G7 declaration: race to climate neutrality picks up speed

• Annual balance sheet of the housing industry shows great commitment of the companies to more affordable housing construction
• Housing industry sends alarm signals - conditions for affordable housing still too poor

Berlin - "We need a social consensus on what housing is worth to us and to the state," explained Axel Gedaschko, President of the German Housing Federation (GdW), at the start of the annual press conference in Berlin. "The heated debates about rent caps and expropriations are a symptom of the problems in more and more housing markets. Many people feel less and less able to cope with their housing costs and are afraid of being displaced from their living environment. On the other hand, the very companies that offer affordable rents are just as exposed to the ever tightening regulations of politics as those who exploit the housing shortage. Behind this, however, lies a fundamental problem. After all, government goals, legal requirements and planning guidelines must also be refinanced. However, beyond Sunday speeches, only very few decision-makers think about this in a consistent manner," says Gedaschko. Ultimately, economic and social issues are dumped on the backs of landlords and tenants. In this way, the state has achieved its goal on paper. But landlords and tenants are increasingly overburdened economically and socially. The tense atmosphere is a result of this misguided development.

Policymakers must face up to the fact that investments and refinancing amounting to 775 billion euros will be necessary by 2030 to meet the demands on housing in the areas of climate protection and energy transition, age-appropriate conversion, neighbourhood development and urban redevelopment, digitisation, repair and refurbishment, and affordable housing.

However, due to the extremely high costs, much of this cannot be refinanced in a socially or economically responsible manner through the current division of responsibilities between the 'ordering' levels of government on the one hand and the financiers on the other. Without a newly coordinated commitment of the federal government, the states and the municipalities, these challenges cannot be met - neither by the landlords nor by the tenants. "This shows quite clearly that we need the # Residential turnaround for the housing market," says the GdW President.

The fact that housing is the social issue of our time has by now been accepted by politicians and the public. The real question, however, is why the answers are only given in tidbits and sometimes in a way that disturbs the market. Because many recipes to effectively treat the symptoms of the two "patients" - tight housing markets on the one hand and shrinking regions on the other - have been available for a long time. The solutions have been worked out in the Alliance for Affordable Housing and Building. But instead of consistently working through the constructive package of solutions, politicians keep trying new placebo measures.

"In this desperate situation for many people, there must finally be an end to blocking constructive solutions for party tactical reasons. It does no good to throw sand in people's eyes and let them believe that the ideological discussions about new forced ownership structures will really change anything. In the same way, a rent cap cannot at the same time do justice to climate policy goals, tenants and the willingness of socially responsible landlords to invest. All of this is poorly done piecemeal," the GdW head states.

Politicians must no longer simply order and then duck out of the way when it comes to the social consequences. Instead of administering placebos, they must take responsibility. This includes, as a state goal, in particular the question of a reorganisation of financing and a socially cushioned refinancing of climate protection activities in the housing stock. This must be based on a new mix of CO₂-This is to be achieved by means of decentralised energy generation and direct consumption on site (tenant electricity).

In the short term, it is of central importance to ensure bridging in the tight markets until sufficient housing is available again in the individual regions. For this, we need a package of measures that goes far beyond the narrower housing sector. Urban and suburban relationships should be made more attractive. This includes improving public transport connections, strengthening new mobility offers beyond metropolitan areas, securing infrastructure offers in anchor cities and, if necessary, relocating public institutions.

In addition, municipalities and Länder should face up to the permanent task of creating more building land, encouraging rather than discouraging redensification and roof extensions, and helping the serial construction of affordable and architecturally valuable buildings to achieve a breakthrough. All of this must be flanked by the federal government through research funding, new funding approaches and better design of federal laws in the areas of urban land use planning and building use as well as the generation and use of decentralised energy and tax legislation.

The housing turnaround is by no means a call from our industry alone - it is a key demand on politicians in the interest of all citizens in Germany. The GdW has drawn up a catalogue of measures to alleviate the pressure on the housing markets in the short term in the interest of affordable housing. You can download this catalogue from the GdW website.

