Energy crisis adds pressure to Germany’s housing shortage

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Energy crisis adds pressure to Germany’s housing shortage
Housing under construction in Lower Saxony. Photo: Julian Stratenschulte

High costs for building materials are seeing more builders cancel projects in the midst of Germany's acute housing shortage.

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A report by the Institute for Economic Research (Ifo) has found that 16.7 percent of companies responding to their survey cancelled building projects in September.

That’s an increase of almost 5 points from 11.6 percent of responding companies in August. It's also the highest share recorded since the Ifo Institute began doing its monthly survey in 1991.

A big part of that is down to higher energy costs and price increases for key construction materials. Some companies have also cancelled projects due to financing concerns, as higher interest rates make homebuilding projects less viable.

That means fewer new homes are getting built in Germany, just as many cities are struggling to deal with housing shortages that often result in hundreds of people applying for a vacant apartment in some places.


Some projects have been put on hold, while others have been cancelled completely.

And while some companies are able to continue because they have large reserves of materials, there is still concern that material shortages mean they cannot plan as many future projects. Around a third of all surveyed companies said they ran into shortages while ordering materials in September.

The share of homebuilding companies reporting that they are cancelling projects in the Ifo survey is at its highest ever in Germany, with the rate typically at 2.5 percent of responding companies before 2020.

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When the pandemic first hit in 2020, it climbed to about 5 percent.

Most also expect the problem to get worse and half of those moving forward with projects expect to have to pass on at least some of the costs to their customers—which will make German housing more expensive.

Some German cities and states—particularly Berlin—are already suffering from major housing shortages. Housing and rent dominated the capital’s 2021 state election, with the current governing coalition committing to a building target of 20,000 new places a year to increase the supply of homes.

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7,000 of these were to be built this year by state-owned companies to bring more social housing to the city. With only 2,816 built in the first six months of 2022, Berlin expects to come up short—partly due to the rising material costs.


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