Germany is in a deep crisis in the construction and housing sector, according to analyses by the Pestel Institute. The current "Construction Monitor 2026", prepared by the institute on behalf of the German Federation of Building Material Retailers (BDB) and presented in Berlin, reveals a record high nationwide housing deficit of 1.35 million units. The scientists describe the situation as fatal, as the demand for housing is as high as it has been for a long time, while new construction figures are reaching a low point.
This situation leads to an immediate loss of 0.6 percent of the gross domestic product (GDP) and a loss of prosperity of at least 1 percent for Germany. Matthias Günther, study director and chief economist at the Pestel Institute, criticises the German government's response in this context. He emphasises that Germany's economic development is significantly dependent on housing construction and that the federal government must understand new construction as a strategic task to bring the country back onto a growth path.
Concrete Economic Consequences of the Construction Downturn
The "Construction Monitor 2026" quantifies the economic impact of the downturn. Last year, approximately 84,600 fewer homes were completed nationwide than two years prior, which corresponds to a missing living space of over 9 million square metres. Specific declines were recorded in North Rhine-Westphalia with 10,720 homes (1.17 million m²), Bavaria with 18,750 homes (2.06 million m²), and Baden-Württemberg with 12,270 homes (1.38 million m²).
The direct financial consequences for the construction industry are significant: The Pestel Institute puts the net loss of turnover between the last strong construction year 2023 and the projected low point of construction activity in 2025 at approximately 26.9 billion EUR. Of this, about 3.25 billion EUR is attributable to North Rhine-Westphalia, 7.1 billion EUR to Bavaria, and 4.5 billion EUR to Baden-Württemberg. Furthermore, the failure of housing construction results in massive revenue losses for the state: 5.1 billion EUR in VAT and 1.9 billion EUR in real estate transfer tax last year, compared to stable construction activity of around 300,000 housing units per year.
Housing Shortage as a Brake on Growth and Employment Risk
Matthias Günther also points out the loss of jobs in the construction sector and the fact that vacancies in booming regions cannot be filled due to the lack of housing. The ifo Institute's forecast for new residential construction in 2026 is only 185,000 homes, which suggests a further exacerbation of the situation.
The construction and real estate industry is a significant economic factor. More than one in ten employees, a total of 4.73 million people, work in this area, predominantly in full-time employment. This is more than double the number of employees in the entire gastronomy and hospitality sector in Germany. The Pestel Institute sees enormous potential in housing construction that Germany is not utilising, even though the sector could serve as a motor for the domestic economy.
- —Berlin recorded an increase of almost 50 percent in employees subject to social security contributions, with an acute deficit of at least 58,000 homes.
- —In Hamburg, employment has increased by over 32 percent since 2010, with an current shortage of 23,000 homes.
- —North Rhine-Westphalia has a housing deficit of 364,000 units.
- —For Bavaria, a deficit of 220,000 homes is stated, and for Baden-Württemberg, 201,000 homes.
The shortage of housing is increasingly becoming a brake on economic growth and employment development in growth regions.
