Photographer: Krisztian Bocsi/Bloomberg

Graveyards Aren't Sacred as Migration Pressures Germany to Build

  • Officials seek to relax planning rules to boost construction
  • Regulations make homes among Europe's costliest to build

German landlords have been complaining for years that cumbersome regulations make it complicated and expensive to build homes. Now, with 800,000 refugees forecast to arrive this year and nowhere for them to stay, politicians are beginning to see their point.

"We want to add stories to our buildings, but it takes three to five years before you can get a permit," said Rolf Buch, chief executive officer of Vonovia SE, Germany’s biggest private homeowner. "We have the financing and the demand, but the political process is too slow."

Germany’s tight regulations make it one of the most expensive European countries to build housing at 34 percent above the average, according to Eurostat. Officials from Chancellor Angela Merkel to local governments are now looking at ways to boost construction, including increasing funding and relaxing building codes.

The chancellor last week agreed with state leaders to double subsidies available for affordable-housing construction to more than 1 billion euros ($1.1 billion) a year. In addition, the government is looking to speed up the permit process and lower energy-efficiency standards. City officials are also pushing for changes, with Berlin considering making it easier for developers to uproot trees and build on graveyards.

Housing in German cities was already under pressure before waves of immigrants began flowing in from countries from Syria to Afghanistan, making the country the top destination for refugees. Migration within Germany to urban areas, coupled with a construction slump that ended a few years ago, has led to apartment shortages in cities including Berlin, Hamburg, Frankfurt and Munich.

Germany needs to build 350,000 apartments a year, the government said in September, increasing the estimate from 270,000 previously to account for the growing immigration. Last year, 220,000 homes were constructed in the country.

Vonovia has rented apartments to thousands of refugees this year, including dozens in Berlin, the CEO said. The company has 30,000 units in the capital, with vacancies only opening up when someone moves out. Vonovia plans to add more homes to its existing developments.

Migrants disembark from a government-chartered train that brought them to Berlin, Germany.
Migrants disembark from a government-chartered train that brought them to Berlin, Germany.
Photographer: Sean Gallup/Getty Images

Refugees, once they are granted asylum, will need to make the transition from hastily assembled shelters in banks, gyms and metal containers to houses and apartments. Landlords including Vonovia will charge the amount typically paid by social-welfare recipients as long as they are on state support. Despite a tightly regulated market, the rising demand will probably push rents higher in the long term, Buch said.

Decades-Long Exodus

Housing refugees in rural areas -- where 1.7 million homes stand empty following a decades-long exodus of young people -- could revive economies outside of the popular urban areas and reduce the pressure on city rents, said Reiner Braun, an economist at research firm Empirica AG.

The bigger effect will be on the construction industry. Building enough apartments will cost at least 60 billion euros over the next 10 years, according to research by Aengevelt Immobilien, a real estate broker in Dusseldorf.

"The public sector can’t afford to spend that much," said Wulff Aengevelt, head of Aengevelt Immobilien. "The only ones who can do it are real estate investors." Government should create more incentives for developers, he said.

Germany’s energy-efficiency rules, some of Europe’s strictest, are among the biggest roadblocks to construction, investors say. In addition to following European Union requirements, German builders must ensure that a certain percentage of heating demand is met with renewable fuels and that only a small amount escapes through walls.

Developers also complain about rules that allow local authorities to halt projects if they believe that habitats for animals such as snails or frogs are threatened.

Creative Thinking

The refugee crisis is forcing investors and governments to think more creatively. Markus Gildner, a former technology entrepreneur, is building homes for 60 refugees in a wealthy suburb outside of Nuremberg using sandstone and drywall. He says a three-story townhouse cost 50 percent less than the average to build.

"When I took my idea to politicians in 2014, they were laughing at me," because they were confident there would be enough space in existing housing, he said. "Now I’m getting letters from Bavaria’s interior minister saying ‘good job, keep on it.’"

H-Hotels AG, which operates properties for the Ramada chain, is turning unprofitable hotels into homes where refugees can stay until their asylum application is processed.

Merkel’s cabinet on Tuesday passed an aid package that speeds up the application process and sets a 5 billion-euro budget to feed and shelter refugees, starting in 2016.

Vonovia’s Buch, who’s lobbying government officials for changes, says he’s pleased with the progress politicians have made recently. "There’s a recognition and willingness to go about this in a constructive manner," he said.

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