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Poverty Risk among Tenants Rising Significantly

14.

June 2018

The poverty risk rate among tenants in Germans has nearly doubled since 1991. While only 16 percent of Germany’s residential tenants lived below the poverty line in the early 1990s, the figure was close to 29 percent by 2015. This is the upshot of a recent survey made by the DIW German Institute for Economic Research. Conversely, Germans living within their own four walls made the record with a poverty risk rate of only around four percent in 2015 (source: www.diw.de).

The statistics arguably show that homeownership effectively lowers the poverty risk. While the poverty risk rate among tenants has gone up steadily, the rate among home owners has been stable since 1991 (at around five percent) or has indeed slightly declined. With a view to these findings, the fact that more than half of all Germans rent their homes—with only 45 percent of the population owner-occupying their homes—becomes a societal problem.

According to a survey by the DIW German Institute for Economic Research, younger Germans renting their accommodation are particularly at risk of poverty. The poverty risk rate among adults of 35 or younger has increased by 15 percent since the turn of the millennium. To explain the trend, the DIW has pointed out that the homeownership rate is lowest in this age group, equalling around one quarter.

Homeownership Essential as Retirement Scheme

The bracket between the ages of 25 and 45 is decisive for the acquisition of property because this age group still has enough time to pay off a home before entering retirement. Assuming things work out this way, the risk of falling on hard times in old age is much reduced. After all, rent payments take a large chunk out of the household income of many pensioners, as the Pestel Institute revealed in a recent survey (source: www.welt.de). According to the latter, 40 percent of those in Germany who will reach retirement age in 2030 may expect no more than 800 euros in social security per month—half of which is likely to go toward the rent. If you take this expense item out of the equation, however, most people will have enough to subsist on in old age.

It is most notably this aspect of retirement planning that for some times now has prompted calls for more government support toward private property ownership. With the child tax credit for first-time home buyers, the Federal Government has recently passed a first subsidy program of this kind (source: www.accentro.de).

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