The press kit for download:

• Press release with graphics669.34 kB
• Presentation for the Annual Press Conference1.73 MB
• The action plan for download285.24 kB

The annual balance sheet of the housing industry:

• Investments at record high: German housing companies build around 25,000 new flats
• GdW companies invest over 17 billion euros in housing stock and new construction
• Housing construction does not gain sufficient momentum: construction costs, high land prices, taxes, levies and regulations slow down affordable new construction

The facts in detail:

Housing and real estate companies invest almost 17 billion euros - new construction investments at record level

The housing companies organised in the GdW and its regional associations invested around €16.9 billion in the management and construction of new housing in 2018. This is 2 billion euros and thus 13.4 percent more than in the previous year. On average, this means that around 46 million euros a day flowed into new housing construction and existing housing in Germany last year. Despite the continued stable upswing, however, the investment figures remain significantly below expectations. The companies had originally expected an increase of more than 18 percent for 2018 and a significant leap over the 17 billion euro mark.

Table: Investments by GdW companies (in million euros)

	Germany	Old countries	New countries
2015	11.907	7.973	3.934
2016	13.825	9.854	3.970
2017	14.927	10.560	4.367
2018	16.933	11.560	5.374
2019	18.833	12.690	6.143

Source: GdW annual statistics

The upswing in investment is being driven by the record high in new residential construction. The GdW companies invested around 7.5 billion euros in the construction of flats in 2018. That is 18.7 per cent and around 1.19 billion euros more than in the previous year.

But beware: there is an alarm sign here. Actual new construction activity is lagging behind the companies' expectations. Because last year they were still forecasting an expansion of new construction investments for 2018 of around 27 percent. In reality, it was 8 percentage points less. Expressed in housing units, this is 1,700 dwellings less than originally planned.

There are several reasons why companies are building less than previously planned: There is a lack of land. And when municipal plots of land for housing construction are available, they are often sold at the highest price bid. In many cities, the climate for new construction is rather negative among the population. The capacity utilisation of construction companies is at a peak and so are prices. In addition, a rising flood of norms and standards is driving up construction costs.

Investments in the future of housing: 9.4 billion euros flow into the modernisation, repair and maintenance of buildings

With 9.4 billion euros, around 55% of the total percent of the total investment in the development of the buildings' stock. With this money, the companies modernised, repaired and maintained flats and buildings. Compared to the previous year, the share of total investments in existing buildings has again decreased. In 2017, 57 per cent of the investments made by GdW companies went into the maintenance and modernisation of existing properties. On the other hand, investments in new housing construction increased again. Almost 45 percent of total investments went into this segment in 2018. In 2019, the share of investments in new construction is expected to remain at this high level.

Outlook for 2019: Growth momentum declines - new construction investments rise more slowly

For this year, the GdW is forecasting a further increase in total investments of around 11.2 per cent. However, the growth momentum is declining. "We expect to clearly break the 18 billion euro mark. Investments could be around 18.8 billion euros," explained Axel Gedaschko. Nevertheless, this increase would fall short of the momentum of 2018 by more than 2 percentage points. This shows for the first time: "Continuing regulations and caps do have an impact on investments in the housing market - and not a good one," explained the GdW President.

This can be seen in particular in new construction investments. According to the planning figures of the housing companies, the increase in 2019 will almost halve to only 10.7 percent. In the previous year, the companies had still planned for a plus of 27 percent. "The general conditions for new residential construction are poor: land that is too expensive, high construction prices, problems with building capacities and a lack of acceptance among the citizens ensure that the housing companies will be significantly more restrained this year than last year, despite all their efforts," said the GdW head. As a result, fewer and fewer affordable flats will actually be completed and come onto the market." Nevertheless, the companies expect investments in the housing stock to increase by 11.6 per cent to an anticipated 10.5 billion euros.

NEW CONSTRUCTION IN GERMANY: HOW MANY FLATS ARE BEING BUILT? - WHERE ARE MORE FLATS NEEDED?

GdW companies build around 25,000 new flats

In 2018, the GdW companies completed around 25,000 new flats. This was 4 percent more than in the previous year. However, this increase is far less than in 2017, when 19.4 percent more flats were built.

