410 With the housing market under pressure, are local authorities also turning to tiny houses?

Whether Backnang in Württemberg or Bad Tölz in Bavaria, Offenburg in Ortenau or Osnabrück in Lower Saxony, Wendelstein in Middle Franconia or Woltersdorf in Brandenburg – one issue unites a total of 410 towns and municipalities in Germany: a tight housing market.

Whether a municipality is officially labelled as having a tight housing market depends on key assessment criteria.

The criteria

• Population development: Has there been continuous population growth in recent years?
• Housing supply development: How is the supply of housing developing in relation to population growth?
• Rent development: How are rents developing in comparison to the state and national average?
• Vacancy rate: How high or low is the vacancy rate in the housing market?
• Commuter and workplace development: Is there an increase in commuters without sufficient housing being available or without enough housing being built?
• Social housing situation: How many social housing units are there?
• Building permits and construction activity: How high is construction activity despite demand over several years?
• Purchase price development: How much are prices for flats and houses rising and is there excess demand?
• Housing cost burden: How much money is spent on housing, measured in terms of monthly income?

If a city meets several criteria, it is labelled as having a ‘tight housing market’. The consequences can be far-reaching. Households with medium or low incomes in particular can usually hardly afford or can no longer afford housing in the centre of communities. Social housing suffers from a tight housing market. In the medium and long term, companies find it more difficult to attract skilled workers to the region.

One option available to local authorities with a tight housing situation is the rent cap. This was introduced in 2025 and extended in June 2025 until the end of 2029. The cap limit is another instrument available to local authorities. Furthermore, cities with a tight housing market are allowed to deviate from the applicable building regulations for the creation of living space.

One city with a tight housing market is Offenburg. How does the city intend to tackle the housing shortage, and do tiny houses play a role in its plans? NEW HOUSING asked.

According to their response: ‘The city of Offenburg pursues an active real estate policy and supports builders in inner-city development within the framework of the city's urban planning concepts. Building land development is based on the building land policy decisions of the municipal council, which include the conclusion of a building obligation and the creation of subsidised and affordable housing.’

Local council decides on construction boom

There is no experience yet with the effects of the construction boom. However, on 16 March, the local council decided that the changes to the Building Code would also take effect in Offenburg, taking the following criteria into account: ‘The measure will create additional living space, the measure is only small in scale, the measure involves a reasonable degree of additional densification and sealing, development is already in place and land readjustment by the city of Offenburg is not necessary.’

Although the construction boost is also being applied in the regional centre of Ortenau, the municipality is certain that the existing economic obstacles (construction costs, lending, interest rates) to housing construction will not be affected by the construction boost. In conclusion, the city told NEW HOUSING: ‘Tiny houses will not solve the housing problem and are subject to the same planning and building regulations as other residential buildings.’

Bauturbo already ignited

The housing market in Radolfzell is also tight. According to its own information, the city adopted the Housing Action Programme in May 2024. The most important goal: to create affordable housing for younger people and especially families, as well as age-appropriate housing for older Radolfzell residents. According to NEW HOUSING, this could take the form of rental, cooperative or owner-occupied housing. The first projects have already been approved with the help of the construction turbo and further projects are in preparation.

Tiny houses already approved

The municipality of Radolfzell goes on to say: "When it comes to the construction of new housing, the focus is increasingly on “cost- and space-saving construction”. It is therefore necessary to rethink the requirements for construction methods and plot sizes in the urban development of building land. Detached houses are no longer in keeping with the times. In Radolfzell, a number of tiny houses have been approved and built. The city administration is focusing on the construction of affordable multi-storey residential buildings with rental, cooperative or owner-occupied flats."