Rent Burden: A Persistent Challenge for Low-Income and Single Households

  • From Xhulia Likaj
  • Reading duration 2 min

Since the early 2000s, the rent burden in Germany has remained nearly constant, despite significant fluctuations in both rent and household net income over the past three decades. In the early 1990s, both rents and incomes rose sharply, with rents outpacing income growth. This was followed by a decade of relative stagnation. Between 2013 and 2016, rents surged again, but since 2017, incomes have grown more quickly. The COVID-19 crisis in 2020 caused a significant drop in incomes, but they rebounded in 2021, though not enough to offset the earlier decline. Despite the crisis, rents continued to rise, keeping the rent burden stable since around 2005.

Low-income households are particularly affected by rent burdens. The lowest income group saw the most significant fluctuations, with the rent burden growing from around 24% in 1990 to just under 36% in 2021, compared to 22% for higher-income groups. Single-person households and single parents also face higher rent burdens. In 2021, single-person households had a rent burden of around 30%, compared to the average of 27% for all households.

Regional differences also persist, with lower rent burdens in East Germany and higher burdens in metropolitan areas. For instance, the rent burden for three-room apartments in city centers like Munich and Berlin is around 37% and 36.7%, respectively. These are the results of a study recently published by the DIW.

Enhancing social housing and increasing housing benefits can offer targeted relief to those most affected by housing costs. Additionally, as shown in our simulation, promoting wealth creation through specific measures, such as starting capital or a basic inheritance, could enable individuals to acquire property. This dual approach could alleviate rent burdens while encouraging long-term financial stability through homeownership.

A basic inheritance could be financed by a higher inheritance tax or the reinstatement of a wealth tax. In this direction goes an open letter recently signed by a coalition of 22 social and environmental organizations in Germany calling for higher taxes on billionaires. They argue that the current tax system benefits the super-rich, exacerbating inequality.