A collapse in residential housing construction between 2023 and 2025 has weighed on Germany's overall economy, with around 84,600 fewer homes built in 2025 than two years earlier, according to a study released on Wednesday.
The Construction Monitor 2026 found that the shortfall represented a net revenue loss for the construction sector of around €26.9 billion ($31.4 billion) over two years. GDP came in 0.6 percentage points lower as a result, while tax revenues were around €7 billion less, the study found.
The Pestel Institute, which produced the Construction Monitor on behalf of the Federal Association of German Building Materials Retailers, uses "stable construction activity" as its benchmark. That means it calculates what would have happened if around 300,000 homes had also been built in 2025, as in previous years. According to the Federal Statistical Office, 206,600 homes were completed last year.
"Economic growth only works with more housing construction," said Matthias Günther, head of the Pestel Institute.
According to the Construction Monitor, there is currently a shortfall of 1.35 million homes across Germany, a figure the institute had already calculated at the start of the year on behalf of the Social Living Alliance. The researchers said the shortage was also becoming a brake on employment.
Where affordable housing was lacking, vacancies were difficult to fill, particularly in economically strong regions, the study said.
It found a shortfall of at least 58,000 homes in Berlin alone, 23,000 in Hamburg, 364,000 in Germany's most populous state North Rhine-Westphalia, 220,000 in Bavaria and 201,000 in Baden-Württemberg.
"People don't move to a new place of work if they can't find a home there that they can also afford," Günther said. That too was weighing on economic growth and causing a loss of prosperity, he said.
Building permits had recently shown an upward trend. According to the Federal Statistical Office, the first six months of this year saw a 15.1% increase to 126,300 units.
The industry is nevertheless pessimistic about the current year. "The collapse in residential construction is catastrophic," said Katharina Metzger, president of the building materials retailers' association. "In 2026 we expect another enormous drop: only 185,000 new-build homes, according to the forecast," she said.
She complained that this was the worst time for the federal government to consider cutting housing construction subsidies by €1.4 billion. Only €2 billion in subsidies is set to be available in 2027. What was needed instead, she said, was reliable and continuous funding.
Metzger also called for the rapid implementation of the announced simplified building standard, known as Type E. Apartment buildings with up to 12 units should be allowed to be built without their own planning permission, she said, as long as the developer complies with the relevant development plan.