Compared to other European countries, housing policy in Germany has been favorable towards private rented housing. As a result, the private rented housing sector in Germany is large according to international standards. It appears to be `healthy’ in terms of housing quality and social prole of its occupants. However, during the late eighties housing shortage developed which lead to a brake down of the broad political consensus on housing policy. A number of highly controversial temporary measures have been adopted attempting to tighten up tenure laws, to discourage condominium conversions, and to foster new construction by more generous tax subsidies. The paper provides background information on the German housing system and gives a critical assessment of the recent policy shift.

The private rented housing sector in Germany is large according to international standards. It appears to be `healthy’ in terms of housing quality and social prole of its occupants. Beyond political rhetoric, housing policy in Germany has been stable and favorable towards private rented housing. Throughout the seventies and eighties the sector benefited from (i) tenure laws which are `liberal’ compared to many other countries in western Europe, (ii) a rather favorable taxation and owner occupation and (iii) a social policy which increasingly relied on general housing allowances while abstaining from direct interference with the market. In response to the recent housing shortage, however, a number of controversial measures have been adopted in the attempt to tighten up tenure laws, to discourage condominium conversions, and to foster new construction by more generous tax subsidies. This approach, however, is criticized in this paper as being inadequate to solve the present difficulties.