To Fix German Housing Crunch, Convert Empty Offices, Lobbyists Say

(Bloomberg) -- German cities should create more affordable homes by converting thousands of vacant office properties into living space, according to an alliance of lobby groups.

As many as 235,000 residential units could be created by 2025 using offices left vacant during the Covid-19 pandemic, according to Social Living, whose members include Germany's Mieterbund tenant association, labor union IG Bau and representatives of construction groups. The group claimed conversion would cost about half of full modernization and a third of a new building, coming in at about 1,100 euros ($1,328) per square meter.

Berlin last year introduced a five-year rent freeze that forced landlords to reduce prices by as much as 40%, following a supply squeeze that saw rental prices in many neighborhoods more than double since 2009. The legislation is at risk of being deemed unconstitutional this year.

Social Living said the economic fallout from Covid-19 was exacerbating the shortage of affordable housing, but also offered a solution if the pandemic-fueled shift away from office working becomes permanent. Just 1% of Germany's offices would be enough space for 50,000 converted apartments of about 70 square meters each, the group said.

To be sure, many German cities, including Berlin, have among the lowest vacancy rates for office space across Europe, and some experts argue the pandemic will not change that much. Even once the virus is under control, employers may have to provide more space per employee at offices in the future to make working there safe and attractive.

The German government agreed in 2018 to build 1.5 million new apartments and ensure enough social living space in what Chancellor Angela Merkel called a “historically unique” proposal. However, Social Living said Germany has built about 26,000 social apartments per year recently -- a rate that needs to more than treble in order to meet this goal.

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