Despite a significant increase in new construction investment, the 18.7 per cent higher investment sum ultimately only enabled around 1,000 more flats to be built than in the previous year. The completion figures of the GdW companies thus reflect the sharp rise in construction costs.

Overall, the GdW companies built around 32 per cent of all new rental flats nationwide in 2018. For 2019, the GdW companies are planning to build around 35,000 new flats. That would be an increase of more than 40 per cent. However, this target figure depends heavily on the political framework conditions. Because this year, too, the companies were not able to fully realise the planned figures in the end due to the poor conditions for new housing construction.

"In 2018, new residential construction by GdW companies focused on the densely populated areas of Berlin, Hamburg, Cologne, Munich and Frankfurt am Main. However, Stuttgart, Hanover, Lübeck, Karlsruhe, Rostock, Potsdam, Nuremberg, Düsseldorf and Münster are also among the areas where GdW companies are particularly focusing on new construction. In the aforementioned focus regions alone, half of all residential units built by GdW companies are currently being built," Gedaschko explained.

Table: Construction completions at GdW companies (in residential units)

	Germany	Old countries	New countries
2015	17.382	13.386	3.996
2016	19.994	15.708	4.286
2017	23.879	18.187	5.692
2018	24.834	18.591	6.243
2019	35.400	24.100	11.300

Source: GdW annual statistics

Building permits decline again - 360,000 mark remains unattainable

In 2018, the construction of 346,810 dwellings was approved in Germany. This is slightly less than in the previous year (-0.3 percent). After a small high of over 375,400 permits in 2016, building permits are thus continuing to decline and once again fall short of the required 360,000 dwellings per year.

A look at the number of flats actually completed shows: With around 286,000 flats, the number of completions remained below expectations in 2018. Although completions of rental flats in multi-family housing rose by 9.2 percent - however, with around 69,000 rental flats, only just under half of the actually necessary number of 140,000 affordable rental flats were built in 2018. This shows that housing construction is still not gaining sufficient momentum. "Consistent calculations have shown that at the moment, with an increase in immigration of almost 390,000 people, at least 360,000 flats should be built annually. So in the past two years alone, almost 150,000 housing units too few have been completed," Gedaschko explained. The recently published building permit figures for the first quarter of 2019 also give little hope that this trend will change decisively - because building permits here declined again for the first time, even in the multi-family housing sector.

Housing 2018 - between need and reality

While a total of 360,000 new flats would actually be needed per year, only 286,000 new flats were completed in 2018. That is only 79 percent of the actual demand. The situation is even worse for rental housing as a whole. Here, instead of the 140,000 affordable flats needed, only 69,000, or 49 per cent, were completed in the end. If we look only at construction activity in subsidised social housing, the degree of need coverage even drops to 34 percent. Only 27,000 new social housing units were built in 2018. What was needed were 80,000 new subsidised rental flats.

"The effective screws must now be turned in order to boost housing construction in the long term. Ideological discussions about ever more regulations of the housing markets or even expropriations are window dressing and only distract from the real problem: We need more and affordable housing," says Gedaschko. The solutions have long been on the table: the Planning and Construction Acceleration Act must come quickly. There must be permanent tax improvements for housing construction. The sector needs an active and forward-looking real estate and land policy of the cities and municipalities as well as inter-municipal solutions and urban-rural cooperations as new starting points. As a matter of principle, the municipalities must give away land on the basis of concept allocation and not on the basis of maximum prices. The approval capacities in the offices must be increased and the results of the building cost reduction commission from the last legislative period must be implemented. Municipalities, Länder and the federal government must pull together. "Only if all measures work together can the necessary pace in housing construction be achieved," said the GdW head.

The housing industry has done its homework and, with the projects of the framework agreement on serial construction, has shown possibilities to counter the shortage of skilled workers and to build affordably through pre-production. It is up to the politicians to create the conditions for a faster nationwide realisation of the innovative housing concepts: "We need a simplified and accelerated land allocation as well as a nationwide uniform type building permit. The motto must be: Once approved, many times built - and that in different, diverse structural and visual designs," says Gedaschko. Only in this way can serial and modular construction make an effective contribution to increasing the number of housing completions and thus the supply of affordable housing in the shortest possible time.

