Housing shortage in western Germany is worse than expected, study finds

Research from the Pestel Institute has found that western German federal states are currently short of 1,2 million housing units, a considerably higher figure than previously predicted.

Western German federal states lack of 1,2 million homes

According to estimations from the Pestel Institute, western German federal states are short of 1,2 million housing units. “The situation is coming to a head,” Pestel economist Matthias Günther said, according to a report from SPIEGEL.

Günther and fellow researchers added that the lack of affordable housing is worsening Germany’s worker shortage. Companies are having difficulty filling vacant positions because workers are less likely to take a job if it involves moving house, with the industry, care and craft sectors among the worst impacted.

The institute called on the German government to fund all areas of housing construction, including social housing, privately financed rental homes and owner occupied housing. Between 2023 and 2024 housing construction in Germany dropped by 14,4 percent, to 251.900 units, considerably below the goal of 400.000 new units set by the SPD-Greens-FDP government.

Germany urgently needs to fund social housing, says VdK

In response to Pestel’s findings, the VdK, Germany’s social welfare association, said that social housing construction should be massively expanded and that newly-constructed social housing should be accessible for older people or people who are disabled. “The only kind of social housing is accessible social housing,” VdK head Verena Bentele said in a statement.

“In addition, reliable financing programs are needed at the federal and state levels to support new construction and renovation of existing buildings for people with low and middle incomes," Bentele added.

According to the CDU-SPD coalition government’s 2025 budget, 20 billion euros has been earmarked for housing construction until 2028. Critics say the funding will only scratch the surface of solving Germany’s affordable housing shortage.