How do you help people who can’t afford housing on the market? The German state essentially gives two answers to this. Firstly, it promotes the construction of social housing. And, secondly, it covers or subsidizes the rents for all those who would otherwise not be able to pay them. In this way, the state ultimately implements the human right to adequate accommodation, which it has committed itself to fulfilling.
However, a study now raises the question of whether the federal government is doing this economically sensibly. The authors and the associations behind them – the Tenants’ Association, the Pestel Institute, the IG BAU union and others – accuse the federal government of neglecting social housing and watching the costs of rent subsidies continue to rise. “The state mismanages housing support,” is how the associations put it in a joint statement.
They justify this with the decline in social housing, in which those in need can live at rents that are well below market prices. In 2007, the number of such apartments was just over two million, but by 2022 it had shrunk to 1.1 million. And this despite the fact that, according to data from the Pestel Institute, there are more people at risk of poverty, around 2.3 million. Study author Matthias Günther criticizes that at least 910,000 such apartments are missing.
In addition, many more people have the right to live in social housing: a rough estimate can be assumed that around half of the renter households in Germany fall below the relevant income limits, writes Günther, that is around 11.5 million. This means: Less than a tenth of eligible households can move into social housing.
Many of those who are left empty-handed are entitled to help. If you receive citizen’s benefit, basic security or asylum seeker benefits, the state usually covers the entire rent through the job centers – low earners can apply for housing benefit as a subsidy. However, the costs for this have increased dramatically recently, says study author Günther. “In order to make it possible for needy households to live at all, the state is now forced to accept steadily rising rents on the free housing market. It even pays rents that are often significantly higher than the average rent.” Landlords in particular benefited from this.
“This is a clear disproportion.”
According to the study, this can be best demonstrated where the rental market is particularly hot, namely in Munich. The rent paid by the job centers there is 19.20 euros per square meter – that is 6.40 euros more than the average rent in the city. The situation is similar in many large cities, where a particularly large number of people want to rent. But also in rural regions, for example in Rhineland-Palatinate and Lower Saxony, because there are too few apartments there. Compared to the usual local rent, the federal government would incur additional costs of around 700 million euros per year.
Overall, the state spends more than 20 billion euros annually on housing benefits and rent payments for those in need, while the federal and state governments have recently only invested around 2.5 billion euros in social housing. “Social spending on housing is eight times as high as the funding for the construction of new social housing,” says scientist Günther. “This is a clear disproportion.” The federal government itself caused the shortage of social housing and provoked the drastically increasing expenditure on rental assistance.
In its coalition agreement, the traffic light government promised to build 100,000 new social housing units every year. However, in 2022 – the last year for which the data is available – only around 22,000 such apartments were built – which is also due to increased loan interest rates and material prices, which make construction projects unaffordable for many providers. This is also why the federal government recently increased funding for social housing: from 2.5 to 3.14 billion euros in 2024. After that, there will be up to four billion euros annually.
From the perspective of the associations behind the study, that is not enough. The federal and state governments would have to set up a funding package of 50 billion euros for the next few years in order to “at least come a little closer” to the goal of 100,000 social housing units per year, they write. Social housing must be “basically protected as a task for society as a whole and exempt from the debt brake.” In addition, when building such apartments, a VAT rate of seven percent should no longer be charged at 19 percent, they demand.