Significant Decline in Non-Profit Housing Construction for 2024

The Association of Non-Profit Building Cooperatives (GBV) has reported a troubling trend in housing construction. According to the association's president, Klaus Baringer, building activity has once again decreased. Despite the ongoing high demand for affordable housing, the number of completed units in 2024 fell by 9% year-on-year to just 14,000. This represents a 16% decrease compared to the ten-year average.

One of the contributing factors to this decline is the rent control measures, which have hindered the ability of non-profit builders to finance new constructions and renovations. Baringer explained that the financial model for non-profit housing is based on covering costs. Profits, which amount to a mere EUR2.05 per square meter after a project is fully paid off in about 35 years, are intended for reinvestment in new projects.

The latest rent control legislation, known as the Fourth Rental Law for Inflation Relief (MILG), aims to alleviate tenant burdens but has inadvertently affected the most affordable housing options. Non-profit housing units are typically priced tightly, and the restrictions on rent increases have severely limited funding for both new builds and maintenance reserves. Baringer argued that this is not merely a rent cap but a significant barrier to affordable housing development.

In 2024, expected rent adjustments due to inflation were projected at 15%, yet the third MILG restricted increases to just 5%, resulting in approximately EUR690 million in lost revenue over four years. The current legislation is expected to yield no rent increases, leading to an anticipated shortfall of about EUR150 million over the next three years, which translates to 11,400 fewer housing units that could have been constructed.

Beyond rent controls, non-profit builders are facing escalating construction costs, a shortage of affordable land, reduced housing subsidies, and persistently high interest rates. The GBV, which represents 173 members, forecasts just 11,000 to 12,000 housing completions for 2025, marking a new low for new construction activity. However, a slight upward trend is anticipated for 2026 based on building permit data.

Compared to the 1990s, funding for housing construction from the federal government has significantly decreased, from around EUR3 billion annually--equating to 1.4% of the GDP--to about EUR2 billion today, or just 0.5% of the GDP. Even these funds are not often earmarked for specific housing purposes, according to GBV representatives.

The GBV has welcomed the government's commitment to re-establishing targeted housing subsidies. They emphasize that when a state provides subsidized loans, there should be financial returns that are also allocated for housing development. Each federal state has its own models for granting housing subsidies, but without legal stipulations ensuring these funds are used for housing, they are often redirected to cover budget deficits.

To address the housing crisis, the GBV calls for substantial investments in affordable housing, which would not only benefit tenants but also stimulate the broader economy. Reflecting on the government's housing initiative launched a year ago, Baringer expressed cautious optimism, recognizing the need for structural solutions rather than temporary fixes. The GBV operates under a cost-oriented framework, managing over one million housing units, including approximately 664,000 rental and cooperative homes. This system has functioned effectively for decades, yet current financial constraints are sharply affecting operational viability.