Micro-apartments could be the answer to a growing housing problem in German cities

With more people in Germany choosing to live on their own and the population of its cities rapidly growing, the country’s housing stock is struggling to keep pace – even with new accommodation models coming on to the market.

The number of single-person households stood at more than 40 percent in 2016, according to Eurostat, driven by an increasingly mobile workforce and younger people delaying traditional life choices such as marriage and children.

It marks a big change from previous years where the country’s housing was geared towards larger households, which has led to a shortage of one and two room apartments in the market in recent times.

Research from the Hans Böckler Foundation found that the country now needs almost 2 million more affordable flats – mainly in Germany’s big cities but also those with large student populations.

Sebastian Grimm, a Team Leader in Residential Valuation at JLL in Germany, says that many people – mostly young, single workers – are finding that suitable apartments are increasingly hard to come by.

“The example of Frankfurt makes that very clear,” he says. “More than 62,500 new inhabitants have moved to the city since 2011, yet only 14,200 new apartments have been built. To meet the demand, at least 7,000 new apartments per year would have to be built over several years in Frankfurt; however, that would be difficult due to the lack of building land.”

The rise of micro-living

For many of Germany’s young professionals, modern city center living is all about minimalism – and not just because it’s a design style currently in fashion.

Fully-furnished blocks of micro-apartments measuring between 20 and 35 square feet are rapidly appearing in the country’s big cities – and are proving popular with young, single workers and weekday commuters looking for a crash pad.

What they lack in space, they make up for with fast wifi connections, smart technology and relatively affordable rent for living in desirable downtown areas, averaging around €400 a month compared to around €700 a month for a one-bed apartment in Berlin or €1,000 in Munich.

Developers are also paying close attention to shared spaces, providing facilities specifically targeted at their younger audience and business nomads; cinemas in the basement, yoga on the roof, communal lounges and work spaces.

Investors are seeing the potential of the micro-living trend with high demand and low rents minimizing the risk of long vacancy. At the start of 2018, two more international investors – the sovereign wealth fund of Singapore and US investor Harrison Street, joined the German micro-apartment market.

“At over € 1.4 billion, this market has already reached an unprecedented level. It is our expectation that micro apartments will become established as a separate asset class over the course of the year,” says Helge Scheunemann, Head of Research at JLL Germany. In recent years transaction volumes have risen sharply, with approximately 10,000 traded units in 2016.

Micro-apartments have their merits but they’re only a part solution to the housing issues in Germany, according to Susanne Gentz, Team Leader, Residential Investment at JLL Germany.

“Creating small housing units can ease the urgency of providing good quality housing to some extent,” she says. “But in general that only meets the needs of the single population aged under 50 and targets the most central locations in a city. Larger dwellings – and focusing efforts across more districts within a city – must be addressed in the same way. ”

Joint efforts to boost housing supply

Hamburg is one German city where co-operation between a variety of local government, local residents and private companies has yielded positive results.

In 2011, the authorities, tenants associations, housing industry representatives and construction companies joined forces to create an alliance which aimed to build 6,000 new apartments a year – a number it has since surpassed. “The success of the Hamburg model is clearly reflected in concrete numbers,” says Grimm. “The number of building permits has increased by 245 percent since 2010. The vacancy rate also remains stable compared to other Top 7 cities while rents and purchase prices clearly show the lowest growth, making them affordable for residents.”

It has created a situation in which everyone benefits, Gentz adds. “The model works,” she says. “Planning permission procedures are completed faster, land prices are more affordable, more subsidies create more affordable housing, tenancy rights are rigorously applied and the buildings are constructed in harmony with the surrounding city.”

Meanwhile, previously overlooked industrial areas are being redeveloped for modern urban living. Hamburg is planning a new quarter on Kleine Grasbrook, the size of one-third of HafenCity where 3,000 new apartments are planned alongside commercial buildings for the port’s use.

Yet such schemes won’t have an impact on the housing shortage for many years, Grimm says. “The redevelopment of a district is a long-term measure that will take more than 20 years for its benefits to be realized. Until then, urban life will continue as is.”

In the meantime, adapting building regulations could help, Gentz believes. “Extensions and loft conversions are possible without retrofitting an elevator in buildings of several storeys,” she says. “Likewise, abolishing parking space regulations or relaxing regulations governing the building height in certain streets make room for more living space. However, the potential impact of these measures must always be carefully considered and supported by all concerned.”

Indeed, getting buy-in isn’t just about having local authorities on-side; increasingly residents are making their voices heard. “One of the main problems of the housing shortage is that too little building land is made available,” Grimm says. “And this is not only due to the lack of construction rights, outdated development plans or overly long approval periods, but also because of increasing citizen protests against the planned development of open spaces. In such situations, serious consideration needs to be given as to when the common good should take precedence over special interests.”

And there’s no simple solution to Germany’s housing shortage, new accommodation models and new partnerships can go some way to helping its cities cope with their growing populations.