Germany Bets on Slashing Red Tape to Reverse Home-Building Slump

Laura Malsch
·2 min read
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(Bloomberg) -- Germany’s ruling coalition pledged to simplify building rules and boost public investment in a bid to lift the country’s construction industry out of a slump and spur new housing projects.

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Regulations must be scaled back as “construction activities need to be massively expanded,” Chancellor Olaf Scholz told reporters Monday before hosting talks with industry officials in Berlin. To coincide with the meeting at the chancellery, his government unveiled a 14-point policy package, including the expansion of existing support programs for building family homes, incentives to replace outdated heating systems, and plans to convert commercial property into residential units.

The government will also postpone the introduction of a stricter environmental standard for new buildings indefinitely, Economy Minister Robert Habeck said.

“Orders are collapsing, and for many families, the dream of owning their own home is in danger of being dashed,” Habeck, who is also the vice chancellor, said in an emailed statement. “All this during a phase in which housing is scarce and expensive.”

Rising interest rates and soaring prices for raw materials have dramatically increased building and borrowing costs for construction companies, causing a number of insolvencies among German housing developers in recent weeks.

More than a fifth of companies in the residential construction sector reported order cancellations in August — the highest since records began in 1991, according to the latest survey by the Munich—based Ifo economic research institute. Almost 12% indicated they are facing financing difficulties.

‘Not Sufficient’

German house prices dropped by 9.9% from a year ago in the second quarter — the steepest decline since the time series began in 2000, the statistics office said Friday. The fall was especially pronounced in the country’s biggest cities.

Industry representatives gave the government’s announcement a cautious welcome. Wolfgang Schubert-Raab, vice president of the ZDB lobby, said still more needs to be done and called for another meeting in December.

“The planned measures for additional investment are a step in the right direction, but are not yet sufficient,” Schubert-Raab said.

“We can no longer afford protracted discussions, they cost jobs,” he added. “Action must follow by the end of the year.”

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