Another reason for the lack of completions, however, is increasing disputes in the planning process that delay new construction, according to the GdW head. "Builders are increasingly dealing with the so-called 'nimby' trend here. According to the motto 'not in my backyard', residents increasingly want to prevent building projects in their own neighbourhood," says Gedaschko. For a better climate for new construction, first and foremost mayors and city councils are massively called upon. Ultimately, all planned laws should be examined in future for their consequences for the costs of building and living. Only if all measures work together can the necessary pace of housing construction be achieved.

The stock of social housing continues to shrink - new construction of affordable housing for the middle of society still too little developed

Nationwide, there are fewer and fewer social housing units. While in 2002 there were still around 2.6 million flats with price maintenance, the number is estimated to have fallen to only around 1.18 million flats by 2018. According to calculations by the funding agencies of the federal states, around 43,000 rental flats will fall out of social binding each year in the period from 2017 to 2020. In order to reverse this decline, the current construction activity in subsidised housing construction is far from sufficient.

In total, around 27,040 new social housing units were built in 2018. "Although the number is increasing, this is still to be seen as a drop in the ocean in view of the great housing need. There is an urgent need for action. Actually, 80,000 new social housing units should be built every year. We need a mix of social housing and affordable housing for the middle class in the housing market," Axel Gedaschko commented on this development.

Current figures from the GdW confirm this trend. The GdW companies manage 63 per cent of the social housing in Germany. In 2018, the GdW companies only had a total of 740,000 flats with rent or occupancy commitments. This is around 18,300 fewer flats than in 2017. "The approximately 7,900 flats newly built by GdW companies in 2018 with rent or occupancy control, i.e. as 'social housing', were thus unable to stop the melting of the social housing stock."

There are reasons for this: Especially in the conurbations, it is currently often no longer possible to meet the demand for affordable housing for the middle class through new construction. In this context, GdW President Gedaschko welcomed the amendment to the Basic Law that enables the federal government to continue to support the Länder in social housing construction.

For the years 2020/2021, a total of 2 billion euros is earmarked for social housing promotion. This means 1 billion euros per year and thus also a reduction of 500 million euros per year compared to the current sum. In order to be able to cover the real need for social housing, at least 5 billion euros would be necessary nationwide - 2.5 billion of which would come from the federal government and 2.5 billion as co-financing by the Länder. "What is missing is a master plan for social housing with clear targets and appropriately funded support," Gedaschko said.

HOW MUCH DOES IT COST TO BUILD IN GERMANY?   

German housing construction is of high quality by international standards, but expensive. The Construction costs have risen by around 65 percent between 2000 and 2018, despite many efforts to increase efficiency. The cost increase due to energy saving regulations (EnEV) alone amounted to 16 percent since 2002. The savings from reduced heating costs can only partially compensate for this, especially since the operating costs for energy-efficient buildings increase significantly. With the current new building standard, the limit of economic viability has long been reached. Higher standards such as KfW 55 are no longer feasible without subsidies. In the overall picture, there is hardly any progress to be made in terms of energy efficiency. The additional costs go 1:1 into higher rents and operating costs. One consequence is that hardly any flats at affordable rents are being built in privately financed housing. Only households with purchasing power are in a position to pay the economically necessary rents or to acquire property.

The Construction prices have increased by 45 percent since the year 2000. Shell construction work on residential buildings alone has increased by 41 percent since 2000. However, prices experienced the greatest boost in the technical finishing of buildings. Here the arrow points upwards by as much as 146 percent in the same period. The construction costs and the ancillary building costs have also joined in the cost race with an increase of 72 percent and 67 percent respectively.

What is striking here: At the turn of the year 2018/2019, construction prices showed the highest increase in 10 years and the momentum has not abated since then. Bricklaying alone is now 6 percent more expensive, concrete work costs around 5.8 percent and earthworks 7 percent more than in the previous year.

The price arrow for finishing work is also pointing significantly upwards in February with an increase of 4.2 percent. Here, prices for low- and medium-voltage installations (+5.6 per cent) as well as for metal construction work (+4.6 per cent) and heating and water heating installations (+4 per cent) are rising in particular.

