Why StEP Wohnen construction targets are insufficient to solve Berlin's housing shortage

Berlin's Stadtentwicklungsplan Wohnen (StEP Wohnen) is the process by which the Senate plans new housing and urban development for the decades to come. Despite the city meeting or exceeding the construction targets laid out by StEP, its housing shortage has steadily worsened. StEP has thus proven itself inadequate for the task: if Berlin's housing crisis is to be solved, the pace of construction will need to be significantly higher than foreseen by the plans.

For more than a decade, the Berlin Senate has done large-scale planning for the city's development. This includes the Stadtentwicklungsplan Wohnen (StEP Wohnen), which forecasts how much new housing the city needs over the next decade or longer. Despite this careful process and new housing production surpassing some of the targets, the city's shortage of housing has been growing, driving up the price of new rental contracts and intensifying competition for rent-controlled units. The disconnect between meeting targets and a worsening housing crisis is because StEP has significantly underestimated how much housing Berlin needs.

This article takes a deeper dive into how StEP derives targets for new construction and core reasons why it keeps underestimating the need for more housing. We will see that StEP deliberately does not fully address the existing shortage of housing, it relies on population forecasts with a poor track record, and that its methodology risks locking in a permanent housing crisis. By making two realistic adjustments to the latest StEP, we arrive at a 70% higher target. We also propose a higher annual construction target in line with historical responses to housing crises.

The overfulfillment of long-term StEP Wohnen construction targets

The past three StEP Wohnen plans make demographic and housing market forecasts and set out the city's housing targets for the next decade-plus period until its title year. StEP Wohnen 2025 sets out housing forecasts and construction targets from 2012 to 2025, StEP Wohnen 2030 from 2017 to 2030, and StEP Wohnen 2040 from 2022 to 2040.

Each of the plans called for an initial period with up to 20,000 new apartments per year followed by a slowdown after the initial targets are met. The latest StEP also calls for land to be held in reserve to allow up to 50,000 total extra apartments to meet unforeseeable needs. In total, the first two StEPs called for 137,000 and 194,000 new apartments over 14 years and the third called for 222,000 new apartments over 19 years.

With the start of 2026, we can now compare actual new housing construction with the first StEP. New housing construction initially lagged the plan before starting to exceed StEP targets in 2019, with cumulative housing construction eventually exceeding them by 40% in 2025. StEP Wohnen 2030 already exhibits the same pattern, with construction initially lagging the target, but on a trajectory to exceed it in 2026 and beat it again by over 10% in 2030. This is despite the slowdown of construction in recent years: each StEP sets modest targets for the first five years, followed by an even larger slowdown, allowing actual construction to exceed the cumulative targets even while falling short of the initial annual goals.

Despite cumulative housing construction exceeding the first long-term StEP target and being on track for exceeding the second, Berlin's housing crisis has steadily deteriorated, with market rents rising fast and competition over rent-controlled units intensifying. StEP Wohnen plans include an estimate of the backlog of housing: dwellings that are needed immediately to loosen the market, providing more options and lower prices to apartment seekers, without accounting for future population growth.

In 2016, construction was 24,000 units behind the StEP Wohnen 2025 target, but the following StEP estimated a larger shortage of 77,000 units. Likewise, at the end of 2021, while construction was more than 15,000 units ahead of StEP Wohnen 2025 and 16,000 behind StEP Wohnen 2030, the most recent StEP estimated a shortage of 118,000 (or 195,000 if one omits an arbitrary factor of 1/2 — see below). Taken at face value, these estimates imply that actual construction since 2011 covered at most half of what the city needed.

Breakdown of StEP Wohnen construction targets

The StEP Wohnen construction targets are derived from three types of indicators, summing (1) the rate of replacement of old buildings, (2) a backlog that must be built to reverse an accumulated housing shortage, and (3) additional dwellings required to keep the per capita housing stock stable for a growing population.

