New Study Reveals Housing Shortage in Germany More Severe Than Anticipated

München - A recent analysis by the Pestel Institute has revealed that the housing shortage in Germany is significantly worse than previously estimated, with a projected deficit of approximately 1.2 million homes in West Germany alone. This figure surpasses earlier assessments made by the German Tenants' Association, which estimated a nationwide shortfall of 910,000 units as of 2024.

Matthias Günther, chief economist at Pestel, emphasized that the situation is deteriorating. Companies are increasingly struggling to recruit new talent, as many individuals are reluctant to switch jobs due to the lack of affordable housing options in new locations. This housing crisis is impeding economic growth across Germany, according to the study commissioned for the Expo Real real estate fair, which opens today in Munich.

The Pestel Institute's report excludes so-called 'structurally vacant homes'--properties that remain unoccupied for extended periods due to issues like the need for renovations or unfavorable locations. The most severe shortages are found in major cities, with Munich facing the highest demand. As of March, the city had a shortfall of 74 homes per 10,000 residents, nearly double the national average. Other cities facing significant shortages include Berlin, Frankfurt, and Hamburg.

In contrast, housing prices in eastern Germany have remained relatively stable, with many regions experiencing price changes that align with or fall below the general inflation rate. However, this stability does not extend to larger cities such as Berlin, Dresden, Leipzig, or Jena. The situation in western Germany is markedly different, where regions around Hamburg, the Rhine-Main area, and much of Baden-Württemberg and Bavaria have seen rental prices for standard housing rise significantly--sometimes more than double the rate of overall consumer price inflation.

Experts are calling for a significant shift in housing policy to address the crisis. They advocate for extensive government support, not only for social housing but also for privately funded rental properties and the construction of home ownership options. Moreover, they suggest that such funding should not be tied to increasingly stringent standards, such as energy efficiency requirements that escalate construction costs.

In July, the industry analyst Bulwiengesa and the Federal Association of Free Real Estate and Housing Companies raised alarms about the housing market. Their analysis indicated that the number of new residential construction starts had plummeted by 85 percent from the peak levels at the end of 2022 to mid-2025. The Pestel Institute corroborates this, noting that housing construction in Germany has been stagnant for three years. Factors such as high interest rates, rising construction costs, and uncertainty surrounding funding conditions are hindering progress in the sector. At the Expo Real, industry professionals are set to discuss potential solutions to this crisis, with the Pestel Institute warning that without decisive political action, the situation is unlikely to improve.