Housing construction in Germany: a turbo to pick up the pace

There is a housing shortage in Germany - but for the first time in years, there’s one sign pointing in the right direction. After three years of declining figures, more residential buildings were approved again in 2025: 238,500 of them in all, an increase of nearly eleven percent. Construction Minister Verena Hubertz sees this as proof “that the tide has turned in housing construction”. The situation on the German housing market remains fraught, however. This is because it often takes a lot of time for construction to begin - and then be completed - once approval has been granted, and because demand exceeds supply in most cities.

Despite a rise in the number of building permits, the sector expects only around 200,000 buildings to be completed in 2026 - significantly fewer than are needed. In many places, the market seems paralysed: moving becomes a risky undertaking given that a new home tends to be much more expensive than the old one. Finding a flat or house is a particular challenge for families with children, while older people living alone often remain in properties that are too large because smaller alternatives aren’t available or are unaffordable.

The “building turbo” and building type E: more pragmatism

Germany’s construction ministry is addressing this situation with its “building turbo”: the idea is for municipalities to grant building permits more quickly and simplify procedures. Hubertz: “We quickly need more affordable housing. The new regulation will enable municipalities to significantly accelerate planning and approval processes.”

The question of cost is particularly important. This is where the planned “building type E” comes in - where “E” stands for “easy”. In future, more buildings are to be constructed in line with legally defined minimum standards - without expensive and unnecessary additional extras in terms of things like soundproofing and electrical equipment. Hubertz: “We don’t need fancy knick-knacks in every corner.” That said, the industry doesn’t expect this to have any noticeable effects until 2027.

Tenancy law: reducing the pressure on existing housing

At the same time, Federal Justice Minister Stefanie Hubig is planning “adjustments to the social tenancy law to counteract the rapid rise in rents and improve the protection of tenants”. Among other things, increases in indexed rents - i.e. rents linked to inflation - are to be capped at 3.5 percent per year in tight markets. In the case of furnished flats, landlords will be required to disclose the furnishing surcharge so that tenants can see exactly what they are paying for. In addition, short-term rentals - for example to tourists - are to be regulated more tightly so that flats are not taken off the market permanently.