"These price increases are also linked to the clearly noticeable Capacity bottlenecks in the skilled trades sector," explained the GdW president. "Overall, capacity utilisation is higher than in the construction boom of the post-reunification period," said the GdW boss. Despite a slight decline in 2018/2019 due to the build-up of new capacities in companies, capacity utilisation is still at 80 percent, 7 percentage points higher than in 2013. "It is obvious that after the times of recession in construction, companies today will only continue to increase their capacities if they have framework conditions for a long-term construction boom," Gedaschko said. Policymakers must therefore set key incentives to meet these demands. It would be good to finally increase linear depreciation from 2 to 3 percent. This is long overdue and would have a better effect than a short-term special depreciation, which builds up even more pressure on the heavily utilised market and thus inevitably drives up prices further," says the GdW president.

The bottleneck for affordable construction in Germany is the Building land. This shows two unfavourable developments for affordable housing at once: less and more expensive.

Building land in the metropolises is becoming scarce. In 2017, 33 percent fewer building plots were sold in A-locations (including the 7 largest cities in Germany) than 6 years earlier. But also in the B and C locations (small cities with tight or very tight housing markets, such as Leipzig, Freiburg, Karlsruhe or Potsdam), fewer and fewer buildable plots are coming onto the market. Here, the number of sales of building plots fell to 82 or 85 per cent of the 2011 level by 2017, a decline of 18 or 15 per cent in the last 6 years. Only in the balanced markets is there still sufficient building land available, although here too the development will be somewhat tighter from 2016.

In addition, the remaining building land is generally extremely expensive. Particularly in the A locations, prices have almost doubled compared to 2011 and average 1,120 euros/sqm. Even the B locations cannot escape these price increases. Here, one pays an average of 500 euros/sqm for building land - but here, too, this means a price jump of over 100 per cent compared to the prices 6 years ago.

WHAT DOES IT COST TO LIVE IN GERMANY?

Housing in Germany is becoming more expensive -
GdW companies stabilise rental development

"The biggest price increases for tenants in recent years have come from rising energy prices, electricity costs and taxes. This drastic inflation applies throughout Germany and to all tenants," Gedaschko explained. Net cold rents nationwide have risen by 26 per cent since 2000 - as have cold operating costs, which include water supply, refuse collection, taxes and other services. This increase is below the general inflation, which amounted to 32 per cent in this period. The biggest price driver in housing costs, however, continues to be clearly energy prices. Consumer prices for gas, heating oil and other household energy have risen since the year 2000 by increased by over 89 percent. After a phase of noticeable easing in energy prices in 2014/2015, these prices have been on a slight growth course again since the beginning of 2016. Gas became 79 percent more expensive over the entire period from 2000 to 2018, district heating by 90 percent and liquid fuels such as light heating oil by as much as 108 percent.

Electricity costs, which are mostly settled directly with the providers and are therefore not part of the operating costs apportioned by housing companies, have climbed by 109 per cent since 2000, contributing far more to the overpricing of housing than net cold rents.

At the same time, the recent slight drop in energy prices highlights a major dilemma: the savings effects assumed by the federal government as a result of comprehensive energy modernisation will be even slower to materialise or not materialise at all in view of lower prices, for example for gas and heating oil. "Energy modernisations at such a high level, as they are now prescribed in Germany, are simply uneconomical in view of lower energy prices, even for tenants," explained GdW President Gedaschko. This dilemma is also affecting more and more housing companies. "They should and want to modernise, they should achieve climate targets, work economically and keep rents affordable with immense construction costs, while still building millions of flats," said the GdW head. It is obvious that this does not work. "The federal government urgently needs to find new approaches here to create the energy transition in the building sector and make it feasible for landlords and tenants. Low-investment measures to support tenants in saving energy and, above all, decentralised energy generation - CO₂-low and low-cost - are the right answers in climate protection in the building sector."

