Importance of real estate policy: Why is the topic so relevant in 2025?

Housing is considered one of the basic human needs and is part of the right to an adequate standard of living as defined in the UN Social Covenant.  

Nevertheless, access to affordable housing in particular is still difficult to achieve for everyone. There are numerous reasons why many people find it difficult to find suitable and affordable housing. One of the most common reasons cited is the lack of housing and rising rents in cities. But what are the reasons for these two points?

Housing shortage

• Geopolitical crises, such as the Russia-Ukraine conflict or the war in the Gaza Strip, mean that Germany's population figures are continuing to rise due to increasing migration, despite demographic change.
• The continuing trend towards urbanization is leading to a sustained high demand for living space in large cities and their conurbations.
• Limited free residential building land within the cities as well as increased construction costs limit the possibilities for new buildings within the metropolitan areas.
  > In contrast, houses and apartments in rural areas are often empty^.1
  > Lack of infrastructure and job opportunities in rural regions reinforce the trend towards urbanization and thus also the housing problems in the cities.

Rising rents

• The limited supply coupled with high demand has led to a significant increase in rental prices. In view of the ongoing development, further price increases are to be expected in the future.
• The rise in interest rates, which was triggered by high inflation as a result of the Russia-Ukraine conflict, is increasing the demand for rental apartments, as it is becoming increasingly difficult to buy property.

‍Germanyremains attractive for investors in the real estate sector, particularly due to low interest rates. However, investments are mainly concentrated in metropolitan areas and university cities. One example of this is the US investor Apollo Global Management, which has invested over EUR 3 billion in Vonovia's residential portfolios in recent years. The deal with Vonovia - one of the largest portfolio holders in the affordable housing sector in Germany - shows that this area is also exciting and lucrative from the perspective of international investors. ²

The initial situation: status quo of real estate policy

In recent years, various measures have been taken at a political level to relieve the housing market. For example, numerous bureaucratic regulations have been abolished in order to facilitate the construction of apartments. According to the Ministry of Construction, many of the agreed measures have been implemented, particularly in the building regulations of the federal ^states3. Expensive regulations such as parking space requirements were abolished and the conversion of commercial space into residential space was ^simplified4.

In addition, all federal states have tackled the digitalization of building application procedures as part of the Online Access Act. Funding for social housing construction also reached a record level, with over three billion euros in funding for 2024 and a total of 20 billion euros by ²⁰²⁸⁵.

Despite these measures, key targets were missed. The 2021 target of 400,000 new builds per ^year6 was never achieved. Only just under half of this figure is expected for 2024, and forecasts for the coming years point to a further ^decline7. While rents are at an all-time ^high8, the number of social housing units has reached an all-time ^low9.

Positions of the parties on real estate policy 2025

In the following, the positions of the four parties with the highest polling power on real estate policy are analyzed on the basis of the election manifestos for the 21st Bundestag election in 2025:

SPD

The SPD wants to enforce more regulations and laws. They are planning the following ^steps10:

Tenancy law and rent regulation

• Extending the rent freeze: The rent freeze should apply indefinitely. Circumvention by temporary or (partially) furnished offers will be prevented.
• Stop usurious rents: The tightening of commercial criminal law is intended to prevent usurious rents.
• Regulations for rent increases: In areas with a tight housing market, the rent may increase by a maximum of six percent over three years up to the local comparative rent.
• Rent index: The rent index is to be extended to ten years, including price-linked housing.

Housing construction and building policy

• Promotion of housing construction: The Germany Fund is used to support housing associations and cooperatives with equity. In addition, a federally owned housing company is founded to relieve the market.
• Reducing construction costs and speeding up procedures: Construction costs are to be reduced, bureaucracy cut and administrative processes digitized.

The SPD burdens investors with rent regulations, but offers opportunities to keep investments in new buildings profitable through lower construction costs and faster procedures.

CDU/CSU

The CDU/CSU largely rejects regulation of the rental market and relies on market mechanisms and incentives for the private sector. They are planning the following ^steps11:

Affordable building and housing

• De-bureaucratization of building regulations and regional planning law to reduce construction costs.
• Special regulations for tight housing markets in order to build faster and more cheaply.
• Massive promotion of more cost-effective and innovative construction.

Incentives for more affordable rents and property

• Tax adjustments to the income-related expense deduction rule for low-rent apartments.
• Improving home ownership for families through more building land, lower construction costs and adapted subsidy programs (e.g. KfW interest rate reduction programs).

Building land, new construction and digitalization

• Creation of more building land, especially in metropolitan areas and growth regions.
• Use of brownfield and conversion sites as well as federally owned land for housing construction.
• Reduction of planning and ancillary costs through digitalization and acceleration of approval procedures.

The CDU/CSU offers an investor-friendly environment, primarily by reducing bureaucracy and providing tax incentives. However, the focus on property ownership could reduce rental demand.

