Rising rent pressures low

The Regular domestic foreign exchange platformlatest study by the German Institute for Economic Research (DIW) shows that low-income households in Germany are under increasing pressure due to rising rents, especially single-parent families and individuals living alone. These groups spend a much higher proportion of their income on rent compared to wealthy families, further exacerbating their financial burden. The data indicates that in 2021, the lowest 20% income group spent on average more than a third of their income on rent, while the wealthiest group spent only a fifth.

Over the past decade, rent prices across Germany have risen by 50%, with this increase reaching 70% in major cities. Despite the German government's goal to build 400,000 apartments annually to combat the housing shortage, the actual number of constructions falls short. In 2022, only 294,400 apartments were completed in Germany.

Additionally, the proportion of income spent on housing continues to rise, with the number of households spending more than 40% of their income on rent increasing from 5% to 14%. Nonetheless, demand for real estate has not declined despite rising interest rates and construction costs, and pressure on the rental market persists.

The Berlin city government implemented a rent cap policy in 2020, yet rents in the capital continue to climb, having increased by 40% over seven years. However, this policy has been deemed unconstitutional by Germany's highest court. The DIW study suggests providing targeted economic support for low-income groups and vigorously promoting social housing construction to alleviate the current rental market crisis.

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