A Future Housing Shortage in Germany?

In recent years talk about the housing situation has almost completely vanished from the every-day political discussion. The housing market is considered to be 'relaxed' after the 1989-1994 housing boom. Until recently, rents and prices for real estate had even fallen in regions that once had extreme housing shortages. Although the number of new housing completions has been falling for five years, those responsible for government housing policy see no cause to stimulate construction activity. Recently, however, the German Tenants Association warned of the likelihood of a new housing shortage, stating that Germany currently lacks some one million residential units. This article, based on the results of the 'Ifo Construction Forecast for West Germany', examines whether this warning is justified. In terms of the housing-supply indicator used in the article - whose suitability for assessing the housing market can be seen critically - there continues to be a considerable housing shortage in west Germany at present. The shortage consists of the deficit that accumulated in the late 1980s and early 1990s, but this deficit should be gradually reduced even with moderate construction activity if immigration remains at a low level. This result stands at odds with the forecast of the Tenants Association, which expects a worsening in the housing supply situation. But the Ifo results only apply to west Germany as a whole; in some regions and in certain quality areas of housing, bottlenecks could remain or re-emerge.