What the UK Can Learn From the German Housing Model

What the UK Can Learn From the German Housing Model

Nationwide estate agency Tepilo looks at the lessons that the UK housing sector can learn from the German model.

What can we learn from the German housing model?

A new report from think tank IPPR has revealed how the triumphs – and deficiencies - of the German housing system could help the UK.

Comparing housing policy in Germany and Britain, the IPPR report believes there is much that the UK can learn from their German counterparts when it comes to bricks and mortar.

In Germany, for example, tighter controls on mortgage lending and a more stable rental market has helped to drive a “a more balanced approach to housing tenure” – this, in turn, has lowered the demand for owner-occupied homes.

In addition, while both Germany and the UK have tax regimes that aim to incentivise property investment, the IPPR report argues that the German capital gains tax system places a greater importance on long-term investment.

The report also suggests that local authorities in Germany have much better means to intervene in the land market – commonly buying up and assembling sites, as well as delivering infrastructure before returning them to the market. In the UK, meanwhile, there is often criticism of the planning process and the lack of power local authorities have when it comes to direct housebuilding.

While the report found that both countries are nearing the level of planning permissions needed to meet their respective housing supply targets, it also found that Germany is much more successful at turning these planning permissions into housing completions.

Germany is also well-known for its use of prefabricated homes – something the government in the UK is considering reviving to help ease the supply-side crisis.  

Elsewhere, the think tank’s findings highlighted the major, glaring differences between the housebuilding sectors in Germany and the UK. In Germany, small and medium-sized building firms play a far bigger role in housebuilding than is the case in the UK, where a number of large companies such as Barratt Development, Taylor Wimpey, Redrow and Persimmon massively dominate. 

IPPR’s report also revealed that, over the last 30 years, Germany has been able to deliver more affordable homes than the UK. That said, its model for achieving this – via the equivalent of 20-30-year covenants – has led to poor outcomes in recent years, with a clear fall in the number of affordable homes.   

As the report’s conclusion makes clear, both countries have faced difficulties in delivering the number of homes needed by their citizens. However, Germany has been successful in delivering more homes than the UK in the last 50 years – so it would be foolish for us to not take note of that and to try and learn lessons from our near neighbours.

A wider range of tenures, a bigger role for small and medium-sized housebuilders, an increase in the number of prefab homes and giving local authorities more power and influence in getting housing construction to happen are all ways in which the UK can borrow from the German model.

There are, however, things the UK should be wary of. The German housebuilding system also highlights the risks of using taxpayer subsidies to fund affordable homes, without the appropriate safeguards to protect them in the future. When looking at the rules and regulations for “Starter Homes” and its other affordable housing schemes, the government should be carefully taking this into account, the IPPR report insists.