A new study by the German Institute for Economic Research (DIW) has found that the number of tenants spending more than 40 percent of their income on rent has nearly tripled since the early 1990s.

Increasing number of “overburdened” renters in Germany

In 1991, just 5 percent of households in Germany were spending 40 percent or more of their income on rent. This figure has now risen to 14 percent, according to a new study by the DIW.

An increasing number of tenants in Germany are no longer able to find houses and flats where rents cost a third of their monthly income, an internationally recognised guideline for affordable housing. Tenants in Germany who pay more than 30 percent of their income on rent are considered “overburdened”.

Tenants in large cities, including Munich and Berlin, are the worst affected. A recent “Wohnbarometer” (housing barometer) by Immoscout24 found that asking rents in Munich now sit at 20,97 euros per square meter, in Frankfurt at 14,97 euros per square metre and in Berlin at 14,19 euros per square.

In many cases, tenants are paying illegally high rents. Despite the German government’s decision to extend the rent brake law until 2029, Conny, a company which helps tenants secure rent reductions, estimates that 75 percent of Berliners still pay too much rent due to loopholes in the existing law.

Shrinking social housing availability in Germany

According to the DIW, the number of “overburdened” tenants in Germany has increased in tandem with a reduction in social housing provision. In the late 1980s, there were around four million social housing units in Germany. In 2022, this had been cut by around three-quarters to just one million units.

“There is no easy solution,” DIW researcher Konstantin Kholodilin said, considering steps to increase the availability of affordable housing. Kholodilin warned that a rent freeze may result in rent increases in the short term and could reduce building incentives. More social housing should be built Kholodilin explained, but added that these plans take time and only a mixture of approaches would solve the problem.

The 2021 agreement signed by the SPD, Greens and FDP stated that the coalition would “promptly introduce a new non-profit housing scheme with tax incentives and investment subsidies”. In 2022, the federal government and the Alliance for Affordable Housing said it would invest 14,5 billion euros in social housing construction by 2026, with an annual goal of building 100.000 new social housing units. Far from the mark, the government built just 23.000 new social housing units in 2023, only 500 more than in 2022.

According to a 2023 study by the Ifo Institute in Munich, Germany will see the housing construction rate drop by 32 percent by 2025. Rising costs in the construction industry - which have partly been spurred on by the Ukraine war - increased interest rates and an uncertain housing market are cited as reasons for the forecasted decline.

With potential buyers priced out of the housing market and a shortage of affordable accommodation to rent, Germany’s Macroeconomic Policy Institute (IMK) has pushed for the government to invest more public money in constructing affordable housing to make up for the gaps left by reduced private construction.

Thumb image credit:  Ekaterina Pokrovsky / Shutterstock.com