High rent burden for Germany's tenants raises 'red flag'

German tenants have to set aside large chunks of their household incomes to pay landlords, with 3.1 million households facing a rent burden of 40%, according to a study published on Friday.

The figures from Germany's federal statistics agency Destatis show that housing costs are especially hefty for those living in big cities or on lower incomes.

How do the figures break down?

The study found that some 16% of Germany's 19.9 million tenant households are spending at least 40% of their income on rent.

For about 1.5 million such households, rental charges amount to more than half of tenants' income.

Another 1.6 million must spend between 40% and 50% of their income on rent and other costs to their landlord. On average — and at a time of high inflation— those households are more likely to be the ones with the lowest incomes.

The study, based on a 2022 microcensus, shows that the average German tenant household spends well over a quarter of income (27.8%) on rent.

In larger cities, with more than 100,000 inhabitants, 28.9% of income was the average, falling to 25.9% in towns of up to 20,000 inhabitants.

The market appears to be drifting toward higher housing costs. Tenants who moved in in 2019 or later have above-average burdens, and average existing rental charges are much lower than those for new ones.

One-person households were hit harder overall, with rent burdens averaging just under a third of their income. Households with two people, on the other hand, had to budget 22.8%.

Trend is likely to be exacerbated

"The rental burden, especially for households with low income and in the big cities is dramatic," commented the scientific director of the Macroeconomic Policy Institute (IMK), Sebastian Dullien, adding that the situation could worsen further.

"It is a red flag that the proportion of income that must be spent on housing costs in the has increased even further in recent years."

Dullien said he expected the housing shortage problem to get worse in the coming years, with housing construction currently in free fall due to increased construction prices and higher interest rates from the European Central Bank.

At the same time, almost a million more people are now living in Germany than had been predicted for 2023 before the coronavirus pandemic — in large part due to an influx of refugees from Ukraine.

Dullien called for an "urgent offensive for more public housing" from federal, state, and local governments.