Discussion Paper for the Foundation for the Rights of Future Generations - The housing crisis as a problem of intergenerational justice: The case of Germany

Abstract

Executive summary

In this discussion paper, it is shown that the current housing affordability crisis in Germany is a problem of intergenerational injustice since it affects young Germans disproportionately negatively. To address these injustices, the following policy measures are suggested.

1. Policies to assure affordable rents

a. Rent controls: Well-designed rent controls help keep rentprice increases in re-lettings in check, while still allowing landlords to pass renovation costs on to their renters and to increase their rents by a small percentage annually. This would especially benefit young individuals, since the young move more often than baby boomers and are therefore disproportionately negatively affected by price increases in re-lettings.

b. Strengthening social housing: Local, state, and national governments must invest in the provision of social housing to provide below-market-priced housing for the most vulnerable households. This measure is especially important in large cities, where rents have risen steeply over the past decade, threatening to displace many poor households.

2. Measures to facilitate first-time homeownership for young
Germans. Supporting young adults in becoming first-time homeowners is another important area in which public policy can help mitigate the negative effects of the housing crisis for young Germans. This can be achieved via:

a. First-time home buyer programmes: First-time home buyer programmes support individuals who are buying their first home through grants or other financial stimuli, such as a first-time home buyer tax credit. Several countries, such as Australia or Canada, already have such programmes in place, helping young individuals to become homeowners. Such measures could also be adopted in Germany.

b. Access to credit for first-time buyers: Young people often face credit constraints when buying their first home since they do not yet own a home they could use as collateral. Governmental programmes, such as the first-time homebuyers plan in Canada, can help young individuals to obtain resources for the down payment on a mortgage, thereby improving their chances to be able to obtain a mortgage at a reasonable interest rate.

3. Measures to increase housing supply. To address issues of housing affordability and intergenerational justice, public policy should aim to increase the housing stock. It should also provide for the needs of young generations, especially in urban areas. Concrete measures to achieve these goals include:

a. Densification policies: Densification policies consist of relaxing zoning restrictions. This allows landowners to build more densely and taller, thereby increasing the overall housing supply. Relaxing zoning restrictions allows the housing supply to respond to an increased demand and can therefore prevent house prices from rising. Therefore, densification
policies have become a widespread tool to address housing unaffordability and could be used more extensively in German cities.

b. Using existing housing stock more efficiently: Another factor that hinders young people from finding adequate homes is that houses that could be occupied by a young family or multiple students are often occupied by an old couple or individual who continue living in the homes where they raised their children, even after the children have moved out. Online platforms, such as Tauschbörse, that connect young individuals currently living in a smaller property with older people currently living in a larger property can help in using the existing housing stock more efficiently.

Since the current German housing crisis is a predominantly urban phenomenon, Germany’s large cities should be the primary focus of these policies. Yet, because of architectural and socio-economic differences between and within cities, there exists no one-sizefits-all solution. Nevertheless, the above measures can serve as a starting point for developing comprehensive measures to fight intergenerational injustice in the German housing market.