Germany's Housing Slump Has Cost Its Economy Billions, New Study Finds

Germany's prolonged downturn in homebuilding has taken a measurable toll on the wider economy, wiping roughly 0.6 percentage points from gross domestic product, according to research published on Wednesday.

The Construction Monitor 2026, compiled by the Pestel Institute for the Federal Association of German Building Materials Retailers, estimates that around 84,600 fewer apartments and houses were completed in 2025 than in 2023. That gap translated into a revenue hit of approximately €26.9 billion ($31.4 billion) for the construction industry over the two-year period, while public coffers lost an estimated €7 billion in tax income.

The institute's calculations rest on a counterfactual scenario of "stable construction activity" — in other words, what output would have looked like if completions had held at about 300,000 units per year, in line with earlier levels. Official figures show that just 206,600 dwellings were actually finished last year.

Matthias Günther, who leads the Pestel Institute, argued that economic expansion is simply not possible without a functioning housing market. His team's analysis also points to a nationwide shortage of 1.35 million homes, a figure previously published at the start of the year for the Social Living Alliance. Beyond its macroeconomic effects, the study warns that the deficit is starting to constrain the labor market: in regions with strong economies, employers struggle to fill open positions when workers cannot secure affordable places to live nearby. "People don't relocate for a job if there's no home they can pay for," Günther noted.

The geographic distribution of the shortfall underscores the scale of the problem. Berlin alone lacks at least 58,000 dwellings and Hamburg around 23,000, while North Rhine-Westphalia, the most populous state, is short an estimated 364,000. Bavaria and Baden-Württemberg face gaps of 220,000 and 201,000 homes respectively.

There are tentative signs of a turn: building permits rose 15.1% in the first half of the year to 126,300 units, according to the Federal Statistical Office. Yet industry leaders remain downbeat. Katharina Metzger, president of the building materials retailers' association, described the residential slump as catastrophic and forecast a further steep decline in 2026, with only 185,000 new homes expected.

Metzger sharply criticized plans in Berlin to trim housing subsidies by €1.4 billion, which would leave just €2 billion available in 2027, calling instead for dependable, sustained funding. She also urged swift adoption of the proposed streamlined "Type E" construction standard, under which apartment blocks of up to 12 units could proceed without individual planning approval provided they conform to the applicable development plan.