1. Replacing old buildings

Data from 2011 indicated that 0.15% of dwellings were torn down and replaced every year; StEP Wohnen 2025 assumed this would decrease to 0.1%, or 28,000 over the duration of the plan. Later plans even assumed this would further decrease to 0.05%: 14,000 and 19,000 over the durations of the 2030 and 2040 plans.

National accounts commonly assume an average lifespan of 50 to 70 years for residential buildings, resulting in an economic depreciation rate between 1.4 and 2.0%, one order of magnitude above the replacement rates considered in StEP Wohnen analysis. This discrepancy may be explained by investment in renovation and refurbishment of existing dwellings absorbing most of that depreciation while excluded from StEP Wohnen analysis; otherwise, the low replacement rate would indicate a material deterioration of Berlin's housing stock over time.

2. Reversing past housing market trends

The first StEP put the immediate need at a negative 30,000 dwellings, diagnosing an excess housing stock. This was based on an existing vacancy rate of 3.5% and the assumption that a further 1.5% of housing was inactive and ready to return to the market. The second StEP estimated a shortage of 77,000, based on targeting a 3% vacancy rate (considered a minimum requirement for a liquid housing market that allows people to move around, since apartments need to be empty between tenants) and for the housing stock to grow in proportion to past population growth.

The third plan switched to a different method, including two more indicators of a precarious housing situation that had deteriorated since 2013. First, increased crowding: a decades-long trend of decreasing average household size had reversed, increasing from 1.75 in 2013 to 1.79 in 2019. Second, the rate of suburbanization: the share of residents moving from Berlin to the surrounding areas had accelerated after 2013. The report estimated that 77,000 dwellings were needed to reverse both of these trends by half.

Why only reverse these trends by half, though? The report cites an issue unrelated to the housing market, namely environmental concerns, as a reason not to recreate the relaxed housing conditions of 2013, even though this contradicts the plan's own acknowledgment that housing shortages drive suburbanization[^1]. Of course, this doesn't mean the actual trends are half as bad, but that the StEP Wohnen methodology explicitly only aims to reverse them by a half. To fully reverse both trends, this construction target would need to be doubled.

Adding another 41,000 new units the third StEP estimates as required to boost the vacancy rate to 3%, the report arrives at 118,000 units to reach its target or 195,000 to fully reverse past crowding and suburbanization trends since 2013. (It is also dubious to expect that 3% vacancy would be reached if only half of the need is provided.)

3. Tracking future population growth

The Senate's population forecasts predict births and deaths as well as more uncertain migration trends, resulting in a low, medium, and high population growth scenario. The three StEP reports only rely on the medium growth scenario to obtain obtaining estimated needs of 137,000, 103,000, and 85,000 additional apartments, respectively. Over the past two decades, population growth generally outstripped even the upper bounds of the StEP forecasts, rendering the overfulfillment of Berlin's housing targets insufficient to stabilize the housing market.

By 2025, population has grown twice as much as in the StEP 2025 medium growth scenario and even exceeds the high growth scenario by more than a hundred thousand residents. Population growth has also exceeded the next two medium growth forecasts, tracking slightly above the high forecasts.

The population development over the past decades also illustrates the large impact of one-time events such as the 2016 and 2022 refugee influxes as well as the COVID pandemic in 2020-2021 that adds uncertainty to the population forecasts. To prepare for unforeseen events, StEP Wohnen 2040 also calls for a buffer of up to 50,000 new apartments beyond the previously incorporated goals, covering about two thirds of the gap between medium and high population growth scenarios.

Deriving construction targets from population forecasts creates a vicious cycle

A broader problem with the StEP approach to set housing targets using population forecasts is that a limited supply of housing itself limits population growth, by pushing people into the suburbs due to high rents or deterring newcomers from moving to the city, just like an abundance of cheap housing can attract more people to it.

