Rents in major German cities have been rising dramatically for years and there is less and less affordable housing. The incoming government of the Christian Democrats (CDU/CSU) and Social Democrats (SPD) also defends the interests of the property companies and secures them fantastic returns at the expense of tenants.

The “Housing Market Report 2024” by Investitionsbank Berlin illustrates the precarious situation on the housing market in the capital. There are still just under 90,000 social housing units in Berlin, which is nowhere near enough. Between 2013 and 2023, Berlin’s population grew by 312,000 to 3.78 million, which has exacerbated the crisis because too few new apartments have been built. The “Housing 2040” urban development plan of the Berlin state government, made up of the CDU and SPD, calculates that 222,000 new flats will be built by 2040, half of which would be for the common good.

The average asking rent in Berlin has risen from €13.99 per square metre in 2023 to €15.74 per square metre in 2024, an increase of 12.5 percent. The local comparative rent (existing rent) rose in the same period from €7.16 to €7.21 per square metre, i.e., by only 0.7 percent. This means that the average asking rent is twice as high as the local comparative rent. This difference is greatest in Berlin compared to other German cities. The average rent for new-build flats in Berlin is €20.50 per square metre.

Rents are most expensive in Munich, with an average asking rent of €21.70 and a local comparative rent of €14.58 per square metre.

Between 2014 and 2023, existing rents in Berlin increased by 25.8 percent and average asking rents by as much as 70.4 percent. In the same period, disposable incomes only grew by 32.1 percent. Rents exploded particularly sharply by 54.6 percent between 2021 and 2024. Before that, between 2019 and 2021, they had briefly stagnated due to the Berlin rent cap. In March 2021, this was declared incompatible with the German constitution and therefore invalid by the Supreme Court.

Anyone looking for a new flat in Berlin will find it difficult. According to the Housing Needs Report 2025, which was compiled by the Berlin state government’s Department for Urban Development, Building and Housing, only “around one in four flats on offer” was affordable for an average renter, as reported by Tagesspiegel.

Those on low incomes are hit even harder by the price increase for new lettings. According to the report, only one in 20 of the flats on offer was affordable for them. A rent is considered affordable if it does not exceed 27 percent of net household income. In reality, households must often spend 40 or 50 percent of their income on rental costs.

The coalition agreement between the CDU/CSU and SPD,“Responsibility for Germany,” codifies this situation. While gigantic war loans totaling €1 trillion were approved immediately after the federal elections, in order to make the country’s infrastructure “fit for war” and to improve it, not a cent is available for sufficient and affordable housing.

The few programmatic points on housing policy in the coalition agreement will help the large real estate companies build more cheaply and bring overpriced flats onto the market. The proposed “digitalisation of planning and approval procedures,” “reduction of bureaucracy” and “tax relief” should be understood in this sense.

The introduction of a so-called building type E (simple) is intended to reduce construction standards, such as noise protection. This will decrease costs for the construction industry and property companies without making rents any cheaper. Rather, the new type of building will serve as a lever to circumvent safety regulations during construction.

Apart from that, the rent freeze, which has proven to be completely inadequate to significantly curb the rise in rents and reduce the profits of property sharks, will only be extended to 2029.

In 2015, the then grand coalition of the CDU/CSU and SPD introduced the barely effective rent freeze, which only applies to cities where the housing market is tight. Here, rents may only be increased to the local comparative rent plus 10 percent, with numerous exceptions.

Representatives of the property lobby have reacted positively to the coalition agreement. They welcomed the fact that building will now be significantly cheaper. In particular, the reduction in the requirements for climate protection and building standards should put billions into the pockets of the property and construction companies.

The planned appointment of a “group of experts” by the end of 2026, to advise on proposals to amend the rent cap regulation and on fines for non-compliance, is nothing more than window dressing. The same applies to the assurances about expanding social housing and ending homelessness by 2030.

The reality is very different. The steady decline in affordable housing for low-income earners is increasing the number of homeless, whose situation is becoming ever more precarious. According to a report in Der Spiegel, 47 homeless people died this winter in Hamburg alone. There is hardly any easy-access primary medical care for the homeless, which means that many receive such care too late or not at all. Most of the deaths were caused by heart attacks, septicaemia and pulmonary embolism. At least one person died of hypothermia. The situation is similar in other German cities, but there is little data available.

The new federal government will invest even less in social housing than the previous coalition of the SPD, Greens and Liberal Democrats (FDP). The latter fell far short of its target of 400,000 newly built flats per year, 100,000 of which were supposed to be social housing. Since 2021, fewer than 300,000 homes have been built each year. Just 93,000 social housing units were built between 2021 and 2024.

According to a study conducted by the Pestel Institute and Schleswig-Holstein Housing Institute, at least 1.05 million social housing units would have to be built in Germany by 2030 to meet demand. The current figure of just under 1 million social housing units would therefore have to be more than doubled. At the end of the 1980s, there were still almost 4 million social housing units in Germany.

Bavaria, Baden-Württemberg, Berlin and Lower Saxony lack the most social housing. Bavaria needs at least 320,000 new social housing units by 2030, Baden-Württemberg 260,000 and Berlin 150,000. Matthias Günther, chief economist at the Pestel Institute, explained that this was the minimum needed to “alleviate the greatest need.” Normally, “even around 5.6 million (in Berlin: 840,000) social housing units would be necessary nationwide.”

Günther warned of a social explosion if politicians continue to remain inactive. “Sooner or later, people will react to the massive housing shortage and, above all, to the blatant lack of social housing.”