ALLIANCE 90/ THE GREENS

Alliance 90/The Greens want to enforce more regulations and laws. They are planning the following ^steps12:

Fast, affordable and climate-friendly construction

• Utilization of existing potential: adding storeys to buildings, converting office space, converting attics, activating vacant buildings.
• Simplification of building law: digitalization of procedures, nationwide harmonization and reduction of excessive standards.
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Social housing and tenant protection  

• Increase in funding for social housing: support for non-profit and cooperative housing companies.
• Extension of the rent freeze: limiting rent increases above the local comparative rent.
• Regional rent freeze: Possibility of freezing rents in very tight residential areas.

Support for home ownership

• Promotion of owner-occupied homes: Support for the purchase and modernization of owner-occupied residential property.
• Relief for ancillary costs: reduction in estate agent and notary fees.
• Housing construction premium: Inflation-adjusted and with a climate component to facilitate access to home ownership for people on low incomes.

The Greens offer investors opportunities in the area of sustainable construction projects, but pose challenges for traditional real estate investments due to rent regulations and the promotion of owner-occupied homes.

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AfD

The AfD (Alternative for Germany) rejects regulation of the rental market and relies on market mechanisms and incentives for the private sector. They are planning the following ^steps13:  

Promotion and protection of home ownership

• Reduction of legal hurdles: Relaxation of legal requirements such as the Building Energy Act (GEG) to facilitate the construction of affordable housing.
• Reduction in housing and ancillary building costs: abolition of land transfer tax for owner-occupiers, property tax, the broadcasting fee (GEZ), the EEG levy and CO2 tax.
• Support for tenants when purchasing property: support through equity replacement and more favorable conditions for the purchase of apartments from public housing companies.
• Grandfathering: Application of building law from the period of construction in the event of subsequent changes to building regulations.
• Protection from foreign investors: Increase in real estate transfer tax to 20% for buyers outside the EU.

The AfD offers good conditions for investors through deregulation and cost reduction. However, the promotion of home ownership could weaken the rental market in the long term.

Why the real estate market remains essential for investors

Real estate policy is not only a socially and politically explosive topic, but also has far-reaching effects on the investment market. The current shortage of housing, rising construction costs and rental prices as well as the focus on regulatory measures are changing the dynamics of the real estate market in the long term.

For investors, this area of tension presents both opportunities and risks. While rising rents and urbanization promise appealing returns in metropolitan areas, political interventions such as rent controls or regulatory hurdles create challenges for long-term planning. At the same time, the need for innovative, sustainable and climate-friendly real estate concepts is growing, opening up new investment opportunities.

The growing influence of institutional and international investors on the German real estate market - particularly in university cities and metropolitan regions - also shows how relevant the political and economic development of this sector is.

It is therefore crucial for investors to understand not only current trends, but also how political decisions and economic conditions can affect their portfolios. FINVIA supports investors in making informed, long-term decisions. With in-depth market knowledge and individually tailored strategies, FINVIA offers the necessary expertise to invest sustainably even in a complex and dynamic environment.

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Conclusion

Housing is a basic need that is essential for everyone. Nevertheless, the issue is a field of tension between politics, society and the economy, which leads to complex decision-making processes that are often delayed by bureaucratic hurdles.  

Long-term strategies and sustainable approaches are essential to secure housing for all. All parties agree that housing construction must be accelerated through digitalization, the removal of bureaucracy and the use of existing land. In addition, social housing construction should be promoted and home ownership made easier.

However, opinions differ greatly when it comes to regulating the rental market. While Alliance 90/The Greens and the SPD are in favor of stronger intervention and measures in the housing market in different ways, the CDU/CSU and AfD are increasingly relying on market mechanisms and incentives.

For investors, this means that the residential market remains a field of tension in which both opportunities and risks exist. Political intervention and regulation can influence potential returns, while sustainable and innovative construction projects are becoming increasingly important.

Sources:
¹ Der Deutschlandatlas - Wie wir wohnen - Wohnungsleerstand
2 Apollo to Provide €1 Billion Capital Solution to Vonovia in Third TransactionApollo Global Management
3 Baugesetzbuch-Novelle für schnellerer Wohnungsbau | Bundesregierung
4 Baugesetzbuch-Novelle für schnellerer Wohnungsbau | Bundesregierung, So fördert die Bundesregierung bezahlbares Wohnen
5 So fördert die Bundesregierung bezahlbares Wohnen
6 BMWSB - Startseite - Maßnahmenpaket der Bundesregierung
7 Wohnungsbau: Klara Geywitz misses target of 400.000 apartments - manager
8 Rent index for Germany until 2024 | Statista
9 Social housing in Germany until 2023 | Statista, German Bundestag - Germany still has around 1.09 million social housing units, Housing: Fewer and fewer social housing units despite subsidies | Immobilien | Haufe
¹⁰ SPD government program for the 2025 federal election
¹¹ CDU and CSU election program
¹² GOVERNMENT PROGRAM 2025
¹³ PROGRAM OF THE ALTERNATIVE FOR GERMANY FOR THE ELECTION TO THE 21.GERMAN FEDERAL PARLIAMENT