Germany’s housing shortage hits record 1.35M units

Germany’s housing shortage remained near a record high at 1.35 million units at the end of 2025, despite easing slightly from about 1.4 million in the previous two years, according to a report released on Wednesday.

The Bau-Monitor 2026 report, prepared by the Pestel Institute for the German Building Materials Trade Association (BDB), warned that the steep decline in residential construction was weighing on economic growth and labor mobility.

Germany needs at least 300,000 new homes annually, but the ifo Institute expects only 185,000 units to be completed this year, the lowest level in 15 years. A total of 206,600 homes were completed in 2025.

Matthias Gunther, head of the Pestel Institute, described the situation as a “toxic combination.”

“Germany needs more homes than it has for a very long time, while fewer homes are being built than in a very long time,” he said, warning that no improvement was in sight.

The report estimated that the collapse in residential construction between 2023 and 2025 resulted in about 84,600 fewer homes and more than 9 million square meters less residential space.

The construction industry lost an estimated €26.9 billion ($31.3 billion) in net turnover during the period, while the decline reduced Germany’s gross domestic product by an estimated 0.6 percentage points.

The government also lost about €5.1 billion in value-added tax revenue and €1.9 billion in property transfer taxes last year compared with stable annual construction of roughly 300,000 homes.

North Rhine-Westphalia recorded the largest housing deficit at 364,000 units, followed by Bavaria with 220,000 and Baden-Wurttemberg with 201,000. Berlin lacked at least 58,000 homes, while Hamburg’s shortage stood at 23,000.

BDB President Katharina Metzger called the construction decline “catastrophic” and urged the government to provide reliable, long-term funding while accelerating simplified building standards.

The shortage is also limiting labor mobility, as workers are increasingly unable to find affordable housing near available jobs, according to the report.