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Germany’s housing shortage reaches a record 1.35 million homes
The Construction Monitor 2026 report, presented in Berlin, found that Germany’s housing shortage has risen to 1.35 million homes. The 185,000 homes expected to be completed this year will fall short of annual demand of at least 300,000.
The contraction in Germany’s housing market has pushed the housing shortage to a record 1.35 million homes, while increasing revenue and tax losses in the construction sector. The shortage of housing is also limiting mobility in the labor market.
The Construction Monitor 2026 report, prepared by the Pestel Research Institute on behalf of the German Association of Building Materials Retailers, was presented to the public at a press conference in Berlin.
Annual demand remains unmet
Data from the Institute for Economic Research indicate that only 185,000 homes will be completed in Germany this year. This figure, the lowest level in 15 years, compares with the 206,600 homes completed in 2025. Annual housing demand in the country is estimated at at least 300,000 homes.
Housing construction permits rose by 15.1 percent in the first half of the year compared with the same period last year, reaching 126,300. Although this was the fastest increase for the same period in the past 10 years, experts do not expect the number of completed homes to rise.
Matthias Günther, chief executive of the Pestel Institute, described the situation in the housing market as a “toxic combination.” Günther said demand for housing had not been this high for a long time, while construction activity had nevertheless remained so low.
Contraction increases economic losses
The report says that the contraction in construction between 2023 and 2025 caused the sector to lose approximately 26.9 billion euros in net revenue over two years. The loss resulted in a 7 billion euro decline in tax revenues.
Günther said that building more homes was necessary for economic growth, adding that the housing crisis was slowing growth and reducing public revenues. He said that if steady construction activity had continued last year, the state could have collected 5.1 billion euros more in sales tax and 1.9 billion euros more in real estate transfer tax.
Günther also said that the housing market and the labor market were diverging. He stated that people were not moving to another city for a new job because they could not find housing within their budgets, adding that this was increasing social unrest and political dissatisfaction.
Shortage is greater in some states
Germany’s most populous state, North Rhine-Westphalia, has an estimated housing shortage of 364,000 homes. The shortage stands at 220,000 in Bavaria, 201,000 in Baden-Württemberg, at least 58,000 in Berlin and 23,000 in Hamburg.
Real estate experts say that rising construction costs, higher interest rates, declining new housing production and the influx of refugees have pushed the housing shortage to its highest level in 20 years.
Rent burden rises in Berlin
In Berlin, where most of the population rents its home, average rents have risen by more than 110 percent since 2010. The rent per square meter for newly built apartments in the capital has reached at least 25 euros.
High energy prices and rising rents are pushing housing and heating costs for families living in major cities above 50 percent of their monthly incomes. The gap between higher-income and lower-income groups is also widening in the housing market.
Reaction to support plan
Katharina Metzger, president of the German Association of Building Materials Retailers, described the decline in housing construction as a “disaster” and criticized the federal government’s economic policy.
Metzger reacted to the government’s plan to cut housing construction subsidies by 1.4 billion euros. She said that 2 billion euros was planned for this budget in 2027 and called for reliable, continuous financial support.
Metzger also called for the rapid implementation of building regulations known as “Type E,” which provide for simpler construction standards to reduce bureaucratic procedures.
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