To sustainably relieve the rental and real estate market in Germany, 206,586 new apartments are simply too few. That is how many apartments were completed according to preliminary figures from the Federal Statistical Office in 2025. A year earlier, the figure was still around 252,000. Both figures are far below the political target of 400,000 apartments per year. This failure is one of the main drivers of the housing crisis in Germany, but it begins much earlier: with land, permits, construction costs, interest rates, regulations and, above all, the question of whether a new building is ultimately profitable at all.
For tenants, this is particularly bitter, because in many cities housing has long been expensive enough. Anyone expected to pay 1,200, 1,500 or 1,800 euros in basic rent does not need a lecture on construction costs. Nevertheless, the same rent can even be too low from the perspective of a new building, and precisely this contradiction makes the debate so difficult. An apartment can be too expensive for the household and still not profitable for new construction.
Anyone who looks at only one side quickly ends up with political answers that are much too short-sighted.
Germany is building past its own calculation
The German housing market does not have a mood problem, but a quantity problem. If fewer apartments are built over years than are needed, housing will not become cheaper in the medium to long term, but simply scarcer. For 2025, the Federal Statistical Office reports around 206,600 completed apartments. Building permits did show a slight increase, but the starting level remains low. In 2024, only around 215,900 apartments were approved, which corresponds to the lowest figure since 2010.
Relief looks different, especially since the political target of 400,000 apartments per year has continuously been missed by a wide margin. At the same time, this figure was supposed to reflect demand, in which population, household sizes, immigration, aging and regional shifts meet a market that is already tight. If only a little more than half of that is completed, the problem is pushed further into the future and becomes increasingly obvious along the way. The problem shows up in waiting lines, overcrowded apartments, rising asking rents and the search for alternative places outside the cities.
Apartments do not simply appear because they are needed. They are built when someone dares to put capital, time and risk into a project, and that has been the real problem for years. A new building often starts with expensive land, lengthy procedures, high technical standards, rising material and labor costs and financing that recently became significantly more expensive again because of higher interest rates.
Cost-covering rent is not just a slogan
The GdW has long pointed out that new buildings in many places would require basic rents of 18 to 20 euros per square meter and therefore actually much higher rents than are often assumed. Otherwise, construction and financing would not be viable. Evaluations around the Empirica housing market report 2026 also arrive at this order of magnitude for larger western German cities. With a typical apartment size of 80 square meters, 20 euros per square meter corresponds to 1,600 euros in basic rent. That is a lot of money for many households. With ancillary costs, electricity, insurance and everyday expenses, too little is quickly left over.
That is precisely why the outrage over such figures is understandable, but outrage alone still does not produce a finished house and thus additional living space. The cost calculation remains: if construction costs, land, interest, maintenance, administration, vacancy risk and regulation ultimately require a certain rent, then politics may find this number unappealing and simply cap it or statistically gloss over it, but it cannot talk it away entirely. This is not meant as a defense of high rents, because there are certainly bad landlords, excessive demands and markets in which scarcity is shamelessly exploited.
But in new construction, the decisive point is different: if the achievable rent is below the necessary cost-covering rent, construction often does not become cheaper. It does not happen at all, and a well-intentioned limit therefore becomes a problem – primarily for the people who do not yet have an apartment. Existing tenants are partly protected, while apartment seekers are pushed into a market in which supply is not growing along with demand.
Low rents are not automatically social
A low rent helps the household that is already living in the apartment. For this family, this pensioner or this student, it is very concretely social. The monthly bill becomes easier, the pressure falls, and perhaps at the end of the month there is even money left for reserves or private retirement provision. However, a housing market consists not only of existing rental contracts. It also consists of people who have to move, start a family, start over after a separation or outgrow an apartment that has become too small.
For these people, a low, regulated rent is helpful only if the apartment actually exists. If regulation prevents new construction or pushes private landlords out of the market, the shortage becomes greater. Then the cheap apartment may be politically desired, but in practice it is barely available, and that is exactly the biggest problem with the rent brake. It can ease pressure in the existing stock and cushion extreme jumps, but it replaces neither a new apartment, nor faster approval, nor cheaper land. In the end, scarcity is mainly being managed. Those who are already in have better cards. Those who are searching face fewer offers, more applicants and higher requirements for income, creditworthiness and personal history. That is not more social. It is just quieter because the price has been politically calmed.