GdW rents are 5.72 euros/sqm and thus below the national average

The net cold rents in the GdW companies rose by 8 cents from 2017 to 2018 to 5.72 euros/sqm. According to calculations by the Federal Institute for Research on Building, Urban Affairs and Spatial Development (BBSR), rents for existing properties in Germany averaged 6.39 euros/sqm net cold in 2018. This means that the net cold rents in the GdW's portfolios are 67 cents below the average for existing rents nationwide. The latter rose by 1.6 per cent or 9 cents/sqm in the course of 2018. Due to the moderate rent development, the housing supply of the GdW companies has a calming effect on the rent level. Rents at GdW companies are a good 17 per cent below the rent index level of 6.92 euros/sqm nationwide. This means that for a living space of 70 square metres, tenant households in flats owned by GdW companies pay 1,008 euros less per year than the average of all tenant households. The differences by region and housing segment are of course very large here.

GdW operating costs 2018: Cold operating costs stable - warm declining

Operating costs have hardly increased at the GdW companies compared to the price increases for the individual cost types. Tenants had to pay an average of 1.54 euros/sqm in advance for cold operating costs in 2018 - and thus only 1 cent/sqm more than in the previous year. The advance payments for warm operating costs even fell again by 1 cent/sqm from 2017 to 2018 and now stand at 1.08 euros/sqm.

The GdW companies have put great effort into further professionalising operating cost management, e.g. in the area of waste disposal. In the past 10 years, the GdW companies have invested a good 33 billion euros in modernising their portfolios - i.e. around 9 million euros per day.

Table: Net cold rent and advance payments for operating costs (in euros/sqm and month) at GdW companies

Source: GdW annual statistics

New and re-letting rents rise by 5.2 per cent nationwide

Rents in advertisements of flats offered from first-time lettings and re-letting have again increased significantly nationwide in recent years - in 2018 by 5.2 per cent to an average of 8.41 euros/sqm net cold. "There are big differences between the regions: In many peripheral rural districts, the average rent advertised is below 5.50 euros/sqm. The city of Munich, on the other hand, is the nationwide leader in advertised rents at 17.73 euros/sqm," says Gedaschko.

In the 13 German cities with more than 500,000 inhabitants, tenants had to pay an average of 70 cents more per square metre for a new flat when moving in than in the previous year (+8.3 per cent). Thus, advertised asking rents in the largest major cities reached a level of 11.20 euros/sqm in 2018 - which is significantly more than the average in the other major cities (7.96 euros/sqm) and urban districts (7.91 euros/sqm).

Calculation of asking rents via online platforms distorts the data situation

On the other hand, the data on the development of new and re-letting rents in Germany is clearly distorted and the increase in rents is thus overstated by a good deal. For lack of alternatives, evaluations of asking rents are based on evaluations of online platforms for rental housing brokerage. Especially in tight markets, the flats of the GdW companies are no longer brokered via these platforms, which is generally also true for other low-priced flats that are re-let via recommendations and under the table. Co-operatives often have long waiting lists and municipal companies can often re-let their housing stock without the support of commercial platforms due to the price advantages presented. Case studies on the housing markets of Hamburg and Berlin, for example, have shown that new and re-letting rents at GdW companies were 38 per cent (Hamburg) and 30 per cent (Berlin) below the market rents determined from online platforms. "It is often passed over without the necessary scientific care that the rent level determined from online platforms is by no means representative," Gedaschko said. "Even in the footnotes, this disproportion is usually not pointed out."

GdW COMPANIES SHAPE HOMELAND AND ARE IMPORTANT ECKPIlES FOR ACTIVE TOWN DEVELOPMENT POLICY EVEN IN STRUCTURALLY WEAK REGIONS

Urban redevelopment: Vacancy rate among eastern German housing companies on the rise

The vacancy rate in the eastern German Länder rose again from 2017 to 2018 for the first time in 18 years. The vacancy rate in the new federal states (excluding Berlin) is 8.3 per cent, 0.3 percentage points higher than in the previous year. At the GdW companies in the eastern German states (excluding Berlin), a total of 148,807 flats were vacant at the end of 2018. This is around 4,500 flats more than in the previous year.

This shows: The housing shortage in metropolitan areas and university cities continues to be contrasted by shrinking regions with their special challenges.

