Housing Strategy.

Taking stock of Housing Strategy

Federal Chancellor Angela Merkel said that housing construction was a prime example of the functioning of the social market economy

Photo: Bundesregierung/Steins

“All the key measures have been implemented. Despite the pandemic, the construction industry has been a driver of the German economy par excellence. We have built 1.2 million new homes and have issued 770,000 building permits. That is a gigantic housing construction programme,” said Horst Seehofer, the Federal Building Minister. He went on to say that the goal which the Federal Government had set itself would thus be met, namely of building or planning 1.5 million new homes in the current legislative period. In the last year alone, he said, 300,000 new homes had been completed – more than in the past 20 years.

Putting funding on a permanent footing

The construction industry was in full swing and had proved to be a driver of the economy. The decisions which the Federal Government had taken at its Housing Summit in September 2018 had put in place the conditions needed to build both new and affordable housing. Now these initiatives had to be put on a permanent footing and expanded, both Angela Merkel and Horst Seehofer underlined. Federal Finance Minister Olaf Scholz added that the speed with which new housing was being made available had to be stepped up once more.

Guiding growth

In times of the pandemic the issue of housing had gained in importance and emotional resonance, the Federal Chancellor said. One’s home was also a place of retreat, she said, “which many are now reliant on because there aren’t currently many opportunities to leave the house”. The housing industry and housing construction were “a prime example of the functioning, or non-functioning, of the social market economy”. Angela Merkel said that guidance was now needed on how to create incentives to invest in the housing market and at the same time to ensure that housing was affordable. 

Long-term promotion of social housing

Under the 2019 amendment of the Basic Law the Federal Government is once more able to provide long-term support to social housing construction. In the current legislative period alone it is providing 5 billion euros in funding to social housing construction projects, more than ever before, Horst Seehofer said. A total of 1 billion euros in federal funding would also in future be earmarked for social housing construction, he added. That meant that the goal set in 2018 together with the federal states, namely of creating 100,000 new subsidised dwellings, might even be exceeded. The Federal Chancellor, however, also stressed “that we are a long way from what is necessary”.

Making it easier to invest in housing construction

The Baukindergeld programme (an allowance to help families with children to acquire real estate) has proved to a very popular instrument for promoting housing construction: 310,000 families have already applied for the allowance since September 2018. Federal Building Minister Horst Seehofer placed particular emphasis on the fact that families in many income brackets would benefit from the allowance. The Federal Chancellor added that new special tax depreciations for the construction of rental accommodation and staff housing and the housing subsidy had contributed to more housing being built.

Future tasks: climate protection and urban development

The Housing Strategy also took account of requirements made in terms of energy efficiency and climate protection in the building sector. The new, standardised energy saving legislation and better conditions for funding energy-efficient buildings and heating had triggered a “wave of renovation work in the existing housing stock”, said Merkel. Urban development funding and city centre development would have an important role to play in the coming years, she added. The Federal Government had provided 790 million euros annually in funding to urban development since 2019.

Legal amendment for affordable rent

The great bandwidth in rental prices had a considerable impact on people’s living situation, the Federal Chancellor said. That was why it was right that the Housing Summit had in 2018 also looked into housing costs in conurbations. In the meantime, Merkel added, the rate of increase in rental prices was levelling off. After years of substantial growth in rents quoted, figures since 2019, and especially in the second half of 2020, showed that average rental increases across Germany had slowed considerably.

Brake on rental costs making a real contribution

The brake on rental costs (Mietpreisbremse), which was extended until 2025, was making a real contribution to affordable rents. The Federal Government had in December 2020 agreed on changes to the qualified rent level survey (Mietspiegel). The 2019 amendment to rental law means that, in the event of violations of the brake on rental costs, it is easier for tenants to claim back the excess in rent paid. The longer review period for local reference rents, which had been extended to six years, also meant that the rise in rental costs would slow down, added Federal Justice Minister Christine Lambrecht.

Angela Merkel and Horst Seehofer both emphasised the importance of the draft bill on the provision of building land which was tabled in November. Its objective is to protect tenants against existing rental accommodation being converted into owner-occupied housing. The bill is currently being given its readings in the Bundestag.

Reformed housing allowance leads to automatic adjustments

Since 1 January 2020 more people are eligible to claim housing allowance, and the amount of the allowance was also increased. As of 2022 the allowance will be adjusted every two years to rental price and income trends. In recent decades adjustments to the housing allowance had time and again had to be fought for. That was now a thing of the past, the Federal Chancellor said. “In this legislative period we have not only increased the housing allowance, we have also created reliability going forward,” Angela Merkel said. Some 660,000 low-income households were benefitting from not one but two increases in the housing allowance, she added.

You can find out more about the Federal Government’s housing construction policy by reading this article.

The Federal Minister of the Interior, Building and Community Horst Seehofer invited Federal Chancellor Angela Merkel, Vice-Chancellor Olaf Scholz and other representatives of the Federal Government, the federal states, local government and various organisations to take part in a digital conference to take stock of progress made so far on the Housing Strategy.