Declining Construction Permits: A Cause for Concern
The number of building permits issued in Germany has reached its lowest level since 2010, according to data from the Federal Statistical Office. In 2024, a total of 215,900 housing units were approved, marking a significant drop of 43,700 units (16.8%) compared to the previous year.
This decline marks the third consecutive year of reduced building permits. The last time fewer new dwellings were approved was in 2010, with only 187,600 units receiving permits. These figures include approvals for both new and renovated buildings.
The declining number of building permits serves as an early indicator of future construction activity and has raised concerns among housing experts. The German Council of Economic Experts (Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, commonly known as Wirtschaftsweisen) has warned of a growing housing shortage in their recent spring report.
The report predicts that only 230,000 new housing units will be built in 2025, following 260,000 in 2024 and 294,000 in 2023. These figures fall short of the German government’s goal of 400,000 new units per year.
The reasons behind the decline in building permits are multifaceted. One factor is the rising cost of construction materials, which has made new construction more expensive and hindered the ability of developers to bring projects to market.
Another contributing factor is the lack of available land for development, particularly in urban areas where demand for housing is high. The shortage of skilled workers in the construction industry has also slowed down the pace of construction and contributed to the decline in building permits.
The impact of the declining number of building permits is likely to be felt most acutely in the rental market, where the shortage of available housing units will lead to increased competition and higher prices. This could have a negative impact on affordability, particularly for low- and middle-income households.
To address this issue, experts are calling for a comprehensive strategy to increase housing supply. This may involve measures such as increasing land availability for development, providing financial incentives for new construction, and investing in vocational training to expand the workforce in the construction industry.
The government has acknowledged the need to increase housing supply and has implemented several measures in recent years, such as the introduction of tax breaks for rental properties and the establishment of a federal fund to finance affordable housing. However, more needs to be done to ensure that Germany meets its housing needs, particularly in the face of rising demand and demographic shifts.