This may result in a vicious cycle: if the forecast projects lower population growth due to high housing costs, resulting in a lower construction target for new dwellings to accommodate that smaller number of people, then this method risks locking in a permanent housing crisis. Research indeed shows that [high housing costs deter migration, particularly for those with lower incomes](https://doi.org/10.1016/j.jue.2017.07.002), meaning population growth does not occur independently of housing policy, but rather is shaped by it.

In fact, the Senate's population forecasts acknowledge that housing construction allows growth at the local level by incorporating past and future construction into their modelling: the city's population growth is expected to occur in districts where the bulk of new housing is planned — Pankow, Treptow-Köpenick, Lichtenberg, Marzahn-Hellersdorf, and Spandau — whereas the remaining districts will add up to slightly negative growth. However, at the city-wide level, StEP effectively treats population growth as a fixed prediction independent of how much housing is built.

A more realistic construction target

So, how much housing does Berlin actually need to build? Let's start from the StEP 2040 framework for the period 2022 to 2040 and modify some factors. First, let's remove the factor of 1/2 applied to the target of reversing the trends in overcrowding and suburbanization since 2013. Then we arrive at an initial shortage of 195,000 dwellings required to fully reverse those trends instead of 118,000 to reverse them by half. Let's also keep the assumption of needing to replace 19,000 old dwellings over the 19-year period. Finally, we correct for the historical underestimation of population by StEP forecasts by using the high growth scenario of the latest population forecast published in 2025, which estimates about twice as many new residents by 2040 compared with the medium forecast from 2022.

These modifications would result in an alternative target of 384,000 new dwellings to be built until 2040, about 70% more than the StEP target. 63,000 homes have already been built between 2022 and 2025, leaving a need of 321,000 dwellings by 2040, or sustained construction of 21,400 per year, close to the Senate's not-yet-reached goal of 20,000 per year and the annual rate in the early years of the StEP plans.

If we want to solve Berlin's housing crisis in less than fifteen years from now, we need to build faster in the early years to clear up the shortage quickly and to stay in line with population growth forecasts that predict faster growth in earlier years. Solving the crisis in ten years would require an increase to 30,000 new dwellings per year.

Berlin could build more housing than you think

How much housing could Berlin realistically build? Historical time series can be a guide to what is possible. During World War II, a fifth of the German housing stock was destroyed. In response to this crisis and a desire to improve living standards, from the mid-1950s to mid-1970s, both West Berlin and West Germany maintained a rate of about one new dwelling per 100 inhabitants per year. East Germany didn't prioritize housing production until the 1970s; however, in the 1980s, East Berlin even surpassed the rate of one per 100 inhabitants. Reunified Berlin also reached this level in the late 1990s. Today, this building rate would correspond to at least 35,000 new dwellings per year in Berlin. If construction had happened at this pace between 2012 and 2021, the full estimated shortage in 2021 would have been more than eliminated.

These historical precedents demonstrate Berlin's capacity to build at the needed scale. Rather than trying to precisely predict future housing needs, prioritizing high levels of housing construction is the most direct way to quickly reduce the housing shortage. The housing market itself can signal when supply becomes adequate through rising vacancy rates and stabilizing rents. Such a prioritization could be achieved by simplifying planning, reducing building standards, and permitting new developments to have the high density that already exists in popular neighbourhoods.

Outlook

StEP Wohnen has consistently underestimated Berlin's housing needs due to arbitrary reduction factors and population forecasts that consistently underpredict growth. Continuing this way risks locking in a vicious cycle of permanent housing crisis, with insufficient housing constraining population growth, leading StEP to project lower growth and set even lower targets. With an election scheduled for September 2026, the city's leaders need to chart a path toward abundant housing by committing to maintain an achievable but high rate of housing construction of up to 35,000 dwellings per year until the vacancy rate grows and rents fall.

[^1] Alon Levy argues that embodied carbon from new construction is small compared with other emissions and that overall, blocking urban housing construction harms the environment.