Liberal Housing Policy Matters Even More Since COVID-19

Claude Monet: The Customs House at Varengeville // CC 4.0 via flickr // rawpixel

So far, the COVID-19 pandemic has had little effect on the German housing market. It has left barely a mark on real estate prices or rentals. But the pandemic is not over yet, and even if it was: the past months have triggered some developments that will transform our working world and are likely to have a considerable impact on the housing market in the long term.

One of these changes is the growing importance of remote and mobile working. In many companies, COVID-19 acted like an accelerant that made working from home normal in the blink of an eye. It is not yet clear what the role of mobile working will be after COVID-19. Finding optimal solutions will depend on the activity profile, the specific circumstances of each company and not least the wishes of employees.

But it is already clear that remote working is here to stay – perhaps not five days per week, and not for everyone, but certainly a lot more than before the crisis. And that is enough to trigger changes in the housing and real estate markets.

These developments require policy that recognises the interplay between supply and demand and creates the necessary preconditions for people to realise their life’s hopes and dreams. But above all, it requires a liberal building and housing policy.

Let us assume that the home office is here to stay. Let us further assume that people will in fact work increasingly from home in fugure. In this case there are three potential effects on the housing market for which policy needs to create the appropriate conditions:

Rural Areas Become More Attractive

Eliminating the commute could boost the attractiveness of rural areas. The digitilisation monitor of the FDP parliamentary group shows that 51% of people would consider moving to the rural areas should the home office opportunities be expanded. It is already possible to make out the initial impacts of this development: In the surroundings of the large metropolises, real estate prices have risen faster than anywhere else – a sign of rising demand away from the large cities.1 But for rural areas beyond the suburbs to benefit, more has to be done.

Home offices “in the country” are only feasible if there is fast internet. What’s more, people only accept occasional trips to the office when travelling between town and the countryside can be done quickly and comfortably.

So what must be done? For people to have the choice of living where they want to in future, a digitilisation offensive for rural areas is required that will ensure fast internet everywhere in Germany. We also need a modern transport infrastructure that connects urban and rural areas in an optimal fashion.

Offices Can Be Repurposed for Housing

If remote working establishes itself as the norm, companies will inevitably shrink their office spaces. Currently, most companies do not yet see a need to do so. A survey showed that just 6.4% of participating companies planned to reduce their office space in the following twelve months. But 16.9% already wanted to use this time to start redesigning their offices.2 These numbers appear low – but they only refer to a very short time horizon.

But what will happen in the next two, three or five years if the evolution towards remote working gathers pace? In this case, the numbers would look completely different. The ARGE building consultancy sees potential for 235,000 housing units in German cities to be created from vacant offices.3

So what must be done? Should companies in fact decide to reduce their office space, this could present a real opportunity for the stretched urban housing markets. In this case a policy is needed that eliminates red tape and makes it easier to convert offices to housing.

Home Ownership Could Become More Important

During COVID-19 we have been spending more time in our own four walls than ever before. The many hours we spend at home working remotely, cooking, watching streaming content or doing other things give us an opportunity to discover the benefits and disadvantages of our living conditions in intimate detail. At some stage we ask ourselves how we would really like to live.

A new study provides an answer to this question: most of us would like to be a home owner and live in a single-family home.4 In the German context this is a surprising result because Germany is a country of renters. The home ownership rate is only 46.5% – lower than anywhere else in the EU. It is quite possible that the current experience during the COVID-19 pandemic will lead to a revaluation of buying property.

So what must be done? We must find a way to enable people in Germany to realise their dream of home ownership. For this, the property transfer tax rate has to be lowered and support for home ownership be improved. At the same time, we must stop talking about new prohibitions that make it more difficult to own a home and build new single-family homes.

In a Nutshell

It is not yet clear what the role of remote working will be after COVID-19 – but it is safe to assume that home offices are here to stay, in some shape or form. This change offers great opportunities for the housing market. But these can only be exploited if the right policy conditions are created.

This requires liberal policies that ensure fast internet in rural areas, enable unbureaucratic repurposing of offices to housing, and which make home ownership accessible to the broader public. Good building and housing policy is more important than ever before.





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