A government with the handbrake on cannot build new housing
The recent coalition agreement announced by the centrist CDU/CSU bloc and the centre-left SPD spans 144 pages, yet only three of those pages address a critical issue that impacts the daily lives of millions of people in Germany: housing. My concern is not with the number of pages; in this context, the fewer the regulations, the better. And rather than unnecessary micromanagement, a clear signal would have been enough to set private capital flowing into new construction. Unfortunately, the coalition agreement fails to send any such signal.
A hodgepodge that pleases no one
The coalition agreement, rather than providing a clear signal to investors, presents a jumble of old promises and new restrictions, all based on the dangerous misunderstanding that housing construction and tenancy law can be kept separate.
Imagine a soup. A handful of fresh ingredients, lots of familiar staples, and, finally, a dash of bitter spices. The result is unpalatable, much like the housing policy outlined in this agreement. While the recipe has a few promising elements, such as the introduction of a simplified building type E, a pledge to revise the Building Energy Act and a commitment to reduce bureaucratic hurdles, these ingredients are undermined when, at the same time, investors are deterred by a raft of new requirements. After all, anyone who wants to build must also be allowed to rent. And that is precisely where the problem lies. There is a lack of genuine support for private property ownership and no reduction in land transfer taxes whatsoever.
New tenancy law, same old mistakes
The rent price brake (Mietpreisbremse) and the ban on converting rental units into condominiums are being extended, stricter regulations on index-linked rents are being introduced, and local authorities’ rights of first refusal are being expanded. Short-term rentals are once again being targeted, and modernisation projects face additional uncertainty. An “expert commission” has been tasked with exploring additional regulations by the end of 2026, including the potential reform of Section 5 of the German Commercial Criminal Code (WiStrG) on usurious rents. The anticipated collaboration between the Ministry of Construction and the Ministry of Justice, both of which will soon be under the control of the left-wing SPD, gives an idea of which direction the journey will take. While these measures may at first sound like good ideas, they are all quite divorced from reality. They insinuate social progress, but achieve the opposite. We should not forget that none of these new regulations will create a single new home. What is missing is a real change of perspective. If you want to increase supply, you need to strengthen those who build rather than impose restrictions on those who rent.
The social injustice of the rent price brake
The impact of rent regulations is well-documented. A decade of the rent price brake has created in nothing but legal uncertainty and frustration for both landlords and prospective tenants. Moreover, Germany’s version of rent control totally ignores the social landscape. For instance, a senior physician may now occupy the same apartment as before, but at a reduced cost, while the free market has been stripped of its essential regulatory function. This is not social justice, it is emotion-based symbolic politics at the expense of property owners. But politicians who punish the owners of existing housing because of their own failures to facilitate new construction are pursuing a policy rooted in envy. Such an approach undermines public confidence in policies that should encourage property ownership rather than cast suspicion upon it.
If no one is building, there will be no landlords
The proposed expansion of municipalities’ right of first refusal is particularly problematic. This is an instrument that provides ample proof of how easy it can be to squander taxpayer funds, as all it accomplishes is the transfer of property – at the expense of freedom of contract. The hope that this policy will in any way stabilize rents is naive. After all, the quality of a building does not improve just because it is owned by the city. Future sellers will likely be apprehensive about the implications of plans to enhance local authorities’ right of first refusal to allow them to buy at a discount.
What this government also fails to realize is that today’s developers are tomorrow’s landlords. If developers are scared off, it will create a void in the rental market as there will be no landlords. And without landlords, there can be no tenants. Social tenancy law has long since gone off the rails. Private property owners serve as the backbone of our rental housing market; if they withdraw, we will be left with only large corporations and the public sector. Is that really the better model?
What are we waiting for?
The government’s approach is not only economically perilous, it is also politically unsafe. Anyone who thinks the issue of housing can be left to the junior coalition partner is not only risking a standstill in housing policy, they are also alienating themselves from their own base. Many property owners, small and medium-sized enterprises and family-run businesses voted for the CDU/CSU because they believed in a housing policy turnaround and market-driven solutions. Presenting these groups with yet another cycle of regulation does nothing to strengthen trust in the new federal government.
So, what should we do now? Should we wait for the next government? Should we hope for better times? No. Now is the time to reignite the debate on housing policy. With a clear focus on what works: promoting homeownership; maintaining stability in tenancy laws; expediting planning processes; and, finally, treating investors as partners rather than problems. In the recent coalition negotiations, the biggest issues in tenancy law were deferred to an “expert commission”, true to the motto: “If I don’t know what to do, I’ll set up a working group”. But we will all know soon enough which political direction the new federal government’s housing policy is going to take.
And let’s none of us forget: affordable housing is not created by legal paragraphs, but by trust. Trust in the market, in owners, in common sense. Anyone who fails to understand this does not stand a chance of solving the housing crisis.