For 2019, GdW expects a further increase in the vacancy rate in the new federal states from 8.3 per cent to 8.5 per cent. Germany is experiencing a demographic divide. While many large cities are growing rapidly and flats there are becoming increasingly scarce and expensive, many rural regions - in eastern, but also in western Germany - are losing inhabitants unchecked.

"In order to prevent Germany's demographic division, shrinking populations in rural areas and the loss of regional culture, we need attractive cities - in other words anchor cities - in the regions. These need to be structurally strengthened," says Gedaschko. This means those cities that have maintained and expanded their historical function as a central trading, communication and meeting space over the past decades. "The guiding principle of polycentricity must be implemented more consistently," the GdW president demanded. "Residential locations are only attractive in the long term if there is a supply of shopping facilities, medical infrastructure, cultural facilities and educational offers as well as good broadband coverage." For this, he said, regional planning and spatial planning must be realigned and strengthened. "We need opening or experimentation clauses for rural areas as well as suitable flexible funding structures to strengthen the attractiveness of the regions beyond the metropolises and thereby alleviate the immigration pressure on the conurbations," said the GdW head. To this end, it is necessary to strengthen inter-municipal cooperation through regional planning associations involving the housing industry. This is the only way the housing industry can manage the increasing balancing act between housing shortages in metropolitan regions and vacancies in rural areas.

In view of the renewed rise in vacancies in eastern Germany, demolition in demographically shrinking regions will also be indispensable in the coming years. The demolition allowance of 70 euros per square metre, which has remained constant for years, urgently needs to be adjusted. Due to the increased requirements, at least twice this amount is necessary.

Federal state comparison of GdW housing companies: Saxony-Anhalt with highest, Hamburg with lowest vacancy rate

Saxony-Anhalt has - in relation to the portfolios of the GdW housing companies - the highest number of housing units.
The vacancy rate in Saxony-Anhalt is the highest in Germany at 10.4 per cent. Compared to the previous year, the vacancy rate in Saxony-Anhalt has even increased again - by a significant one percentage point. This is the highest percentage increase in a federal state. This means that around 34,200 flats were vacant in Saxony-Anhalt at the end of 2018. Saxony is behind with a vacancy rate of 8.8 per cent - however, the vacancy rate in this federal state has also gone up by 0.1 percentage points. The lowest rate in the new federal states - apart from the city state of Berlin - is in Mecklenburg-Western Pomerania with 5.7 per cent. Nevertheless, the trend has reversed here as well and there are almost 1,200 more vacant flats in 2018 than in the year before. In the western German states, Saarland has the highest value with a vacancy rate of 4.2 per cent. This is followed at some distance by Rhineland-Palatinate and Baden-Württemberg with 1.8 and 1.6 per cent respectively. The city state of Hamburg has the lowest vacancy rate of all the federal states at 0.9 per cent. At 1.0 and 1.2 per cent, Schleswig-Holstein and Lower Saxony have the lowest vacancy rates of the western German states.

The GdW Bundesverband deutscher Wohnungs- und Immobilienunternehmen (Federal Association of German Housing and Real Estate Companies) is the largest German industry umbrella organisation and represents around 3,000 municipal, cooperative, church, private, state and federally owned housing companies nationwide and at European level. They manage around 6 million flats in which over 13 million people live. The GdW thus represents housing companies that manage almost 30 per cent of all rented housing in Germany.

Appendix:

The GdW has drawn up a catalogue of measures to alleviate the pressure on the housing markets in the short term in the interest of affordable housing. You can download this catalogue from the GdW website. You can find an abridged version here:

Package of measures:

Preserve living space

• Do not allow new second homes in areas of shortage
  Make new second homes subject to approval, exceptions only for occupationally necessary use.
• Protect tenants against termination of own use and property conversion
  All cases of abusive behaviour by landlords are to be dealt with in a separate chapter within economic criminal law and flanked by facilitated claims for damages in the BGB.
• Disposing of land belonging to the federal railway assets at a reduced price
  Regulation in the Federal Budget Code (BHO) on the discounted sale of federally owned real estate, in particular the Federal Railway Assets (BEV), for social housing and other social purposes as well as for affordable housing construction

