German housing stock is generally of good quality, though there is a considerable discrepancy between eastern and western Germany. In the territory of the former West Germany, the stock is modern, some three-fourths of its dwellings having been built since the end of World War II. In contrast, eastern German housing stock is significantly older, about half of it having been built prior to the end of the war. Home ownership rates also vary considerably; almost half of dwellings are owner-occupied in western Germany, compared with less than one-third in eastern Germany.

In principle, under the communist government of East Germany, every citizen and family had the right to adequate accommodations. Rents everywhere, together with charges for heating and electricity, were held at extremely low levels. The need for new housing after the war was solved by erecting massive apartment blocks of cheap material, places that are now generally out of favour with people who have the means to choose their style of housing.

After unification the government devoted significant resources to modernizing eastern Germany’s stock and alleviating the housing shortages caused by the extensive immigration of the 1990s. Significant tax incentives were offered to spark investment in the real estate sector of the former East Germany, and a speculative boom followed, eventually resulting in a housing supply that far outstripped demand. When the tax incentives expired in 1998, the real estate bubble burst, and housing prices across Germany slumped. This had the unintended consequence of insulating Germany from the exuberance that fueled 21st-century housing bubbles across the industrialized world. As a result, German banks and investors were far less exposed to the shocks of the economic crisis than their American, British, Spanish, and Irish counterparts.

The private sector provides most of the capital for new housing. However, the federal government’s building savings policy offers loans to those who save for a prescribed period to build or purchase a home. Much of the housing built with government subsidies is allocated to “social housing”—dwellings provided at “cost rent” far below the market rental value to families with many children, people with disabilities, the elderly, and persons with low incomes. Stringent definitions of tenants’ rights, including injunctions against arbitrary or unfair evictions and protection against precipitous rent increases, balance the rights of tenants and landlords.

The rebuilding of the cities in the 1950s and ’60s, coupled with increased automobile ownership, invariably led to the desertion of older city centers by many residents. Easier access and parking near town centers, improved public transportation, large-scale refurbishing of historic buildings, and the creation of pedestrian zones offering special entertainments, festivals, and attractions were among the attempts to reverse this trend and lure the public back downtown in the evening. Nonetheless, suburbanization has continued, particularly in eastern Germany since unification.

The physical appearance of villages and towns throughout western Germany was improved on a grand scale beginning in the 1970s through extensive renovation programs undertaken by the states; grants, subsidies, and matching funds were made available to restore the exteriors of historic monuments and older buildings to pristine condition. The process also occurred in eastern Germany after unification.