Construction costs are expected to decrease.

The Ministry of Construction has presented an action plan to reduce construction costs. The construction industry views this positively, but also sees room for improvement.

The Federal Ministry for Housing, Urban Development and Building has bundled various measures to reduce construction costs and create more affordable housing. To this end, it is presenting its action plan for reducing construction costs, which includes short- and medium-term instruments designed, according to its own statement, to systematically address cost drivers, unlock efficiency potential, and make investments more attractive again.

The ministry aims to combat rising prices with this plan, thereby relieving the burden on private builders, investors, and the public sector, and accelerating and increasing the volume of housing construction. The action plan comprises 13 measures. Construction is to become more digital, and planning and approval processes are to be expedited. Additional measures include those related to building type E, a new construction subsidy program, and new tax incentives. 

The measures:

1. Digitization of construction
   The consistent implementation of Building Information Modeling (BIM) aims to digitally network and thus increase the efficiency of building planning, construction, and management throughout their entire life cycle. The "BIM Germany" initiative is intended to contribute to this goal. Plans include a bonus system for BIM use and open standards for comprehensive data interoperability to enable widespread practical application of BIM.
2. Digital building application
   The digital building permit application process is to be further developed. The goal is seamless, paperless digitization from application to approval. Semi-automated procedures, as well as BIM-based applications and reviews, are expected to make a significant contribution to accelerating the process. The federal government intends to support the states in implementation through networking, expert guidance, and targeted funding. The states' objective for the digital building permit application process is to make digital applications the mandatory standard procedure by 2028. Paper applications will then only be permitted in justified cases of hardship.
3. Acceleration of planning and approval processes
   Standardized data models and a digital procedural traffic light system are intended to make the urban development planning process more transparent and efficient as part of the building code upgrade. The goal is to limit the duration of urban development planning procedures to a maximum of two years.
4. Serial and modular construction
   Serial and modular construction is to be expanded, as standardized processes, harmonized interfaces, and digital planning methods shorten construction times, increase planning reliability, and stabilize cost structures. The ministry intends to develop a bonus system for new construction subsidies that rewards shorter construction times and reduced building costs through serial and modular construction. It also aims to identify obstacles to the practical use of type approvals, with the goal of facilitating systemic construction methods.
5. Use of secondary components and material approval
   Obstacles to the approval of new building materials are to be removed to promote the circular economy and innovation in construction. Resources are to be used more efficiently. The increased use of secondary raw materials and reusable building components enables cost savings, reduces dependence on primary raw materials, and makes the construction sector more resilient to global supply chain problems and resource scarcity. Further development of the legal framework for reuse and recycling in the building sector aims to remove barriers to the use of used building products.
6. Platform for cost-reduced construction
   The Ministry of Construction plans to establish a platform for cost-reduced construction, jointly operated by the federal and state governments. It will consolidate proven solutions and make them easily accessible to all stakeholders.
7. Building type E
   There should be regulatory flexibility. Building type E is intended to make it easier to deviate from standards and technical norms in a legally sound manner. The Ministry of Justice is expected to present a draft bill later this year. At the same time, the Ministry of Construction intends to initiate measures to accelerate the implementation of building type E.
8. Better integration of planning and construction
   Integrated and cooperative project approaches aim to more closely link planning and execution in the future and involve all key stakeholders at an early stage. The federal government intends to specifically support the dissemination of these approaches and strengthen existing initiatives. The goal is to implement construction projects more economically and to sustainably reduce construction costs.
9. Cost control in standards and technical requirements
   The cost-benefit analyses of the German Institute for Standardization (DIN) will in future be additionally reviewed by an impartial testing body to prevent further cost increases due to new standards. Furthermore, the binding effect of standards set by self-governing organizations will be reviewed and reduced to a level relevant to safety.
10. Central funding program for new construction
    In the future, new construction subsidies will be consolidated into a central, modular new construction funding program to make it clearer and easier to access. The new program is scheduled to launch in 2027. 
11. Improvement of declining-balance depreciation and special depreciation
    To improve investment conditions, the Ministry of Construction wants to extend and standardize degressive depreciation and make special depreciation in residential construction more targeted. 
12. Ensuring effective financing options
    A fund for affordable housing is to be established as a pilot project to mobilize private capital for affordable and climate-friendly new housing construction, targeting investors seeking high security at moderate returns. The federal government intends to ensure that the perspective of housing financing is adequately considered in future adjustments to the legal framework.
13. The focus of the state prize is cost-effective construction.
    The German Architecture Prize will place a greater emphasis on cost considerations next year. Similarly, the BMWSB's strategic research planning focuses on cost-effective planning and construction. This will provide clear impetus for the technological and economic innovations of tomorrow.

"It is good that the Federal Ministry for Housing has presented a plan to reduce construction costs and thus focuses on the economic viability of construction projects. The construction stimulus and the amendment to the Building Code improve the framework conditions, but still make building unaffordable for a large part of the population," explains Felix Pakleppa, Managing Director of the Central Association of the German Construction Industry .

"Many of the action plan's proposals are a step in the right direction, but we need significantly more speed and ambition in implementing the projects so that considerably more housing is built during this legislative period." Regarding building type E, over a year has already been lost. It is right that construction must become more affordable and that standards must be made more flexible. Pakleppa notes the absence of a draft law from the federal government on this matter.

You might also be interested in:

Operations management

First signs of recovery in housing construction

Craft policy

5.800 medium-sized businesses received funding

Operations management

ING launches new fixed-term deposit offer for medium-sized businesses

"There is a lack of economic incentive"

"We have long clearly identified a rapidly effective financing stimulus via KfW funding: the extension and increase of the KfW program for the Efficiency House 55, which expires at the end of June, in conjunction with 100 percent renewable heat, equipped with a long-term fixed interest rate below market level, and the linking of the special depreciation allowance to this standard." The action plan does not yet address this concretely enough. 

The adjusted special depreciation allowance, linked to the EH-55 standard, alone could activate around 30.000 additional apartments annually from a backlog of over 430.000 construction projects. "The capacity is there. Architects, planning offices, and construction companies are underutilized and could start immediately." What's missing is an economic incentive that takes effect now – not in 2027.

"The key is the pace."

Serial and modular construction currently covers a share of housing construction that still has room for expansion. However, serial housing construction is not suitable for densification and adding stories to existing buildings in inner-city locations, and it is not yet more cost-effective. A government bonus system would only be applied to a very small proportion of the apartments built in Germany.

"We expressly welcome the use of recycled construction materials, the legally compliant use of which we have been demanding for almost ten years. This includes redefining the waste status in the Substitute Building Materials Ordinance so that recycled building materials can be used legally to protect natural resources. Nothing has happened in this regard during the last two legislative periods." The construction industry is finally expecting concrete steps in this matter.

Pakleppa: "Overall, the action plan is a correct and overdue step. It identifies the key levers and creates a good foundation. However, the crucial factor now is the pace. The structural measures improve the framework conditions, but without a rapid and effective financial boost, construction will remain uneconomical and unaffordable for many people."

DHB now also available digitally! Simply click here and register for the digital German Crafts Journal (DHB)!