The state often responds more strongly to symptoms than to causes – a circumstance we have already addressed several times on this blog.
Germany is not a special case of high rents
A look abroad somewhat grounds the German debate. Germany is expensive, but not at the very top everywhere. A supplementary market indicator such as Numbeo shows higher rent levels in Switzerland and in many large Swiss cities for 2025. Norway, too, is not far from Germany or is above it in international comparisons – depending on city and measurement method. Such data are not official rent statistics and do not replace a clean analysis by income, living space, location and construction quality. Nevertheless, they point in one direction: the German problem is not only that rents are high; it is the combination of many tenants, too little new construction and a difficult path into ownership.
Germany is one of the countries in Europe with a particularly low home ownership rate. According to Eurostat, the majority of households here live in rented accommodation. The same is true in Switzerland, whereas it is much less common in Norway. This changes the impact of rising rents. If many people live in their own house or apartment, a tight rental market affects fewer households directly. But if large parts of the population rent permanently, rising rents become a broad purchasing power problem.
Even more important: anyone who does not build home ownership owns no asset that could replace rent, devalue debt or bundle wealth over the long term. Housing then remains an ongoing monthly item.
Making ownership harder pushes people into the rental market
Germany talks a lot about affordable housing, but still treats home ownership like a marginal topic for higher earners. That does not fit together. Anyone who wants to buy encounters high purchase prices, higher interest rates, real estate transfer tax, notary, land registry, often brokers, renovation risks and strict equity requirements. Even though real estate prices are no longer rising as strongly as in the years of zero interest rates, entry remains difficult. We only recently classified exactly this in a separate article.
The effect is clear: anyone who cannot reach ownership remains a tenant. That can make sense individually if a purchase is not financially viable. For the overall market, however, it becomes a problem when millions of households have hardly any realistic alternative to the rental market and that market itself suffers from a shortage of supply. This creates a double dependency: ownership becomes harder, rents become more expensive, new construction stalls. After that, politics again reaches for the price brake because the situation is socially tense, and thereby heats up the investment calculation for new apartments even further. The spiral starts moving ever faster.
The German reflex is often redistribution instead of building ownership. Rents are to be limited, costs subsidized, hardships cushioned. This may be necessary in individual cases. As a basic model, it does not work at all in the long term. A fairer country is not created through new transfers, but by more people owning productive property, and that applies especially to housing.
Price brakes calm things down; supply policy would work
Price brakes are politically attractive because they are quickly explained and can be sold very easily to the public as something positive. The government points to a price, limits it and can then say that it has acted and provided improvement. A funding pot works similarly. It distributes money without lowering construction costs themselves. For the housing market, however, the only thing that counts in the end is how more apartments are created and whether they can be built at costs that people can bear.
This is precisely where the political misdirection lies. Rent brake, subsidy programs and special funds do not replace affordable construction and change little if approvals take too long, building land remains scarce, standards become ever more expensive and investors do not know which rules will apply in five years. Supply policy is always unspectacular, but honest: faster approvals, more building land and simpler standards where they bring hardly any additional benefit. Above all, however, predictable rules for landlords and lower ancillary purchase costs for owner-occupiers.
Assessment: What follows from this
The housing crisis in Germany is not just a rent debate. It is a question of construction costs, a question of ownership and a question of political honesty. For tenants, high rents are a real problem. For new construction projects, the same rents are nevertheless often not high enough to make new apartments economically viable. This tension cannot be swept under the rug – it has to be endured and solved.
Affordable housing does not emerge when the state hides the bill. It emerges when construction, renting and building ownership become economically viable again. Anyone who wants low rents needs more apartments. Anyone who wants more apartments must make building possible again, and anyone who wants to get people out of dependence on the rental market must make ownership more broadly attainable.
Everything else remains the management of scarcity…
