East Germany | There is an abundance of housing in the Saxon province

Even in the life of a Riesa landlord, there are moments of joy. Recently, the Riesa Housing Cooperative renovated a prefabricated East German building, converting the top two floors into maisonettes: five rooms, 120 square meters, two bathrooms, and two balconies. "It's like living in a single-family home," says Lutz Trept, the cooperative's technical director. The apartments sold like hotcakes: "We were able to rent them out while they were still under construction."

Trept and his colleagues, on the other hand, are praising many other apartments like sour beer. "Now even cheaper!" is the slogan on the cooperative's website for a three-room apartment with a balcony. For just under 60 square meters, the price is €353 (cold rent). It's one of dozens of vacant apartments currently on offer. Potential tenants have plenty to choose from. The problem is: there are hardly any. "Interest is muted," says Trept: "There's certainly no waiting list."

From the perspective of those seeking housing in Germany's metropolitan areas, these conditions are paradisiacal. Affordable housing is in short supply there, and rents have known only one direction for years: steeply upwards. Politicians are trying to respond. At the federal level, the current coalition of the CDU/CSU and SPD has set the goal of building 400,000 new apartments per year. To this end, building regulations are to be simplified and a so-called "construction turbo" is to be ignited. One of the goals formulated in the coalition agreement is that "a large number of apartments can be built in tight housing markets for less than 15 euros per square meter."

At the Riesa Housing Cooperative, such figures are a far cry from reality. "Our average rents are €4.99," says Chief Financial Officer Sirko Lunkwitz, "and for new rentals, it's €6." The federal government's push for new housing construction isn't an issue for the company—quite the opposite. Due to a lack of demand, the cooperative has demolished nearly 1,000 of its 4,300 apartments since 1990, and even one in ten of the remaining apartments is vacant. Trept says he'd be happy if the vacancy rate didn't rise any further. The average age of the tenants is 64, and quite a few are over 80 or even 90. Finding successors will be difficult.

Yet, says Trept, Riesa is actually a good place to live. "There are plenty of daycare places and supermarkets within walking distance, a cinema, sports fields, and clubs," he says. What's lacking are jobs. The steel and rolling mill, for whose employees most of the apartments of the former Workers' Housing Cooperative (AWG) Riesa were built during the GDR years, now employs just under 800 people, down from 13,000. The situation is similar at the Riesa pasta and tire factory. The traditional soap factory was recently closed down completely.

Where jobs are scarce, people move away. Riesa's population has already fallen from 50,000 to 29,000 since 1990, and forecasts predict a further decline of up to 5,000. The upswing in the chip industry in Dresden, for example, is also not expected to have a positive effect. While it is foreseeable that the construction and expansion of the chip factories there, owned by TSMC, Infineon, and Bosch, will have a massive impact on the housing market in Dresden and its suburbs, Trept fears, however, that this will not be felt in Riesa, a good 50 kilometers away. The journey time by train or car is over an hour, which is too long: "People are willing to accept half an hour; if it takes longer, they'd rather pay higher rent."

The problem Trept and his colleagues face: They deal with real estate. As the name suggests, real estate isn't mobile. While the church in Kiruna, Sweden, was recently relocated at great expense, an apartment block isn't a valuable religious building. "I can't just load a four-story building onto a low-loader and drive it to where apartments are in demand," he says. So, even the most affordable apartments are sitting empty in large numbers.

The housing market situation in many small and medium-sized towns in eastern Germany is similar to that in Riesa. Housing associations announced in the spring that 95,000 apartments are currently vacant in Saxony, Thuringia, and Saxony-Anhalt, warning of a new " wave of vacancies " in light of demographic trends. This poses a significant problem for landlords, says Mirjam Philipp, board member of the Association of Saxon Housing Cooperatives (VSWG). Because operating and other costs continue to accrue, vacancy costs around 50 cents per square meter. In total, this amounts to €103 million per year in Saxony.

Another problem, albeit not for tenants, is the low rents. The average rent in Saxony outside of major cities is €5.62, lower than in any other federal state. Deducting all running costs leaves only a surplus of two cents per square meter. "This leaves us with no money for urgently needed investments," says Philipp.

Landlords outside of urban centers can't avoid this either. Even in cities with high vacancy rates, there is often a lack of sufficient senior-friendly apartments. Furthermore, Philipp says that Germany's climate-neutrality requirements must be met by 2045. To achieve this, Saxony's housing cooperatives would have to spend €17 billion – twice as much as they have invested in their housing stocks since 1990. At the same time, after their upgrades in the post-reunification years, a "second wave of renovations" is now underway, says Trept, a cooperative board member in Riesa. Bathrooms and doors are being modernized, thresholds removed, shower trays lowered, and in some cases, balconies and elevators added. The costs amount to up to €50,000 per apartment, says Lunkwitz: "You can't make that money on €5 in rent."

So there's also a debate among municipal and cooperative landlords about whether and how much rents can be increased. As part of the "social housing sector," they don't want to make profits at the expense of their tenants. There's a "reluctance to address the issue of rent levels," says Alexander Müller, director of the Saxony Association of the Housing and Real Estate Industry (VDW). However, this is unavoidable if the companies' economic stability is not to be jeopardized.

In addition, federal policymakers must take greater account of the fact that the housing market in Germany is divided and that there are different problems than in the metropolises. "Simply talking about a tense market is a fatal misunderstanding of the facts," says Philipp, adding: "The construction boost won't help us." Support measures are also needed to address the high vacancy rate in rural areas. The Riesa cooperative, for example, would like to continue demolishing, but "that's not possible in the next two years," says Lunkwitz. The corresponding federal funding program has expired, and "it would be far too expensive for us alone."