This article was the Topic of the Week in the newsletter of week 10 in 2025.

The growing housing shortage, especially in urban areas, is increasingly hindering labour market mobility – with negative consequences for securing skilled workers in the economy. For this reason, the federal government set a target in 2021 to build 400,000 apartments annually. But reality tells a different story: In 2023, only about 294,400 apartments were actually completed, and the number was even lower in 2024. The situation continues to deteriorate, as the real construction volume is set to shrink for the fifth consecutive year in 2025. Finding a flat will become even more challenging, and rents are likely to rise further.

This development also hits companies hard: An adequate supply of affordable housing is a crucial prerequisite for attracting and retaining qualified employees in the long term. Particularly in times of a noticeable shortage of skilled workers in Germany, this is an important factor in strengthening the competitiveness of Germany as a business location.

Better utilisation of market potential

However, investments in the urgently needed housing construction are significantly hindered by legal frameworks and obstacles in their implementation. Long approval periods, strict requirements, and high standards not only increase costs but also delay both the construction of new buildings and the modernisation of existing housing. Regulations and requirements associated with climate policy goals further burden the industry.

The collapse of the coalition government in November 2024 resulted in the long-awaited comprehensive amendment of the Building Code, which would have provided many facilitations for the construction and real estate industry, not being implemented. Parties are now pursuing different approaches to creating more affordable housing. Many of these revisit the original proposals and are positively received by the economy – such as the planned acceleration of planning and approval procedures, reduction of regulations – and thus costs – for new buildings and energy-efficient renovations, as well as comprehensive digitalisation of all processes.

From the perspective of companies, however, there are additional important approaches. To actually create more and faster sufficient housing in Germany, the construction industry needs clear investment incentives that can revitalise the market. Simply making data available electronically is not enough to significantly speed up processes.

Targeted strategy and more speed

The failed amendment of the Building Code is an opportunity for companies and policymakers to send further positive signals for stronger housing construction with a new attempt after the election. From the perspective of the German economy, a targeted strategy is required to advance the expansion of housing supply. This can be achieved, among other things, by placing even greater focus on accelerating planning and approval processes and by consistently digitalising public administration processes.

In addition, companies need legal certainty in implementing statutory requirements. At the same time, bureaucratic burdens must be effectively reduced, and the flood of constantly new regulations needs to be curbed. One approach to this is the introduction of a practical approval fiction. According to this, a decision is deemed positive if authorities do not object within a legally prescribed period. This not only avoids further increases in construction costs but also improves the structural investment conditions in housing construction for companies – a valuable contribution to securing skilled workers.