Why is the German Homeownership Rate so Low?

Abstract

The comparatively low homeownership rate in Germany is often referred to as a weakness of the German housing market. As it turns out, the situation in Germany is primarily due to four factors. First, rental housing makes up a larger share of the market because of an extensive social housing sector. The high quality standard of social housing and the fact that private investors were included in the subsidisation scheme from the beginning laid the foundation for a large private rental housing market. Second, homeowners in Germany did not benefit from the same high subsidies as in countries such as Spain or the Netherlands. Third, the German rental housing market was not rendered inoperative by excessive interventions in rents, as was the case in countries such as Spain and the UK. Finally, German house prices remained stable over a long period of time. Therefore, in view of these results, judgements on Germany's housing market should be revised.