The precarious state of the housing market becomes evident when we look at an example from Berlin: 43,000 applicants applied for 288 apartments in just 30 minutes. The listing was taken offline immediately after. For state-owned companies like Howoge and other housing corporations, dealing with such high demand and swiftly removing listings to cope with inquiries has become routine. The solution? Expanding the housing supply through measures like attic conversions, building extensions, repurposing vacant offices and commercial spaces, and, above all, new construction. However, what's happening in practice is that prospective builders are abandoning their projects, orders are being canceled en masse, and building permits, a crucial leading indicator, are dwindling. This decrease is reflected in housing completions one or two years down the line. The SPD-led federal government promised 400,000 new homes per year, but this goal is now a distant prospect. Projections suggest that in the next year or two, it will only reach 200,000 – half of the promised number, despite the rising demand due to unabated immigration.

There are various reasons for the decline in housing construction. First and foremost, it's the rapid rise in interest rates and construction costs. Instead of paying less than 1% for a ten-year mortgage, buyers now have to pay more than 4%. Since the outbreak of the pandemic, construction costs have soared by around 40%. As a result, many projects are no longer economically viable. Interest rates and energy prices are expected to remain high for the foreseeable future, and labor costs are unlikely to decrease. Commercial property managers, like Vonovia, are putting new projects on hold as they no longer make financial sense. Public housing companies are still building because their owners, often municipalities, demand it. Nonetheless, this is likely to cause financial problems for them in the coming years.

The housing problem cannot be solved with government subsidies alone. Substantial double-digit billions of euros, which the budget cannot provide, would be necessary for that. The planned depreciation allowances, known as the "dentist program," primarily support the luxury segment but do not address the core issue: the lack of affordable housing. And the promotion of homeownership for families primarily helps prospective builders in rural areas, where the housing market is comparatively relaxed. Income limits for new construction in large cities remain too low. In the industry, it's said that family support costs little and achieves nothing.

Relaxing regulations to make refinancing through higher rents easier is unlikely. The political discussion tends to lean toward further tightening measures to protect low-income individuals from the price consequences of the housing crisis. Rents are already difficult to afford for some segments of the population. According to the DZ Bank's estimation, rents would have to increase by at least 50% to make housing construction economically viable again, a development that would lead to social disruptions. Associations are advocating for a reduction in the state's share in construction, which includes costs related to taxes and government regulations. The industry organization ZIA estimates this share to be at 37% of the selling price, encompassing taxes, fees, technical and energy requirements, and social housing quotas. However, apart from the controversial majority decision in the Thuringian state parliament, where the property transfer tax was reduced from 6.5% to 5% with the help of the AfD, there has been little change.

A commendable initiative is now led by Federal Minister for Construction Klara Geywitz, who aims to tackle the Herculean task of streamlining building regulations. This is a praiseworthy step. Reducing bureaucracy, expediting planning and approval processes, and introducing fewer, especially standardized regulations are vital issues that significantly contribute to lower construction costs. Even if Geywitz succeeds, it will be years before the revised standards are received and implemented by municipal building authorities through the federal and state levels. Quick advancements are improbable, meaning the housing crisis will occupy the nation for years to come.