Limit housing costs     

• Affordable climate protection - strengthening tenant electricity
  Release the brakes on decentralised energy generation in the neighbourhood. Housing companies that want to generate electricity locally from renewable energies such as photovoltaics or from combined heat and power (CHP) will be at a serious tax disadvantage. As soon as they feed the generated electricity into the general grid or make it available to tenants, the rental activity, which is actually exempt from trade tax, becomes subject to trade tax. The Trade Tax Act urgently needs to be amended to finally allow tenant electricity.
• Affordable climate protection - introduce investment allowance
  The introduction of an investment allowance for measures to modernise buildings in terms of energy would be simple and would have low hurdles for companies and individuals who want to implement energy-saving and greenhouse gas-reducing measures.
• Affordable climate protection - funding structures on CO₂-align avoidance
  A KfW funding programme should be introduced that is based on CO₂-avoidance and final energy savings. In this way, the goal of converting the climate protection system in the building sector to the avoidance of greenhouse gases would be consistently pursued.
• Distribute the costs of the EEG levy fairly
  Currently, private electricity customers pay a significant share of the EEG levy for the reduction of industrial electricity prices. This is not fair. The industrial reduction should be changed to tax financing in order to relieve especially tenant households with low household incomes.
• Only fair CO₂-introduce price
  A CO₂-The price must make tenants with low and medium incomes better off compared to households with higher incomes. Only then is it part of a progressive policy.
• Extend housing benefit
  In areas where the cap is in force, expand the group of recipients of housing benefit for a limited period of at least 3 years. Increase the funds for housing benefit to 2 billion euros.        
• Increase housing promotion
  Increase funding from 2020 to a total of 5 billion euros from the federal government and the Länder and make it stable in the long term.
• Strengthen staff housing
  Introduce tax-free allowance for the discounted provision of housing by the employer to employees. Employee housing must not lead to employees having to fear negative tax effects due to a pecuniary advantage.
• Promote attic extension
  Loft conversions and the conversion of commercial space into residential space offer great potential. Ensure investment subsidy to support 10 percent of construction costs up to a maximum of 2,800 euros/sqm under a KfW funding programme.
• Cost transparency for all measures
  Mandatory construction and housing cost MOT in the context of legislative procedures.
• Make broker and notary fees more flexible
  Make costs for brokers and notaries more flexible. Enable low costs for the review of standardised contracts or advisory services.
• Reduce land transfer tax
  Limit land transfer tax to 2 per cent in the case of first-time acquisition for owner-occupation or social housing.
• Supporting age-appropriate conversion
  Expand state subsidies to avoid additional burdens on tenants.
• Strengthening smart home and e-health
  Smart home solutions, when properly designed, contribute to energy savings and enable older groups of people to live largely independently in their traditional homes. Suitable technical assistance systems are to be included in the benefits legislation of the health and long-term care insurance funds and equipped with higher subsidies for eligible aids in the list of long-term care aids. The investments are to be supplemented by an investment grant within the framework of a KfW funding programme.
• Accelerate construction progress - Extend roof extension
  Simplify the possibility of designating attic conversions in urban land use planning, make the Building Use Ordinance more flexible. Allow flexible regulations for the provision of parking spaces. Allow the permissible number of storeys (GFZ) to be exceeded by adding storeys without costly compensatory measures. Review regulations on distance between buildings to facilitate redensification.
• Strengthen modular and element-based construction
  Implement the model building code uniformly and integrate the type approval into all state building codes and expand it to include the regulations of the referential building permit from NRW.
• Temporarily suspend strict public procurement law
  Temporarily suspend EU procurement law when creating affordable housing. In order not to close participation to EU economic operators, procedures should be made available on appropriate platforms.
• Do not overload housing construction
  Do not increase energy efficiency requirements without a thorough analysis of the impact on rents. Formulate requirements for accessibility in a balanced way, taking into account the real rental situations, and standardise the state building codes. Introduce compensation regulations in the neighbourhood.
• Increase capacities in the authorities relevant to construction
  Increase staff capacities in the authorities. Form competence teams across municipalities with the support of the individual federal states and secondments of staff from under-utilised municipalities.