DIW: Federal government must realign housing construction targets

Adjusted for inflation, construction volume will decline in 2022 - Price development and rising interest rates will continue to have a severe impact on the construction industry in the years to come - New residential construction will slump more than the overall construction volume - Policymakers will have to change their strategy in order to achieve their goals for the creation of new housing and energy-efficient building renovation in the medium term

Inflation and supply bottlenecks have stopped the construction boom in Germany: In 2022, real construction volume declined for the first time in many years, by around two percent. Similar declines are expected this year as well. Only in 2024 will the construction volume, adjusted for inflation, be back in the black. Residential construction in particular is disproportionately affected by the decline. This is the result of the current calculations of the construction volume, which are prepared annually by the German Institute for Economic Research (DIW Berlin).

Inflation pushes real construction volume into the red - residential construction develops below average
© DIW Berlin

Although the construction volume rose by a record-breaking 13.6 percent last year in nominal terms, i.e. in current prices, the increase is solely due to the rapid rise in construction prices. Although this gave the construction companies good sales, adjusted for inflation, construction activity fell by two percent. The urgently needed new housing construction was and is particularly affected, which was even down 4.5 per cent in real terms. "For many years, residential construction has always grown faster than the overall construction volume. Now there are signs of a trend reversal, especially in new construction, which policymakers must take into account," says study author Laura Pagenhardt.

Change in strategy called for

The federal government's goal of building 400,000 new flats per year is thus becoming a distant prospect. Already in the last two years, no more than 300,000 flats have been built. This year and next, the study authors expect that worsening financing conditions and political uncertainty will make investors even more cautious. However, construction prices are likely to rise less sharply due to the easing of supply chains and declining capacity utilisation. "Adjusted for inflation, the construction volume will probably still be negative this year and will only be positive again from 2024, but even then residential construction, especially new construction, is likely to lag behind the overall development," expects study author Martin Gornig.

"What is needed is a master plan that not only supports demand with long-term funding programmes, but also counteracts the bottlenecks in supply" Martin Gornig

He therefore calls for a change in strategy. Although the federal government has already decided on measures to promote housing construction through taxation, it must focus more on redensification of existing buildings in order to create affordable new housing, especially in urban areas. At the same time, there is a danger that a large part of the subsidies, especially for energy-efficient building renovation, will evaporate into rising prices if the supply side is not strengthened in addition to the demand side. According to Gornig, what is needed is a master plan that not only supports demand with long-term subsidy programmes. In addition, it must increasingly promote the expansion of planning, production and installation capacities in order to counteract bottlenecks in supply and thus price increases.

Links

Keywords: DE-News, Quarters, Settlements, Housing, Housing policy

Published 7 May 2018

BUND presents shutdown plan for nuclear power plants and coal-fired power stations

Berlin: On 4 May 2018, BUND presented a shutdown plan for nuclear power plants (NPPs) and coal-fired power plants. This analysis shows that the decommissioning of the most climate-damaging coal-fired power plants by 2020 and a significant acceleration of the nuclear phase-out in Germany are possible without jeopardising security of supply. "The shutdown plan is a call to action for the political actors to finally take action," explains BUND Chair Hubert Weiger at the presentation of the shutdown plan in Berlin.

In the shutdown plan, BUND has drawn up a concrete performance balance and names power plants as well as annual figures for the shutdown. The focus is on the years 2020 and 2023. This period is considered to be a particular challenge for supply security, since on the one hand it is the legal date for the phase-out of nuclear power. On the other hand, a good half of the coal-fired power plants must be taken off the grid in order to achieve the German climate target for 2020.

The BUND shutdown plan shows that this is possible and that significantly more coal-fired power plants can be taken off the grid in the short term than has been discussed so far, and that this can also be combined with a significant acceleration of the nuclear phase-out. As a result, the power surplus in Germany is declining, but the supply remains guaranteed even in hours without sun and with little wind. "In the first quarter of 2018, Germany exported on average the electricity production of five large power plants. Against this background alone, it is surprising that the new federal government has not agreed on the short-term decommissioning of the most climate-damaging coal-fired power plants," says the BUND chairman. "We want to show with our analysis that much more is possible if the political will is there."

The BUND shutdown plan shows that security of supply can be ensured if politicians do not continue to wait, but actively promote the energy transition in parallel to the shutdowns. The calculations of the power balance are mainly based on values from, for example, the Federal Network Agency or the transmission system operators. Deviations and other assumptions are justified. "With our analysis, we want to provide an important impetus for a transparent debate within the framework of the amendment to the Atomic Energy Act and the coal phase-out commission that is being constituted," explains Weiger.

In a shutdown list for coal-fired power plants, BUND proposes the units that would have to be taken off the grid first in order to achieve the 2020 climate target. It concerns all larger coal-fired power plants that were connected to the grid before 1990, in order to reduce the coal capacity on the electricity market to 20 gigawatts. As a new measure to enable a socially acceptable coal phase-out and to safeguard security of supply in extreme situations, the environmental association proposes the introduction of an additional coal phase-out reserve of six to eight gigawatts.

"The Paris Climate Agreement requires the phase-out of coal before 2030. The federal government is responsible for achieving the climate targets, it must enshrine the phase-out in law and ensure a just structural change. To achieve the 2020 climate target, it must now launch an immediate programme. Waiting any longer is irresponsible," continued the BUND chair. Due to the inactivity of climate policy in recent years, the German "climate problem" has become increasingly acute. According to the latest emission forecasts, the German climate protection target for 2020 will be missed by ten percentage points.

At the same time as the coal phase-out, the nuclear power plants can also be taken off the grid more quickly than required by law. The seven nuclear power plants that are currently still connected to the grid represent a constant safety risk for the population and must be decommissioned as soon as possible. So far, however, the federal government does not want to use the amendment to the Atomic Energy Act to really accelerate the nuclear phase-out. "BUND demands an immediate nuclear phase-out. At the very least, the current revision of the Atomic Energy Act must be used to legally prohibit further transfers of electricity volumes," says Weiger. Without this transfer, the nuclear power plants would run for a total of ten years less and the production of 300 tonnes of highly radioactive nuclear waste would be avoided.

Getting out of nuclear power and coal and still securing the energy supply - this is possible if the energy transition is driven forward. "It is a matter of further expanding renewable energies with commitment and creating the energy-economic framework conditions for an energy turnaround that is essentially based on wind energy and photovoltaics," says Weiger. This means an expansion of flexible decentralised CHP power plants, a reduction in electricity consumption, optimised utilisation of the electricity grids and a significant increase in the possibilities for load reduction.

More information