For every DIN, there is a norm fetishist who insists
*Housing construction is in a deep crisis, and this is also due to the fact that tens of thousands of regulations and norms have made building in Germany extremely expensive. A draft law proposed by the Justice Ministry for a new "Building Type E" aims to clear up this regulatory jungle and enable affordable building again. Economist and real estate expert Reiner Braun from the consulting firm Empirica welcomes the approach but remains skeptical about implementation.
ntv.de: Why is the housing market in crisis from many aspects? How much of an impact have rising construction costs had in recent years?
Reiner Braun: Broadly speaking, the problems on the housing market can be traced back to three fundamental factors: interest rate increases, construction costs, and a lack of building land. As long as interest rates were extremely low, this offset the problem with high construction costs and expensive, scarce building land to some extent. Since interest rates have normalized, these three factors in combination are having a full impact.
What does this mean for politics?
As for interest rates, we don't need to go into detail here, as they are not determined by German politics but by the ECB. The building lobby is calling for compensation in the form of subsidies, which would help in the short term. But on the one hand, it is extremely expensive in the long run, and on the other hand, subsidies address symptoms rather than causes: The real causes of the current crisis are the construction costs and the lack of building land in regions with tight housing markets.
Could the initiative for "Building Type E," which aims to lower standards in areas such as sound insulation compared to current practice, actually make a breakthrough and lead to more and especially affordable housing being created?
I am rather cautiously optimistic. The idea of Building Type E is to give up on certain norms and standards that have unnecessarily increased construction costs. However, it's important to note that these are not only state regulations - for example, for energy efficiency - but mostly standards that builders adhere to out of fear of being sued by the builder. They can always demand the "state of the art technology." This includes a multitude of norms, down to the number of outlets in certain rooms. Sorting through and simplifying this is certainly sensible. But I remember several cost-cutting commissions in the past decades, which ultimately failed to achieve their goals. Behind each of these individual norms is a good idea that cannot be argued against. But together, they are cost-driving and counterproductive.
Assuming it manages to actually reduce costs: Would builders and landlords in the face of severe housing shortages in urban areas have any interest in passing on this cost savings?
In principle, rent is not determined by costs but by supply and demand. When the demand is very high, there is usually no incentive for the supplier to pass on reduced costs as price cuts. However, the costs for housing construction are currently so high that there is hardly any demand. With current interest rates and construction prices, rents would have to be around 20 Euros per square meter for a new build to make sense. However, this is hardly affordable for anyone, so construction is not taking place. If it were possible to reduce construction costs significantly, so that apartments could be offered for 15 or 16 Euros per square meter, this would certainly lead to some of the houses that have been approved but not built yet being completed. The idea behind reducing construction costs is of course that more will be built and thus the supply will be increased, leading to lower prices and more affordable rents.
However, this only works if sufficient building land is available.
Yes, there is no one-size-fits-all solution for the housing market, but rather many puzzle pieces. One of the most challenging pieces is the complex jurisdictions and sometimes conflicting interests, making it difficult to allocate sufficient building land at the right locations.
Max Borowski spoke with Reiner Braun
- The rising construction costs, including expenses in real estate and real estate prices, have significantly impacted housing construction in Germany, leading to higher prices for new builds.
- Reiner Braun, an economist and real estate expert, suggests that the proposed draft law for "Building Type E" could potentially lower standards in certain areas, such as sound insulation, to reduce construction costs and consequently, rent in the real estate market.
- Despite the potential cost savings, the implementation of "Building Type E" might face challenges, as builders and landlords might not pass on reductions in construction costs due to high demand for housing in urban areas.
